Exam 8: Depreciation, Cost Recovery, Amortization, and Depletion

The § 179 limit for a sports utility vehicle with a GVW of 7,000 pounds will not apply if the sports utility vehicle is used as a taxi.

The amortization period for $58,000 of startup expenses is 180 months.

In 2017, Marci is considering starting a new business. Marci incurs the following costs associated with this venture.​ Marci started the new business on January 5, 2018. Determine the deduction for Marci's startup costs for 2017.

Polly purchased a new hotel on July 20, 2017, for $6,000,000. On January 20, 2024, the building was sold. Determine the cost recovery deduction for the year of the sale.

On March 3, 2017, Sally purchased and placed in service a building costing $12,000,000. The building has 10 floors. The bottom three floors are rented out to businesses. The top seven floors are residential apartments. The gross rents from the businesses are $60,000 and the gross rents from the apartments are $110,000. Determine Sally's cost recovery for the building in 2017.

Orange Corporation begins business on April 2, 2017. The corporation reports startup expenditures of $64,000 all incurred last year. Determine the total amount that Orange can elect to deduct in 2017.

Cost depletion is determined by multiplying the depletion cost per unit by the number of units sold.

Carlos purchased an apartment building on November 16, 2017, for $3,000,000. Determine the cost recovery for 2017.

George purchases used seven-year class property at a cost of $200,000 on April 20, 2017. Determine George's cost recovery deduction for 2017 for alternative minimum tax purposes, assuming George does not elect § 179 and does not take additional first-year depreciation.

Taxable income for purposes of § 179 limited expensing is computed by including the MACRS deduction.

Barry purchased a used business asset (seven-year property) on September 30, 2017, at a cost of $200,000. This is the only asset he purchased during the year. Barry did not elect to expense any of the asset under § 179, did not take additional first-year depreciation, and did not elect straight-line cost recovery. Barry sold the asset on July 17, 2018. Determine the cost recovery deduction for 2018.

Property used for the production of income is not eligible for § 179 expensing.

On May 2, 2017, Karen placed in service a new sports utility vehicle that cost $60,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used 60% for business and 40% for personal use. Determine Karen's total cost recovery for 2017. Karen wants to use both §179 and additional first-year depreciation.

Goodwill associated with the acquisition of a business cannot be amortized.

The inclusion amount for a leased automobile is adjusted by a business usage percentage.

On June 1 of the current year, Tab converted a machine from personal use to rental property. At the time of the conversion, the machine was worth $90,000. Five years ago Tab purchased the machine for $120,000. The machine is still encumbered by a $50,000 mortgage. What is the basis of the machine for cost recovery?

Cora purchased a hotel building on May 17, 2017, for $3,000,000. Determine the cost recovery deduction for 2018.

Under MACRS, if the mid-quarter convention is applicable, all property sold is treated as being sold at the mid-point of the quarter in which it is placed in service.

Residential rental real estate includes property where 80% or more of the net rental revenues are from nontransient dwelling units.

Tan Company acquires a new machine (ten-year property) on January 15, 2017, at a cost of $200,000. Tan also acquires another new machine (seven-year property) on November 5, 2017, at a cost of $40,000. No election is made to use the straight-line method. The company does not make the § 179 election and elects to not take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machines for 2017.