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

Wu Copy Shop purchases a new copy machine in July 2016 for $30,000.No other depreciable assets are placed in service in 2016.Since Wu Copy Shop expects to be in a much higher tax bracket in future years,it desires to minimize its current cost recovery amount to the fullest extent possible.What is the amount of Wu Copy Shop's ADS depreciation for 2016?

Periodic capital recovery deductions for tax purposes include I.Depletion. II.Amortization. III.Depreciation. IV.Proration. ​

Which of the following intangible assets is subject to the 15-year amortization period?

Which of the following assets would not be allowed a depreciation deduction? I.A business computer used to process payroll and maintain a company's general ledger. II.A personal residence of a taxpayer. III.A building rented out for the production of rental income. IV.A yacht rented to a fishing party. ​

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

Serena owns a van that she paid $22,000 for in 2010 and used exclusively for personal purposes until May 9,2015,when she began using the van in her plumbing business.On May 9,2015,a comparable van was selling for $13,000.Serena sells the van on October 28,2017.Assuming that the van is 5-year MACRS property,it is not listed property,and that Serena did not make the Section 179 election to expense on the van,what is her allowable depreciation deduction in 2017?

Under the computation of the alternative minimum tax,the Alternative Depreciation System may be used but is not required.

Nonresidential commercial realty placed in service on March 2,2016,is depreciated over

Ralph buys a new truck (5-year MACRS property)to use in his landscaping business on May 13,2016,at a cost of $18,000.On November 5,2016,Ralph takes advantage of an end of the season clearance sale to purchase various landscaping equipment (7-year MACRS property)costing $34,000.Assuming that Ralph does not wish to immediately expense any of the cost of the property purchased this year,what is his 2016 maximum allowable cost recovery deduction?

A limitation exists on the annual amount of deductible depreciation for passenger automobiles.The limitation rules include which of the following? I.If the automobile is used less than 100% for business,the annual limitation amount is reduced by multiplying it by the business-use percentage. II.Section 179 expensing is available for passenger automobiles,but often is not advantageous. ​

In June 2015,Chase purchases a new car for $37,000.He uses the car 75% for business purposes.What is Chase's maximum depreciation deduction for the car in 2015?

The mid-month convention under MACRS provides that

To compute cost depletion,you must know the basis subject to depletion,the recoverable quantity of the natural resource,and the quantity of the natural resource sold during the year.

Tucker Estates places an apartment building in service on November 22,2012.The building's depreciable basis is $3,300,000.Tucker Estates sells the building on March 5,2016.What is Tucker Estates' 2016 depreciation deduction on the property?

Weston purchases equipment classified as 7-year property on January 5,2015,at a cost of $80,000.Section 179 was not elected.He sells the equipment on February 12,2017.What is Weston's 2017 depreciation deduction?

Sally purchased new equipment for her consulting business.She allocates the Section 179 deduction among the new assets.One piece of equipment cost $500,000 and was allocated one-half of the allowable Section 179 deduction and therefore has a depreciable basis of $250,000.

Why would a taxpayer ever elect to use the alternative depreciation system (ADS)rather than the MACRS?

Which income tax concepts/constructs might taxpayers who take depletion deductions be violating? I.Accounting method construct. II.All-inclusive income concept. III.Capital recovery concept. ​

Ying pays $170,000 for an office building on August 27,2015,to use in his consulting business.He properly allocates $150,000 to the building and $20,000 to the land.What is Ying's 2016 depreciation deduction on the property?

Match each statement with the correct term below. -Amortization