Exam 10: Cost Recovery on Property: Depreciation, depletion, and Amortization

Davis,Inc.,a motorcycle wheel manufacturer,purchased a new spoke machine in 2016 for $200,000.What are the tax effects of this purchase? I.If taxable income is $100,000,then $100,000 can be expensed in 2016. II.No Section 179 election is allowed if Davis decides to use a $200,000 depreciable basis. III.If Davis had purchased a total of $3,400,000 of equipment in 2016,the corporation can deduct none of the purchases in 2016 through use of the Section 179 election. ​

Rafael bought an apartment building on March 27,2010,at a cost of $2,000,000 (exclusive of the cost allocated to the land).He sells the building on November 3,2016.What is Rafael's cost recovery deduction on the building for 2016 if he wants to take the maximum deduction allowable on the building?

Felix purchases the franchise rights to a new sports team and will be able to amortize the cost over the 15-year amortization period for intangibles.

Pedro purchased used delivery equipment costing $80,000 and used computers costing $90,000 (the only assets purchased)that are used in his business.He may allocate his section 179 deduction to either or both assets.

Jim places a new lift truck (7-year MACRS property)into service on January 16,2016.He pays $30,000 for the truck.This is the only business asset placed into service during this year.Jim does not desire to use the Section 179 election.How much depreciation may Jim deduct for 2016?

Jason purchases a patent at a cost of $24,000.The patent has 8 years of legal life remaining from the date of purchase. I.If the patent is the only asset Jason purchased,he must amortize the patent over 15 years. II.If the patent was part of the purchase of all the assets of a business,he must amortize the patent over 15 years. ​

Under current law,taxpayers must use regular MACRS.

Brent purchases a new warehouse building on May 16,2015,for $6,000,000 (exclusive of the cost of the land).What is Brent's 2016 depreciation deduction?

Cost recoverable intangible properties include I.Uranium ore. II.Patents. III.Agreements not to compete. IV.Copyrights. ​

What is the MACRS recovery period for a video game used in an arcade?

Mountain View Development Co.purchases a new high volume paper shredder for use in their document management department for $20,000 on November 7 of 2016.It was the only piece of depreciable property placed in service during 2016.The paper shredder is 7-year MACRS property,the Section 179 election to expense was not exercised.What is Mountain View's 2016 depreciation deduction on the paper shredder?

During 2016,Witt Processing Corporation places $210,000 of Section 179 property in service for use in its business.What is the amount of Witt Processing's maximum Section 179 deduction for 2016?

Chestnut Furniture Company purchases a delivery van on June 14,2016,at a cost of $30,000.The delivery van has a 5-year MACRS life and an ADS recovery period of 5 years.What is Chestnut's minimum cost recovery deduction on the van in 2016?

What is the Alternative Depreciation System (ADS)recovery period for a light general purpose truck?

In May 2016,Preston purchases 5-year MACRS property costing $150,000 and 7-year MACRS property costing $60,000.Preston's income is $100,000.If Preston wishes to maximize his total 2016 cost recovery deduction,what will his total cost recovery deduction be on the properties purchased in 2016?

Which of the following is not part of the modified accelerated cost recovery system (MACRS)?

Wilson Corporation purchases a factory building on September 29,2016,for $4,000,000 (exclusive of the amount allocated to the land).It elects the alternative depreciation system (ADS).What is the 2016 depreciation deduction?

Sophia purchases a completely furnished condominium in Breckenridge,Colorado.She uses the condo as a rental property.Which of the following assets are subject to periodic cost recovery? I.Land. II.Furniture. III.Building. IV.Trout fishing equipment. V.Kitchen appliances. ​

During 2016,Duncan Company purchases and places in service office equipment with a cost of $40,000.The equipment is 7-year MACRS property with an ADS recovery period of 10 years.Duncan desires to avoid the AMT.What is its minimum 2016 depreciation deduction?

In 2016,Oscar purchases $2,150,000 of equipment.The taxable income of the business is $20,000.What is Oscar's maximum Section 179 deduction in 2016?