Question 1

YumYum Corporation (a calendar-year corporation) moved into a new office building adjacent to its manufacturing plant in 2018. It purchased and placed in service the following assets during 2018:  All assets are used 100% for business use. The office building does not include the cost of the land on which it is located that was an additional $300,000. The corporation had $900,000 income from operations before calculating depreciation deductions. If YumYum does not apply Section 179 expensing or bonus depreciation, but elects to use straight-line depreciation on all of its assets, how much is its 2018 depreciation deduction?

Accepted Answer

A)  $17,281 
B)  $28,972 
C)  $35,134 
D)  $35,394

Question 2

What is the purpose of the lease inclusion amount for automobiles?

Accepted Answer

The answer of What is the purpose of the lease...

Question 3

Coralbay, a calendar-year corporation, purchased used office furniture for $240,000 and new machines for $1,880,000 in July 2018. What is Coralbay's maximum cost recovery deduction for 2018?

Accepted Answer

A)  $240,000 
B)  $510,000 
C)  $1,000,000 
D)  $2,120,000

Question 4

What are listed properties?

Accepted Answer

The answer of What are listed properties?...

Question 5

Other Objective Questions
Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions:
-Jack did not depreciate one of his machines that cost $40,000 because he had net operating losses for the last two years. Which of the following statements is true?

Accepted Answer

A)  Jack's basis in the asset is $40,000 this year. 
B)  Jack can deduct three year's depreciation in the current year. 
C)  Jack must file amended returns to claim the depreciation for prior years. 
D)  If Jack sells the machine for $20,000 this year, he has a $20,000 loss.

Question 6

During the year, Garbin Corporation (a calendar-year corporation that manufactures furniture) purchased the following assets:  In computing depreciation of these assets, which of the following averaging conventions will be used?

Accepted Answer

A)  Half-year and mid-month 
B)  Mid-quarter and mid-month 
C)  Half-year, mid-quarter, and mid-month 
D)  Mid-quarter only

Question 7

Other Objective Questions
Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions:
-MACRS depreciation

Accepted Answer

The answer of Other Objective Questions
Indicated by a P for...

Question 8

Section 179 expenses exceeding the annual cost limitation may be carried forward for five years only.

Accepted Answer

A) True 
 B)False

Question 9

Depletion is the term used for the cost allocation of wasting assets.

Accepted Answer

A) True 
 B)False

Question 10

Other Objective Questions
Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions:
-The after-tax cost of an asset increases if

Accepted Answer

A)  The cost recovery period is increased 
B)  The marginal tax rate increases 
C)  The discount percentage decreases 
D)  The asset's salvage value increases

Question 11

Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2018:  All assets are used 100% for business use. The warehouse building does not include the cost of the land on which it is located which was an additional $1,000,000. The corporation has $3,000,000 income from operations before calculating depreciation deductions. Sanjuro Corporation made whatever elections were necessary to maximize its overall depreciation deduction for 2018. To maximize its total cost recovery deduction, what was Sanjuro Corporation's cost recovery deduction for the used office equipment for 2018?

Accepted Answer

A)  $2,185,000 
B)  $1,000,000 
C)  $885,000 
D)  $442,500

Question 12

Morgan Corporation, a calendar-year corporation, purchased a $2,800,000 factory building in February, $950,000 of new machinery in April, $80,000 of new office furniture in August, $900,000 of used machinery in October, and $150,000 of additional new office furniture in December 2018.
What is the corporation's first year maximum cost recovery deduction assuming the corporation expects at least $2,500,000 of income before depreciation deductions in 2018?

Accepted Answer

The answer of Morgan Corporation, a calendar-year corporation, purchased a...

Question 13

Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2018:  All assets are used 100% for business use. The warehouse building does not include the cost of the land on which it is located which was an additional $1,000,000. The corporation has $3,000,000 income from operations before calculating depreciation deductions. Sanjuro Corporation made whatever elections were necessary to maximize its overall depreciation deduction for 2018. To maximize its total cost recovery deduction, what was Sanjuro Corporation's cost recovery deduction for the automobile for 2018?

