Question 1

If an asset's actual useful life is longer than the assigned recovery period, the MACRS tables cannot be used.

Accepted Answer

A) True 
 B)False

Question 2

If an automobile is purchased for 100 percent use in the taxpayer's business, the annual automobile depreciation limitations do not apply.

Accepted Answer

A) True 
 B)False

Question 3

Countryside Acres Apartment Complex had the following transactions during the year:
Using the accrual method, calculate the net income:
   ​

Accepted Answer

The answer of Countryside Acres Apartment Complex had the following...

Question 4

Generally, cash basis taxpayers must account for payments of prepaid interest using the accrual method.

Accepted Answer

A) True 
 B)False

Question 5

Sales of property at a gain may be restricted under the related party rules of the Internal Revenue Code.

Accepted Answer

A) True 
 B)False

Question 6

On September 21, 2014, Jay purchased a commercial building. The cost basis assigned to the building is $700,000. Jay also owns a residential apartment building he purchased on June 15, 2013 with a cost basis of $500,000.
a.Calculate Jay's total depreciation deduction for the buildings for 2014, using MACRS.
b.Calculate Jay's total depreciation deduction for the apartment building for 2015, using MACRS.

Accepted Answer

The answer of On September 21, 2014, Jay purchased a...

Question 7

Depreciation on property in the five-year MACRS class is claimed over a period of six tax years due to the half-year convention.

Accepted Answer

A) True 
 B)False

Question 8

Depreciation is the process of allocating the cost of assets to expense over a period of years.

Accepted Answer

A) True 
 B)False

Question 9

Quince Corporation changes its year-end from a fiscal year-end to a calendar year-end. The corporation has taxable income of $39,000 for its 3-month short period beginning October 1, 2014 and ending December 31, 2014. Calculate the corporation's tax for the short period.

Accepted Answer

$39,000 / 3 months × 12 months

Question 10

Amy is a calendar year taxpayer reporting on the cash basis. Indicate which of the following income or expense items should not be included in her 2014 tax return.

Accepted Answer

A) On April 15, 2015, she makes a deductible contribution to an IRA for 2014. 
B) She prepays half a year of interest in advance on her mortgage on the last day of 2014. 
C) She pays all her outstanding invoices for standard business expenses in the last week of December. 
D) She sends out a big bill to a customer on January 1, 2015, even though she did all of the work in December of 2014. 
A) On April 15, 2015, she makes a deductible contribution to an IRA for 2014. 
B) She prepays half a year of interest in advance on her mortgage on the last day of 2014. 
C) She pays all her outstanding invoices for standard business expenses in the last week of December. 
D) She sends out a big bill to a customer on January 1, 2015, even though she did all of the work in December of 2014.

Question 11

Mark the correct statement.

Accepted Answer

A) Residential real property is depreciated over 39 years. 
B) Nonresidential real property is depreciated over 27.5 years. 
C) Nonresidential real property is depreciated over 39 years. 
D) Depreciation on real property starts at the beginning of the year in which the property is placed in service. 
A) Residential real property is depreciated over 39 years. 
B) Nonresidential real property is depreciated over 27.5 years. 
C) Nonresidential real property is depreciated over 39 years. 
D) Depreciation on real property starts at the beginning of the year in which the property is placed in service.

Question 12

ABC Corp bought a production machine on January 1, 2012 for $31,250. The company elected out of Section 179 expensing and elected out of claiming bonus depreciation in 2012, and is depreciating the machine using the MACRS accelerated depreciation tables for 5-year property. What is the 2014 depreciation (year 3) deduction for the machine?

Accepted Answer

A) $6,000 
B) $6,250 
C) $10,000 
D) $12,500 
E) None of the above is correct 
A) $6,000 
B) $6,250 
C) $10,000 
D) $12,500 
E) None of the above is correct

Question 13

Taxpayers may expense the cost of depreciable personal property placed in service during the year and used in a trade or business in an amount up to a maximum of $20,000 annually.

