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

On March 23,2016,Saturn Investments Corporation purchases a $5,000 computer (5-year property)for business-use.On November 27,2016,it pays $4,000 for new office furniture (7-year property).It does not wish to use the Section 179 election to expense.How much depreciation may Saturn deduct on the computer for 2016?

Wellington Apartments purchases an apartment building on November 9,2016,for $1,000,000 (exclusive of the cost allocated to the land).What is the 2016 MACRS depreciation deduction?

Kuo Corporation uses the following assets in its business in 2016: ​ Assume Kuo Corporation does not utilize Sec 179 expense,has not disposed of any asset since 2002,and has never expensed an asset previously.The equipment was sold on 9-9-16 for $4,000. What is Kuo's 2016 depreciation expense using MACRS and for ADS?

Which of the following assets would be allowed a depreciation deduction? I.A truck used to provide transportation to a job site. II.A car used for personal purposes. III.An apartment building rented out for the production of rental income. IV.A personal-use computer of the taxpayer. ​

Mike purchases a computer (5-year property)for $3,000 during the current year.He uses the computer 40% of the time in his consulting business.Mike would like to maximize his cost recovery deduction.What is his allowable cost recovery deduction on the computer?

The mid-quarter convention under MACRS provides that

Match each statement with the correct term below. -Depreciation

Determine the MACRS cost recovery deductions for 2016 and 2017 on the following assets that were purchased for use in a farming business on July 15,2016.The taxpayer does not wish to use the Section 179 election. ​ a.Breeding hogs depreciation:​Total 2016 Breeding hogs Cost Recovery Deduction (show your calculations)Total 2017 Breeding hogs Cost Recovery Deduction (show your calculations) b.Dairy cattle depreciation:​Total 2016 Dairy Cattle Cost Recovery Deduction (show your calculations)Total 2017 Dairy Cattle Cost Recovery Deduction (show your calculations) c.Tractor depreciation:​Total 2016 Tractor Cost Recovery Deduction (show your calculations)Total 2017 Tractor Cost Recovery Deduction (show your calculations)

Why might a taxpayer elect to depreciate assets using the Alternative Depreciation System (ADS)? I.The taxpayer desires rapid write off of assets. II.The taxpayer may be close to being subject to the alternative minimum tax. III.The taxpayer is experiencing a low income time period. ​

Which of the following statements related to the Section 179 election to expense is (are)true? I.A Section 179 deduction can be claimed on tangible personal property II.A Section 179 deduction can be claimed on property held for the production of income. III.A Section 179 deduction can be claimed on real property. IV.A Section 179 deduction is allowed only for assets used in trade or business. ​

The Section 179 election promotes which of the following tax concept(s)or doctrine(s)? I.Claim of Right Doctrine. II.Administrative Convenience Concept. III.Tax benefit rule. IV.Substance-Over-Form Doctrine. ​

MACRS requires the use of one of three conventions.For personal property,the general and most common convention is

Charles purchases an interest in a uranium mine for $2,500,000 on June 7,2016.Recoverable tonnage is estimated at 500,000.During 2016,25,000 tons are mined and sold for $800,000.Charles incurs $500,000 of expenses during 2016.The percentage depletion rate for uranium is 22%.What is the depletion deduction for 2016?

Annie owns a mine,which cost her $460,000 several years ago.In prior years she had claimed depletion in the amount of $140,000.It is estimated that 800,000 tons of minerals remained in the mine at the beginning of the year.During the current year,Annie mined and sold 180,000 tons.What is the amount of Annie's cost depletion deduction for the current year?

Shannon purchases equipment classified as 3-year property on December 19,2016,at a cost of $100,000.Section 179 is not elected and Shannon does not use the straight-line method.Shannon purchased no other depreciable property in 2016.What is the amount of the MACRS depreciation deduction for 2016?

Daniel purchases 5-year class listed property (a computer)on March 2,2016,for $30,000.It is used 75% for business,and the remainder for personal use.Daniel wishes to maximize his 2016 depreciation deduction.What is Daniel 's 2016 depreciation deduction?

Match each statement with the correct term below. -Straight line

Match each statement with the correct term below. -MACRS

Listed property rules include the following: I.If listed property is not predominantly used in the taxpayer's business,the business-use portion of the asset cannot be depreciated. II.If more than 50 percent of the listed property's total use for each year is related to the taxpayer's business,the asset is treated the same as any other mixed-use business asset. III.When listed property is used 50% or less in the taxpayer's business,the Section 179 expense election does not apply to the asset. IV.Listed property includes computers,and passenger automobiles. ​

MACRS applies to new and used depreciable personal property used for the production of income.