Question 1

Residential rental real estate placed in service on July 17,2016,is depreciated over

Accepted Answer

A) 39 years, straight-line method, mid-month convention. 
B) 40 years, straight-line method, mid-month convention. 
C) 27.5 years, 150%-declining-balance method, mid-year convention. 
D) 27.5 years, straight-line method, mid-month convention. 
E) 39 years, 150%-declining-balance method, mid-year convention. 
A) 39 years, straight-line method, mid-month convention. 
B) 40 years, straight-line method, mid-month convention. 
C) 27.5 years, 150%-declining-balance method, mid-year convention. 
D) 27.5 years, straight-line method, mid-month convention. 
E) 39 years, 150%-declining-balance method, mid-year convention.

Question 2

If the total amount paid for a business is greater than the sum of the net fair market values of the assets of the business,the excess

Accepted Answer

A) Is currently deductible. 
B) May be amortized over the period of 15 years. 
C) May be characterized as goodwill and amortized over a period of not more than 60 months. 
D) May be allocated to a noncompetition covenant and amortized over the period of time of the covenant. 
E) Is never deductible. 
A) Is currently deductible. 
B) May be amortized over the period of 15 years. 
C) May be characterized as goodwill and amortized over a period of not more than 60 months. 
D) May be allocated to a noncompetition covenant and amortized over the period of time of the covenant. 
E) Is never deductible.

Question 3

While Congress has enacted several different depreciation methods,all currently owned assets are depreciated using the method in effect when the asset was placed in service.

Accepted Answer

A) True 
 B)False

Question 4

Match each statement with the correct term below.
-Section 179

Accepted Answer

A) Computers, and automobiles. 
B) Used to recover the investment in intangible assets. 
C) Used to recover the investment in long-lived tangible business-use assets. 
D) An attempt to stimulate capital investment by small businesses. 
E) Used to recover the investment in assets that waste away through extraction. 
A) Computers, and automobiles. 
B) Used to recover the investment in intangible assets. 
C) Used to recover the investment in long-lived tangible business-use assets. 
D) An attempt to stimulate capital investment by small businesses. 
E) Used to recover the investment in assets that waste away through extraction.

Question 5

In most cases,the taxpayer may continue to use percentage (statutory)depletion after the initial basis has been fully recovered.In other words,the taxpayer's depletion deduction can exceed the cost of the depletable asset.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following correctly describe(s)cost recovery of automobiles placed in service in 2015?

Accepted Answer

A) Total depreciation, including bonus depreciation, cannot exceed $9,600. 
B) No cost recovery is allowed if the automobile is used 50% or less for trade or business. 
C) The amount of the depreciation deduction cannot exceed $11,160. 
D) No cost recovery is allowed for automobiles used for production of income activities. 
A) Total depreciation, including bonus depreciation, cannot exceed $9,600. 
B) No cost recovery is allowed if the automobile is used 50% or less for trade or business. 
C) The amount of the depreciation deduction cannot exceed $11,160. 
D) No cost recovery is allowed for automobiles used for production of income activities.

Question 7

Which of the following would not be allowed a depreciation deduction?
I.Inventory.
II.Business equipment.
III.Land acquired as an investment.
IV.Cattle used in a dairy herd.
​

Accepted Answer

A) Only statement I is correct. 
B) Statements I and III are correct. 
C) Statements I, III and IV are correct. 
D) Only statement IV is correct. 
E) All of the assets are depreciable. 
A) Only statement I is correct. 
B) Statements I and III are correct. 
C) Statements I, III and IV are correct. 
D) Only statement IV is correct. 
E) All of the assets are depreciable.

Question 8

Aaron purchases a taxicab (5-year MACRS property)for $20,000 on December 3,2016.This is the only business asset Aaron acquires in 2016.He does not desire to use the Section 179 election.What is the maximum amount of depreciation that he can deduct in 2016?

Accepted Answer

A) $1,000 
B) $3,000 
C) $4,000 
D) $10,500 
E) $14,000 
A) $1,000 
B) $3,000 
C) $4,000 
D) $10,500 
E) $14,000

Question 9

On July 17,2016,Elise purchases office furniture (7-year property)costing $50,000 for use in her business.She wishes to use the Section 179 election.Her taxable income before the depreciation deduction is $25,000.What is the maximum total cost recovery deduction Elise can take for the current year?