Accepted Answer

A) True 
 B)False

Question 14

Mark the correct answer. In cash basis accounting, for tax purposes:

Accepted Answer

A) Income is recognized when it is actually or constructively received and expenses are recognized when they are actually or constructively incurred, regardless of when paid. 
B) Income is recognized when it is earned regardless of when received and expenses are recognized when they are actually or constructively incurred. 
C) Income is generally recognized when it is actually or constructively received and expenses are generally recognized when they are paid. 
D) The cash basis is not allowed for businesses reported on Schedule C. 
A) Income is recognized when it is actually or constructively received and expenses are recognized when they are actually or constructively incurred, regardless of when paid. 
B) Income is recognized when it is earned regardless of when received and expenses are recognized when they are actually or constructively incurred. 
C) Income is generally recognized when it is actually or constructively received and expenses are generally recognized when they are paid. 
D) The cash basis is not allowed for businesses reported on Schedule C.

Question 15

Which of the following is true with respect to the related party rules?

Accepted Answer

A) Bill sells stock to his sister for a $3,000 loss. Bill can deduct the loss on his tax return. 
B) A taxpayer's uncle is a related party for purposes of Section 267. 
C) A disallowed loss on a related party transaction can be used to offset any future gain when the property is sold to an unrelated party. 
D) Under the constructive ownership rules of Section 267, a shareholder owns 10 percent of the stock owned by a corporation in which he or she is a shareholder. 
E) None of the above are true. 
A) Bill sells stock to his sister for a $3,000 loss. Bill can deduct the loss on his tax return. 
B) A taxpayer's uncle is a related party for purposes of Section 267. 
C) A disallowed loss on a related party transaction can be used to offset any future gain when the property is sold to an unrelated party. 
D) Under the constructive ownership rules of Section 267, a shareholder owns 10 percent of the stock owned by a corporation in which he or she is a shareholder. 
E) None of the above are true.

Question 16

Jasper is a self-employed businessman. On March 5, 2014 he purchases a personal computer for use at his home. He uses the computer for personal purposes 50 percent of the time and for business use the remainder of the time. The computer cost $2,300. Jasper wants to claim the maximum amount of depreciation possible for 2014, including the election to expense, if it is available. What is the amount of depreciation that Jasper should claim on the computer for 2014?

Accepted Answer

A) $2,300 
B) $1,150 
C) $460 
D) $230 
E) Some amount less than the above amounts 
A) $2,300 
B) $1,150 
C) $460 
D) $230 
E) Some amount less than the above amounts

Question 17

Patrick purchased a used passenger automobile on June 1, 2014. He paid $18,000 for the automobile. During 2014, he uses the automobile 75 percent of the time for business. Patrick wishes to claim the maximum amount of depreciation possible.
a.Calculate Patrick's depreciation expense on the automobile for 2014.
b.​Calculate Patrick's depreciation expense on the automobile for 2015, assuming the same 75 percent business use.

Accepted Answer

The answer of Patrick purchased a used passenger automobile on...

Question 18

Goodwill is considered to be a Section 197 asset amortized over 15 years for tax purposes.

Accepted Answer

A) True 
 B)False

Question 19

On January 1, 2014, Roxburgia Company places a commercial storage building in service. The costs allocated to construction of the building total $300,000 and land is accounted for separately. Which of the following is a true statement with respect to the depreciation of the building?

Accepted Answer

A) The period over which the building must be depreciated is shorter than the period over which a residential building must be depreciated. 
B) Since the building was placed in service on the first day of the year, the depreciation expense for each year the building is used, except for the year of disposition, will be the same amount. 
C) Since the land is accounted for separately, the amount of depreciation expense for the building cannot be determined from the information given. 
D) The depreciation expense for Year 2 would be the same regardless of whether the building is placed in service on January 1, 2014 or February 1, 2014. 
E) All of the above. 
A) The period over which the building must be depreciated is shorter than the period over which a residential building must be depreciated. 
B) Since the building was placed in service on the first day of the year, the depreciation expense for each year the building is used, except for the year of disposition, will be the same amount. 
C) Since the land is accounted for separately, the amount of depreciation expense for the building cannot be determined from the information given. 
D) The depreciation expense for Year 2 would be the same regardless of whether the building is placed in service on January 1, 2014 or February 1, 2014. 
E) All of the above.

