Question 1

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

Accepted Answer

A) An amended return may be filed to claim the loss previously disallowed. 
B) The unrelated party may claim the loss previously disallowed. 
C) The disallowed loss may be used to offset gain on the subsequent sale. 
D) The disallowed loss may be used if there is a further loss on the subsequent sale. 
E) The disallowed loss is lost forever.

Question 2

If a taxpayer purchases land worth $200,000 with an office building valued at $100,000 on it, how are the two depreciated for tax purposes?
Land:
Office building:

Accepted Answer

The answer of If a taxpayer purchases land worth $200,000...

Question 3

If a corporation has a short tax year, other than their first or last year of operation, explain how the corporation calculates the tax for the short period.

Accepted Answer

The answer of If a corporation has a short tax...

Question 4

ABC Corp bought a production machine on January 1, 2013 for $31,250. The company elected out of Section 179 expensing and elected out of claiming bonus depreciation in 2013, and is depreciating the machine using the MACRS accelerated depreciation tables for 5-year property. What is the 2015 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

Question 5

The maximum annual Section 179 immediate expensing deduction in 2015 is $500,000.​

Accepted Answer

A) True 
 B)False

Question 6

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 7

Perry develops a successful advertising business that he subsequently sells to his competitor, Carl, for $108,000. He retires in the same town where he has always lived and done business. Carl insists that Perry sign a covenant not to compete.The advertising business has no tangible assets; Carl receives only the name of the business, the client lists and whatever going-concern value there is. How should Carl treat the $108,000 cost of the advertising business he purchased?

Accepted Answer

The answer of Perry develops a successful advertising business that...

Question 8

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.

Question 9

Taxpayers must use the straight-line method of depreciation for all productive assets.

Accepted Answer

A) True 
 B)False

Question 10

Automobiles generally have a 3-year cost recovery period under the Modified Accelerated Cost Recovery System (MACRS).

Accepted Answer

A) True 
 B)False

Question 11

Mark the correct answer. In calculating depreciation:

Accepted Answer

A) Straight-line depreciation is higher than double declining balance depreciation in the early years. 
B) Straight-line depreciation is higher than double declining balance depreciation in the later years. 
C) Double declining balance is a method of straight-line depreciation. 
D) MACRS depreciation requires that salvage value be taken into account.

Question 12

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 $54,000. The tax for this short period is:

Accepted Answer

A) $2,040 
B) $6,250 
C) $8,667 
D) $10,572

Question 13

On June 1, 2015, Cork Oak Corporation purchased a passenger automobile for 100 percent use in its business. The auto, with a cost basis of $22,000, has a 5-year estimated life. It also is 5-year recovery property. How much depreciation should be taken for 2015, assuming Cork Oak Corporation uses the accelerated depreciation method under MACRS but does not choose to make the election to expense or take bonus depreciation?

Accepted Answer

A) $2,100 
B) $3,160 
C) $4,400 
D) $4,900 
E) None of the above

Question 14

To be depreciated, must an asset actually lose value each year?

Accepted Answer

The answer of To be depreciated, must an asset actually...

Question 15

Choose the incorrect statement.

Accepted Answer

A) Books and records may be kept on a different year-end basis than the year-end used for tax purposes. 
B) The choice to file on a fiscal year-end basis must be made with an initial tax return. 
C) Almost all individuals file tax returns using a calendar year accounting period. 
D) An individual may request IRS approval to change to a fiscal year-end basis if certain conditions are met.

Question 16

A taxpayer places a $50,000 5-year recovery period asset in service in 2015. This is the only asset placed in service in 2015. Assuming half-year convention, no immediate expensing and no income limitation, what is the amount of total cost recovery deduction ​if bonus depreciation is extended into 2015?​

Accepted Answer

A) ​$0 
B) ​$5,000 
C) ​$25,000 
D) ​$30,000 
E) ​$50,000

Question 17

Which of the following is not an acceptable method of accounting under the tax law?

Accepted Answer

A) The accrual method 
B) The cash method 
C) The hybrid method 
D) All of the above are acceptable 
E) None of the above are acceptable

Question 18

On October 21, 2015, 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, 2014 with a cost basis of $500,000.
a.Calculate Jay's total depreciation deduction for the buildings for 2015, using MACRS.
b.Calculate Jay's total depreciation deduction for the commercial building for 2016, using MACRS.

Accepted Answer

The answer of On October 21, 2015, Jay purchased a...

Question 19

Scott purchases a small business from Lew on July 1, 2015. He paid the following amounts for the business:
​  
a.How much of the $458,000 purchase price is for Section 197 intangible assets?
b.What amount can Scott deduct on his 2015 tax return as Section 197 intangible amortization?

Accepted Answer

The answer of Scott purchases a small business from Lew...

Question 20

The hybrid method of accounting involves the use of both the accrual and cash methods of accounting.

Accepted Answer

A) True 
 B)False

Exam 7: Accounting Periods and Methods and Depreciation

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 a taxpayer purchases land worth $200,000 with an office building valued at $100,000 on it, how are the two depreciated for tax purposes? Land: Office building:

If a corporation has a short tax year, other than their first or last year of operation, explain how the corporation calculates the tax for the short period.

The maximum annual Section 179 immediate expensing deduction in 2015 is $500,000.

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

Mark the correct statement.

Taxpayers must use the straight-line method of depreciation for all productive assets.

Automobiles generally have a 3-year cost recovery period under the Modified Accelerated Cost Recovery System (MACRS).

Mark the correct answer. In calculating depreciation:

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 $54,000. The tax for this short period is:

To be depreciated, must an asset actually lose value each year?

Choose the incorrect statement.

Which of the following is not an acceptable method of accounting under the tax law?

Scott purchases a small business from Lew on July 1, 2015. He paid the following amounts for the business: a.How much of the $458,000 purchase price is for Section 197 intangible assets? b.What amount can Scott deduct on his 2015 tax return as Section 197 intangible amortization?

The hybrid method of accounting involves the use of both the accrual and cash methods of accounting.

Exam 7: Accounting Periods and Methods and Depreciation

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 a taxpayer purchases land worth $200,000 with an office building valued at $100,000 on it, how are the two depreciated for tax purposes? Land: Office building:

If a corporation has a short tax year, other than their first or last year of operation, explain how the corporation calculates the tax for the short period.

The maximum annual Section 179 immediate expensing deduction in 2015 is $500,000.​

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

Mark the correct statement.

Taxpayers must use the straight-line method of depreciation for all productive assets.

Automobiles generally have a 3-year cost recovery period under the Modified Accelerated Cost Recovery System (MACRS).

Mark the correct answer. In calculating depreciation:

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 $54,000. The tax for this short period is:

To be depreciated, must an asset actually lose value each year?

Choose the incorrect statement.

Which of the following is not an acceptable method of accounting under the tax law?

Scott purchases a small business from Lew on July 1, 2015. He paid the following amounts for the business: ​ a.How much of the $458,000 purchase price is for Section 197 intangible assets? b.What amount can Scott deduct on his 2015 tax return as Section 197 intangible amortization?

The hybrid method of accounting involves the use of both the accrual and cash methods of accounting.

The maximum annual Section 179 immediate expensing deduction in 2015 is $500,000.

Scott purchases a small business from Lew on July 1, 2015. He paid the following amounts for the business: a.How much of the $458,000 purchase price is for Section 197 intangible assets? b.What amount can Scott deduct on his 2015 tax return as Section 197 intangible amortization?