Exam 7: Accounting Periods and Methods and Depreciation

Shellie purchased a passenger automobile on March 2, 2016. She paid $15,000 for the automobile and can support business use of 85 percent. Calculate the amount of depreciation on the automobile for 2016 using the accelerated MACRS method (if available), assuming Shellie does not make the election to expense or claim bonus depreciation.

On June 1, 2016, Sandalwood Corporation purchases a passenger automobile for 100 percent use in its business. The automobile is in the 5 year cost recovery class and has a basis for depreciation of $30,000. Assuming that the corporation elects the accelerated method of cost recovery for the asset and does not elect to expense any of its cost or take bonus depreciation, what is the total tax depreciation deduction for the 2016 calendar tax year (Year 1)?

The Dot Corporation has changed its year-end from a calendar year-end to August 31. The income for its short period from January 1 to August 31 is $54,000. The tax for this short period is:

William, a cash-basis sole proprietor, had the following receipts and disbursements for the current year: ​ For the current year, what amount should William report as net earnings from self-employment?

Under the cash basis of accounting, expenses are generally deducted in the year they are paid.

Generally, cash basis taxpayers must account for payments of prepaid interest using the accrual method.

If a cash basis business owner pays 18 months of rent expense in advance during the last month of the tax year, how is this treated on the tax return? What is the reason tax law requires this treatment?

A taxpayer places a $50,000 5-year recovery period asset in service in 2016. This is the only asset placed in service in 2016. Assuming half-year convention, no immediate expensing, what is the amount of bonus depreciation?​

Perry develops a successful advertising business that he subsequently sells to his competitor, Carl, for $108,000. He retires in the same town where he has always lived and done business. Carl insists that Perry sign a covenant not to compete.The advertising business has no tangible assets; Carl receives only the name of the business, the client lists and whatever going-concern value there is. How should Carl treat the $108,000 cost of the advertising business he purchased?

Choose the correct statement.

Mark the correct answer. Section 197 intangibles:

During 2016, Travis purchases $13,000 of used manufacturing equipment (7-year property) for use in his business, his only asset purchase that year. Travis has taxable income from his business of $500,000. What is the maximum amount that Travis may deduct under the election to expense?

Section 197 intangibles:

Depreciation refers to the physical deterioration or loss of value of an asset.

A taxpayer places a $50,000 5-year recovery period asset in service in 2016. This is the only asset placed in service in 2016. Assuming half-year convention, an election to expense under Section 179, and taxable income after all deductions except Section 179 of $5,000, what is the amount of Section 179 immediate expensing?​

Which of the following is true with respect to the related party rules?

Amy is a calendar year taxpayer reporting on the cash basis. Indicate which of the following income or expense items should not be included in her 2016 tax return.

Which of the following statements with respect to the depreciation of real property under MACRS is correct?

If a taxpayer purchases land worth $200,000 with an office building valued at $100,000 on it, how are the two depreciated for tax purposes? Land: Office building:

Depreciation on property in the five-year MACRS class is claimed over a period of six tax years due to the half-year convention.