Question 20

John purchases residential rental property on September 30, 2014 for a cost of $290,000. Of this amount, $140,000 is allocable to the cost of the home and the remaining $150,000 is allocable to the cost of the land. What is John's maximum depreciation deduction for 2014?

Accepted Answer

A) $5,090 
B) $1,485 
C) $1,061 
D) $370 
E) None of the above 
A) $5,090 
B) $1,485 
C) $1,061 
D) $370 
E) None of the above

If an asset's actual useful life is longer than the assigned recovery period, the MACRS tables cannot be used.

If an automobile is purchased for 100 percent use in the taxpayer's business, the annual automobile depreciation limitations do not apply.

Countryside Acres Apartment Complex had the following transactions during the year: Using the accrual method, calculate the net income:

Generally, cash basis taxpayers must account for payments of prepaid interest using the accrual method.

Sales of property at a gain may be restricted under the related party rules of the Internal Revenue Code.

Depreciation on property in the five-year MACRS class is claimed over a period of six tax years due to the half-year convention.

Depreciation is the process of allocating the cost of assets to expense over a period of years.

Quince Corporation changes its year-end from a fiscal year-end to a calendar year-end. The corporation has taxable income of $39,000 for its 3-month short period beginning October 1, 2014 and ending December 31, 2014. Calculate the corporation's tax for the short period.

Amy is a calendar year taxpayer reporting on the cash basis. Indicate which of the following income or expense items should not be included in her 2014 tax return.

Mark the correct statement.

Taxpayers may expense the cost of depreciable personal property placed in service during the year and used in a trade or business in an amount up to a maximum of $20,000 annually.

Mark the correct answer. In cash basis accounting, for tax purposes:

Which of the following is true with respect to the related party rules?

Goodwill is considered to be a Section 197 asset amortized over 15 years for tax purposes.

On January 1, 2014, Roxburgia Company places a commercial storage building in service. The costs allocated to construction of the building total $300,000 and land is accounted for separately. Which of the following is a true statement with respect to the depreciation of the building?

John purchases residential rental property on September 30, 2014 for a cost of $290,000. Of this amount, $140,000 is allocable to the cost of the home and the remaining $150,000 is allocable to the cost of the land. What is John's maximum depreciation deduction for 2014?

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 7: Accounting Periods and Methods and Depreciation

If an asset's actual useful life is longer than the assigned recovery period, the MACRS tables cannot be used.

If an automobile is purchased for 100 percent use in the taxpayer's business, the annual automobile depreciation limitations do not apply.

Countryside Acres Apartment Complex had the following transactions during the year: Using the accrual method, calculate the net income: ​

Generally, cash basis taxpayers must account for payments of prepaid interest using the accrual method.

Sales of property at a gain may be restricted under the related party rules of the Internal Revenue Code.

Depreciation on property in the five-year MACRS class is claimed over a period of six tax years due to the half-year convention.

Depreciation is the process of allocating the cost of assets to expense over a period of years.

Quince Corporation changes its year-end from a fiscal year-end to a calendar year-end. The corporation has taxable income of $39,000 for its 3-month short period beginning October 1, 2014 and ending December 31, 2014. Calculate the corporation's tax for the short period.

Amy is a calendar year taxpayer reporting on the cash basis. Indicate which of the following income or expense items should not be included in her 2014 tax return.

Mark the correct statement.

Taxpayers may expense the cost of depreciable personal property placed in service during the year and used in a trade or business in an amount up to a maximum of $20,000 annually.

Mark the correct answer. In cash basis accounting, for tax purposes:

Which of the following is true with respect to the related party rules?

Goodwill is considered to be a Section 197 asset amortized over 15 years for tax purposes.

On January 1, 2014, Roxburgia Company places a commercial storage building in service. The costs allocated to construction of the building total $300,000 and land is accounted for separately. Which of the following is a true statement with respect to the depreciation of the building?

John purchases residential rental property on September 30, 2014 for a cost of $290,000. Of this amount, $140,000 is allocable to the cost of the home and the remaining $150,000 is allocable to the cost of the land. What is John's maximum depreciation deduction for 2014?

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Countryside Acres Apartment Complex had the following transactions during the year: Using the accrual method, calculate the net income: