Exam 7: Accounting Periods and Methods and Depreciation

Steve Corp bought a $600,000 apartment building in June of 2013. Of the purchase price, $104,950 is allocated to the value of the land. What is the maximum amount of depreciation that the company can claim in 2014 (year 2) for the building?

Residential real estate purchased during 2014 is assigned a 27.5-year cost recovery period under the Modified Accelerated Cost Recovery System.

Jerry and Julie are brother and sister. Jerry sold stock to Julie for $5,000, its fair market value. The stock cost Jerry $10,000 5 years ago. Also, Jerry sold Carol (an unrelated party) stock for $2,000 that cost $10,000 3 years ago. What is Jerry's recognized loss before the $3,000 capital loss limitation?

The Dot Corporation has changed its year-end from a calendar year-end to August 31. The income for its short period from January 1 to August 31 is $48,000. The tax for this short period is:

Calculate the following amounts: a. The first year of depreciation on a residential rental building costing $100,000, purchased on November 30. b. The first year of depreciation on an auto used 100 percent in business, costing $30,000, purchased in May, 2014. (No bonus depreciation deducted). c. The second year of depreciation on a computer used exclusively for business, costing $7,000, purchased May 2013. d. The third year of depreciation on business furniture costing $1,000, purchased in July 2012, using the half-year convention and accelerated depreciation.

Aaron has a successful business with $50,000 of income in 2014. He purchased a new 7-year MACRS property with a cost of $7,000. For tax purposes, what is the largest write-off Aaron can obtain in 2014 for the new asset?

William, a cash-basis sole proprietor, had the following receipts and disbursements for 2014: For 2014, what amount should William report as net earnings from self-employment?

Shellie purchased a passenger automobile on March 2, 2014. She paid $14,000 for the automobile and can support business use of 85 percent. Calculate the amount of depreciation on the automobile for 2014 using the accelerated MACRS method (if available), assuming Shellie does not make the election to expense or claim bonus depreciation.

During 2014, Travis purchases $13,000 of used manufacturing equipment (7-year property) for use in his business, his only asset purchase that year. Travis has taxable income from his business of $500,000. What is the maximum amount that Travis may deduct under the election to expense?

If a loss from sale or exchange of property between related parties is disallowed and the property is subsequently sold to an unrelated party,

If land declines in value, it may be depreciated for tax purposes.

The tax law imposes restrictions on the depreciation of "listed" property such as automobiles and computers.

Which one of the following is a Section 197 intangible?

Maintenance costs for capital assets are deducted in the year the amount is paid or incurred.

Under MACRS, the same method of depreciation (accelerated or straight-line) must be used for all property in a given class placed in service during that year.