Accepted Answer

A) $7,145 
B) $24,287 
C) $23,573 
D) $28,573 
E) $29,462 
A) $7,145 
B) $24,287 
C) $23,573 
D) $28,573 
E) $29,462

Question 10

The mid-year convention under MACRS provides that

Accepted Answer

A) Depreciation is allowable in the year of acquisition of qualified property only if the property is placed in service in the first one-half of that year. 
B) One half of the year-of-acquisition depreciation is allowed regardless of when the property is placed in service during the year. One-half year's depreciation is allowable for the year of disposition. 
C) Depreciation is allowable in the year of disposition only if the property is disposed of in the last one-half of that year. 
D) The cost recovery deduction is based on the number of months the property was in service in the year of acquisition. Therefore, one-half month's cost recovery is allowable for the month in which the property is place in service and for the month of disposition. 
A) Depreciation is allowable in the year of acquisition of qualified property only if the property is placed in service in the first one-half of that year. 
B) One half of the year-of-acquisition depreciation is allowed regardless of when the property is placed in service during the year. One-half year's depreciation is allowable for the year of disposition. 
C) Depreciation is allowable in the year of disposition only if the property is disposed of in the last one-half of that year. 
D) The cost recovery deduction is based on the number of months the property was in service in the year of acquisition. Therefore, one-half month's cost recovery is allowable for the month in which the property is place in service and for the month of disposition.

Question 11

In 2016,Sanford Corporation purchases and places in service $2,410,000 of equipment for its manufacturing business.What portion of the $2,410,000 may Sanford elect to treat as a Section 179 expense?

Accepted Answer

A) $-0- 
B) $15,000 
C) $20,000 
D) $25,000 
E) $90,000 
A) $-0- 
B) $15,000 
C) $20,000 
D) $25,000 
E) $90,000

Question 12

Delta Freight Company purchases 10 delivery vans on April 4,2016,at a total cost of $366,000.Delta uses the regular MACRS system on all of its delivery vans (the delivery vans are 5-year MACRS property and are not limited by listed property rules).Delta's annual income is $15,000 before the depreciation deduction.What is Delta's maximum cost recovery deduction on the vans in 2016?

Accepted Answer

A) $15,000 
B) $69,200 
C) $73,200 
D) $85,200 
E) $91,200 
A) $15,000 
B) $69,200 
C) $73,200 
D) $85,200 
E) $91,200

Question 13

Manu bought Franklin's ownership interest in Antoine Company on July 1 of the current year.Manu pays Franklin $30,000 cash not to compete or interfere with Manu's business activities over the next three years.How much cost recovery can Manu claim in the current year because of the covenant not to compete?

Accepted Answer

A) $1,000 
B) $2,000 
C) $3,000 
D) $6,000 
E) $30,000 
A) $1,000 
B) $2,000 
C) $3,000 
D) $6,000 
E) $30,000

Question 14

What is the MACRS recovery period for a warehouse placed in service on August 31,2016?

Accepted Answer

A) 10 years. 
B) 27.5 years. 
C) 31.5 years. 
D) 39 years. 
E) 40 years. 
A) 10 years. 
B) 27.5 years. 
C) 31.5 years. 
D) 39 years. 
E) 40 years.

Question 15

Rand Company purchases and places into service a company automobile costing $40,000 in April 2015.What is the 2015 depreciation deduction on the auto?

Accepted Answer

A) $2,960 
B) $7,200 
C) $8,000 
D) $11,160 
E) $40,000 
A) $2,960 
B) $7,200 
C) $8,000 
D) $11,160 
E) $40,000

Question 16

Qualified Section 179 property for a retail store includes
I.Store shelving.
II.Company auto used by salesmen.
III.Sidewalks in front of the store.
IV.Delivery van owned by the store.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement III is correct. 
C) Statements I and IV are correct. 
D) Statements II and III are correct. 
E) Statements I, II, and IV are correct. 
A) Only statement I is correct. 
B) Only statement III is correct. 
C) Statements I and IV are correct. 
D) Statements II and III are correct. 
E) Statements I, II, and IV are correct.

Question 17

If more than 40% of the depreciable basis of personal property is placed in service during the last three months of the tax year,the taxpayer must use the mid-quarter convention.

Accepted Answer

A) True 
 B)False

Question 18

During 2016,Williams Company purchases and places in service office equipment with a cost of $40,000.The equipment is 7-year MACRS property.What is its 2016 depreciation deduction for purposes of the alternative minimum tax?

Accepted Answer

A) $2,000 
B) $2,857 
C) $3,000 
D) $4,000 
E) $5,714 
A) $2,000 
B) $2,857 
C) $3,000 
D) $4,000 
E) $5,714

Question 19

In 2016,Steve purchases $975,000 of equipment.The taxable income of the business is $10,000.What is Steve's maximum Section 179 deduction in 2016?

Accepted Answer

A) $10,000 
B) $- 0 - 
C) $25,000 
D) $975,000 
E) $500,000 
A) $10,000 
B) $- 0 - 
C) $25,000 
D) $975,000 
E) $500,000

Question 20

The Section 179 expense deduction is allowed on all depreciable and tangible property used in a trade or business.

Accepted Answer

A) True 
 B)False

Residential rental real estate placed in service on July 17,2016,is depreciated over

If the total amount paid for a business is greater than the sum of the net fair market values of the assets of the business,the excess

While Congress has enacted several different depreciation methods,all currently owned assets are depreciated using the method in effect when the asset was placed in service.

