Exam 8: Depreciation, cost Recovery, amortization, and Depletion

If a used $35,000 automobile used 100% for business in the first year (2014)fails the 50% business usage test in the second year,no cost recovery will be recaptured.

Polly purchased a new hotel on July 20,2014,for $6,000,000.On January 20,2021,the building was sold.Determine the cost recovery deduction for the year of the sale.

Mary purchased a new five-year class asset on March 7,2014.The asset was listed property (not an automobile).It was used 60% for business and the rest of the time for personal use.The asset cost $90,000.Mary made the § 179 election.The income from the business before the § 179 deduction was $60,000.Mary does not take additional first-year depreciation (if available).Determine the total deductions with respect to the asset for 2014.

Norm purchases a new sports utility vehicle (SUV)on October 12,2014,for $60,000.The SUV has a gross vehicle weight of 6,200 lbs.It is used 100% of the time for business and it is the only business asset acquired by Norm during 2014.Compute the maximum deduction with respect to the SUV for 2014.Norm does take additional first- year depreciation (if available).

Carlos purchased an apartment building on November 16,2014,for $3,000,000.Determine the cost recovery for 2015.

Once the more-than-50% business usage test is passed for listed property,it does matter if the business usage for the property drops to 50% or less during the recovery period.

On July 10,2014,Ariff places in service a new sports utility vehicle that cost $70,000 and weighed 6,300 pounds.The SUV is used 100% for business.Determine Ariff's maximum deduction for 2014,assuming Ariff's § 179 business income is $110,000.Ariff does not take additional first-year depreciation (if available).

Under the alternative depreciation system (ADS),the half-year convention must be used for personalty.

Discuss the effect on the cost recovery method of a taxpayer election if the uniform capitalization rules apply to a farming business.

If an automobile is placed in service in 2014,the limitation for cost recovery in 2016 will be based on the cost recovery limits for the year 2014.

On February 20,2014,Susan paid $200,000 for a leasehold improvement to an office building that she is going to lease to John.The leasehold improvement is not a qualified leasehold improvement.The lease will begin on June 1,2014,and terminate on May 31,2024.At the termination of the lease,the improvement will be worthless.Determine Susan's deductible loss as a result of the termination of the lease.

On April 5,2014,Orange Corporation purchased,and placed in service,seven-year class assets costing $54,000 and five­year class assets costing $14,000.Orange elects to expense the maximum amount under § 179.Orange does not take additional first-year depreciation (if available).Assume taxable income is not a limitation.Determine Orange Corporation's cost recovery with respect to the assets for 2014.

Augie purchased one new asset during the year (five-year property)on November 10,2014,at a cost of $650,000.She would like to use the § 179 election if available.The income from the business before the cost recovery deduction and the § 179 deduction was $600,000.Determine the total cost recovery deduction with respect to the asset for 2014.

Pat purchased a used five-year class asset on March 15,2014,for $60,000.He did not elect § 179 expensing. Determine the cost recovery deduction for 2014 for earnings and profits purposes.

Hazel purchased a new business asset (five-year asset)on September 30,2014,at a cost of $100,000.On October 4,2014,Hazel placed the asset in service.This was the only asset Hazel placed in service in 2014.Hazel did not elect § 179 or additional first­year depreciation if available.On August 20,2015,Hazel sold the asset.Determine the cost recovery for 2015 for the asset.

Under the MACRS straight-line election for personalty,only the half-year convention is applicable.

If startup expenses total $53,000 in 2014,$51,000 is amortized over 180 months.

The statutory dollar cost recovery limits under § 280F for passenger automobiles are changed if mid­quarter cost recovery is used.

On May 2,2014,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 the cost recovery for 2014.Karen wants to maximize her deductions.

For personal property placed in service in 2014,the § 179 maximum deduction is limited to $25,000.