Exam 7: Accounting Periods and Methods and Depreciation

On July 15, 2016, H. P. purchases a personal computer for his home. The computer cost $4,000. H. P. uses the computer 60 percent of the time in his business, 15 percent of the time for managing his investments and the remaining 25 percent of the time for various personal uses. Calculate H. P.'s maximum depreciation deduction for 2016 for the computer, assuming he does not make the election to expense or take bonus depreciation.

The hybrid method of accounting involves the use of both the accrual and cash methods of accounting.

Jerry and Julie are brother and sister. Jerry sold stock to Julie for $5,000, its fair market value. The stock cost Jerry $10,000 5 years ago. Also, Jerry sold Carol (an unrelated party) stock for $2,000 that cost $10,000 3 years ago. What is Jerry's recognized loss before the $3,000 capital loss limitation?

Taxpayers must use the straight-line method of depreciation for all productive assets.

Taxpayers may expense the cost of depreciable personal property placed in service during the year and used in a trade or business in an amount up to a maximum of $250,000 annually.

The election to expense is not permitted where listed property does not meet the qualified business use test.

An asset (not an automobile) placed in service in June 2016 has a depreciable basis of $35,000 and a recovery period of 5 years. Assuming bonus depreciation is used, a half-year convention, and no expensing election, what is the maximum amount of cost that can be deducted in 2016?​

On October 21, 2016, Jay purchased a commercial building. The cost basis assigned to the building is $700,000. Jay also owns a residential apartment building he purchased on June 15, 2015 with a cost basis of $500,000. a.Calculate Jay's total depreciation deduction for the buildings for 2016, using MACRS. b.Calculate Jay's total depreciation deduction for the commercial building for 2017, using MACRS.

If an automobile is purchased for 100 percent use in the taxpayer's business, the annual automobile depreciation limitations do not apply.

In general, accrual basis taxpayers recognize income when it is earned, regardless of when it is received.

On January 1, 2016, Sandy, a sole proprietor, purchased for use in her business a used production machine (7-year property) at a cost of $4,000. Sandy does not purchase any other property during 2016 and has net income from her business of $80,000. If the standard recovery period table would allow $572 of depreciation expense on the $4,000 of equipment purchased in 2016, what is Sandy's maximum depreciation deduction including the Section 179 election to expense (but not bonus depreciation) for 2016?

Aaron has a successful business with $50,000 of income in 2016. He purchased a new 7-year MACRS property with a cost of $7,000. For tax purposes, what is the largest write-off Aaron can obtain in 2016 for the new asset?

Give the depreciable or amortizable lives for 2016 tax purposes for these assets: ​ Automobiles Business furniture Computers Residential real estate Commercial real estate Land Purchased goodwill

Residential real estate is currently assigned a 27.5-year cost recovery period under the Modified Accelerated Cost Recovery System.

Eva purchased office equipment (7-year property) for use in her business. She paid $12,600 for the equipment on July 1, 2016. Eva did not purchase any other property during the year. For 2016, her business had net income of $6,000, before depreciation and before considering the election to expense. a.What is the maximum amount that Eva can elect to expense in 2016 under Section 179? b.​ ​ ​ What is the total depreciation (regular depreciation and the amount allowed as a 2016 deduction under the election to expense) on the office equipment for 2016, assuming Eva uses the accelerated method under MACRS and claims the maximum amount allowable under the election to expense? c.​ ​ ​ Assuming that Eva elected to expense the equipment in 2016 and that her business has net income in 2017 of $200,000, before depreciation and before considering the election to expense, what is Eva's total depreciation deduction (regular depreciation and the amount allowed under the election to expense) for the equipment for 2017?

Becky is a cash basis taxpayer with the following transactions during her calendar tax year: What is the amount of Becky's taxable income from her business for this tax year?

What is the maximum depreciation expense deduction for Year 2 (2017) for a passenger automobile, used 100 percent for qualified business use, placed in service on June 15, 2016 and costing $16,000 (the election to expense is not made and no bonus depreciation was taken)?

Countryside Acres Apartment Complex had the following transactions during the year: Using the accrual method, calculate the net income: ​

Betty purchases a used $12,000 car in 2016, to use exclusively in her business. a.What will the standard MACRS depreciation schedule be for the 6 years the auto is depreciated (no bonus expense)? Year 1: Year 2: Year 3: Year 4: Year 5: Year 6: b.If Betty holds the car until it is fully depreciated, and uses straight-line depreciation, how many years will this take?

Taxpayers choosing the election to expense: