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

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?

Match each statement with the correct term below. -Amortization

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

Sorensen Corporation purchases equipment in 2018 for $200,000. Sorensen has substantial taxable income and desires to minimize this amount to the fullest extent possible. How much can Sorensen deduct under Section 179?

The mid-year convention under MACRS provides that

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

Ying pays $170,000 for an office building on August 27, 2017, to use in his consulting business. He properly allocates $150,000 to the building and $20,000 to the land. What is Ying's 2018 depreciation deduction on the property?

To be considered predominately used in a trade or business under the listed property rules, more than 75% of an asset's total use for each taxable year must be related to the taxpayer's trade or business.

The mid-month convention under MACRS provides that

Aaron purchases a taxicab (5-year MACRS property) for $20,000 on December 3, 2018. This is the only business asset Aaron acquires in 2018. He does not desire to use the Section 179 election and elects not to take bonus depreciation. What is the maximum amount of depreciation that he can deduct in 2018?