Match each statement with the correct term below. -Section 179

In most cases,the taxpayer may continue to use percentage (statutory)depletion after the initial basis has been fully recovered.In other words,the taxpayer's depletion deduction can exceed the cost of the depletable asset.

Which of the following correctly describe(s)cost recovery of automobiles placed in service in 2015?

Which of the following would not be allowed a depreciation deduction? I.Inventory. II.Business equipment. III.Land acquired as an investment. IV.Cattle used in a dairy herd.

Aaron purchases a taxicab (5-year MACRS property)for $20,000 on December 3,2016.This is the only business asset Aaron acquires in 2016.He does not desire to use the Section 179 election.What is the maximum amount of depreciation that he can deduct in 2016?

On July 17,2016,Elise purchases office furniture (7-year property)costing $50,000 for use in her business.She wishes to use the Section 179 election.Her taxable income before the depreciation deduction is $25,000.What is the maximum total cost recovery deduction Elise can take for the current year?

The mid-year convention under MACRS provides that

In 2016,Sanford Corporation purchases and places in service $2,410,000 of equipment for its manufacturing business.What portion of the $2,410,000 may Sanford elect to treat as a Section 179 expense?

What is the MACRS recovery period for a warehouse placed in service on August 31,2016?

Rand Company purchases and places into service a company automobile costing $40,000 in April 2015.What is the 2015 depreciation deduction on the auto?

Qualified Section 179 property for a retail store includes I.Store shelving. II.Company auto used by salesmen. III.Sidewalks in front of the store. IV.Delivery van owned by the store.

If more than 40% of the depreciable basis of personal property is placed in service during the last three months of the tax year,the taxpayer must use the mid-quarter convention.

During 2016,Williams Company purchases and places in service office equipment with a cost of $40,000.The equipment is 7-year MACRS property.What is its 2016 depreciation deduction for purposes of the alternative minimum tax?

In 2016,Steve purchases $975,000 of equipment.The taxable income of the business is $10,000.What is Steve's maximum Section 179 deduction in 2016?

The Section 179 expense deduction is allowed on all depreciable and tangible property used in a trade or business.

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

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

Residential rental real estate placed in service on July 17,2016,is depreciated over

If the total amount paid for a business is greater than the sum of the net fair market values of the assets of the business,the excess

While Congress has enacted several different depreciation methods,all currently owned assets are depreciated using the method in effect when the asset was placed in service.

Match each statement with the correct term below. -Section 179

In most cases,the taxpayer may continue to use percentage (statutory)depletion after the initial basis has been fully recovered.In other words,the taxpayer's depletion deduction can exceed the cost of the depletable asset.

Which of the following correctly describe(s)cost recovery of automobiles placed in service in 2015?

Which of the following would not be allowed a depreciation deduction? I.Inventory. II.Business equipment. III.Land acquired as an investment. IV.Cattle used in a dairy herd. ​

Aaron purchases a taxicab (5-year MACRS property)for $20,000 on December 3,2016.This is the only business asset Aaron acquires in 2016.He does not desire to use the Section 179 election.What is the maximum amount of depreciation that he can deduct in 2016?

On July 17,2016,Elise purchases office furniture (7-year property)costing $50,000 for use in her business.She wishes to use the Section 179 election.Her taxable income before the depreciation deduction is $25,000.What is the maximum total cost recovery deduction Elise can take for the current year?

The mid-year convention under MACRS provides that

In 2016,Sanford Corporation purchases and places in service $2,410,000 of equipment for its manufacturing business.What portion of the $2,410,000 may Sanford elect to treat as a Section 179 expense?

What is the MACRS recovery period for a warehouse placed in service on August 31,2016?

Rand Company purchases and places into service a company automobile costing $40,000 in April 2015.What is the 2015 depreciation deduction on the auto?

Qualified Section 179 property for a retail store includes I.Store shelving. II.Company auto used by salesmen. III.Sidewalks in front of the store. IV.Delivery van owned by the store. ​

If more than 40% of the depreciable basis of personal property is placed in service during the last three months of the tax year,the taxpayer must use the mid-quarter convention.

During 2016,Williams Company purchases and places in service office equipment with a cost of $40,000.The equipment is 7-year MACRS property.What is its 2016 depreciation deduction for purposes of the alternative minimum tax?

In 2016,Steve purchases $975,000 of equipment.The taxable income of the business is $10,000.What is Steve's maximum Section 179 deduction in 2016?

The Section 179 expense deduction is allowed on all depreciable and tangible property used in a trade or business.

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Which of the following would not be allowed a depreciation deduction? I.Inventory. II.Business equipment. III.Land acquired as an investment. IV.Cattle used in a dairy herd.

Qualified Section 179 property for a retail store includes I.Store shelving. II.Company auto used by salesmen. III.Sidewalks in front of the store. IV.Delivery van owned by the store.