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

Wellington Company purchases a new warehouse on August 24, 2006, for $1,000,000 (exclusive of the cost allocated to the land). What is the 2018 MACRS depreciation deduction?

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

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 2018. It was the only piece of depreciable property placed in service during 2018. The paper shredder is 7-year MACRS property, the Section 179 election to expense was not exercised and bonus depreciation was not elected. What is Mountain View's 2018 depreciation deduction on the paper shredder?

Match each statement with the correct term below. -Depreciable basis

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.

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

Under current law, taxpayers must use regular MACRS.

Match each statement with the correct term below. -Depletion

What is the MACRS recovery period for an office desk?

Fonzi purchases a personal computer for $4,000 on March 19, 2018. He used it personally for correspondence, keeping track of personal finances, and on-line data base services. His children used it for schoolwork and games. On June 1, 2018, Fonzi starts a new secretarial service business and he converts the personal computer to 100% business use. The computer is worth $2,500 at the time (similar computers were selling for that amount in the used-computer market). a.What is Fonzi's depreciable basis? Briefly explain your reasoning. b.Fonzi desires to minimize depreciation deductions on the computer. What is the minimum allowable depreciation for 2018??

Mary Wilson purchases a factory building on September 29, 2018, for $4,000,000 (exclusive of the amount allocated to the land). It elects the alternative depreciation system (ADS). What is the 2018 depreciation deduction?

Discuss why listed property gets special attention.

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

Greenville Floral places a new tractor (7-year MACRS) into service on January 8, 2018. They pay $28,000 for the tractor. This is the only business asset placed into service during this year. Greenville Floral wants to minimize the amount of depreciation deductible in 2018. What is Greenville Floral's cost recovery for 2018?

Jim places a new lift truck (7-year MACRS property) into service on January 16, 2018. 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 2018?

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. ​

On March 23, 2018, Saturn Investments Corporation purchases a $5,000 computer (5-year property) for business-use. On November 27, 2018, it pays $4,000 for new office furniture (7-year property). It does not wish to use the Section 179 election to expense and elects not to take bonus depreciation. How much depreciation may Saturn deduct on the computer for 2018?

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

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. ​

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 passenger automobiles and trucks. ​