Accepted Answer

A)  $18,000 
B)  $11,160 
C)  $10,000 
D)  $3,160

Question 14

Wolfgang, a calendar-year taxpayer, purchased residential rental realty in April of year 1 for $150,000 ($50,000 of which was for the land).

Accepted Answer

A)  What is Wolfgang's MACRS depreciation deduction in years 1 and 2? 
B)  What is his depreciation deduction in year 20 if he disposes of the asset in August of that year? 
C)  How would your answers change to (a) and (b) if the property is nonresidential realty?

Question 15

Wendell purchased a computer system for $6,000 on June 1, 2016. He kept records of his computer usage and found out he used the computer 45 percent of the time for his business, 20 percent for tracking his extensive investment portfolio and making trades, and the remaining time was for personal use in both years.
a. Determine Wendell's depreciation deductions in 2016 and 2017.
b. In 2018, Wendell's usage remained the same but he decided to dispose of the computer on November 1. Determine his 2018 depreciation deduction and his gain or loss on the disposition if he received $2,500 for the system.

Accepted Answer

The answer of Wendell purchased a computer system for $6,000...

Question 16

Other Objective Questions
Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions:
-The cost of an asset with a useful life exceeding one year can be

Accepted Answer

A)  Expensed immediately 
B)  Capitalized until disposal 
C)  Capitalized with part of the costs deducted annually 
D)  All of the above are possible depending on the asset

Question 17

Other Objective Questions
Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions:
-Mixed-use depreciation limitations

Accepted Answer

The answer of Other Objective Questions
Indicated by a P for...

Question 18

Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2018:  All assets are used 100% for business use. The warehouse building does not include the cost of the land on which it is located which was an additional $1,000,000. The corporation has $3,000,000 income from operations before calculating depreciation deductions. Sanjuro Corporation made whatever elections were necessary to maximize its overall depreciation deduction for 2018.
What would be Sanjuro Corporation's cost recovery deduction for the used office equipment for 2019?

Accepted Answer

A)  $0 
B)  $129,797 
C)  $442,500 
D)  $18,000

Question 19

The mid-year and mid-month are acceptable conventions for depreciating personalty.

Accepted Answer

A) True 
 B)False

Question 20

On November 7, 2018, Wilson Corporation, a calendar-year taxpayer, acquires 7-year property for $1,090,000. This is the only property acquired this year. Section 179 expensing is elected, without application of bonus depreciation. What is Wilson's total depreciation deduction for 2018?

Accepted Answer

A)  $510,000 
B)  $1,000,000 
C)  $1,003,213 
D)  $1,090,000

Exam 7: Property Acquisitions and Cost Recovery Deductions

What is the purpose of the lease inclusion amount for automobiles?

Coralbay, a calendar-year corporation, purchased used office furniture for $240,000 and new machines for $1,880,000 in July 2018. What is Coralbay's maximum cost recovery deduction for 2018?

What are listed properties?

During the year, Garbin Corporation (a calendar-year corporation that manufactures furniture) purchased the following assets: In computing depreciation of these assets, which of the following averaging conventions will be used?

Other Objective Questions Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions: -MACRS depreciation

Section 179 expenses exceeding the annual cost limitation may be carried forward for five years only.

Depletion is the term used for the cost allocation of wasting assets.

Other Objective Questions Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions: -The after-tax cost of an asset increases if

Wolfgang, a calendar-year taxpayer, purchased residential rental realty in April of year 1 for $150,000 ($50,000 of which was for the land) .

Other Objective Questions Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions: -The cost of an asset with a useful life exceeding one year can be

Other Objective Questions Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions: -Mixed-use depreciation limitations

The mid-year and mid-month are acceptable conventions for depreciating personalty.

On November 7, 2018, Wilson Corporation, a calendar-year taxpayer, acquires 7-year property for $1,090,000. This is the only property acquired this year. Section 179 expensing is elected, without application of bonus depreciation. What is Wilson's total depreciation deduction for 2018?