Question 1

Lopez Corporation is a calendar-year taxpayer. What is the MACRS depreciation percentage deduction for the last year for a 7-year asset acquired May 12 under the mid-quarter convention.

Accepted Answer

A)  1.09% 
B)  3.33% 
C)  5.53% 
D)  7.64%

Question 2

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 was Sanjuro Corporation's cost recovery deduction for the warehouse in 2018?

Accepted Answer

A)  $55,052 
B)  $60,295 
C)  $70,536 
D)  $77,959

Question 3

Useful lives for realty include all of the following except:

Accepted Answer

A)  25 years 
B)  27.5 years 
C)  39 years 
D)  40 years

Question 4

On June 20, 2018 Baker Corporation (a calendar-year taxpayer) acquired 5-year equipment costing $30,000 and on October 28, 2018, it acquired 7-year equipment costing $160,000. Baker did not claim Section 179 expensing or bonus depreciation and no other assets were acquired during the year. Baker's depreciation for 2018 is:

Accepted Answer

A)  $28,864 
B)  $27,152 
C)  $13,212 
D)  $7,212

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:
-Listed property limitations

Accepted Answer

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

Question 6

What is the adjusted basis of an asset?

Accepted Answer

The answer of What is the adjusted basis of an...

Question 7

What is the difference between depreciation, depletion, and amortization?

Accepted Answer

The answer of What is the difference between depreciation, depletion,...

Question 8

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. What is the maximum Section 179 deduction YumYum can claim for 2018?

Accepted Answer

A)  $500,000 
B)  $253,160 
C)  $208,000 
D)  $25,000

Question 9

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 10

When would it be advisable to use the alternative depreciation system? Which properties must be depreciated by the alternative depreciation system?

Accepted Answer

The answer of When would it be advisable to use...

Question 11

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 12

Momee Corporation, a calendar-year corporation, bought only one asset in 2013, a crane it purchased for $700,000 on November 24. It disposed of the asset in April, 2018. What is its depreciation deduction for this asset in 2018 if cost recovery was determined using only regular MACRS?

Accepted Answer

A)  $62,510 
B)  $61,110 
C)  $31,255 
D)  $22,916

Question 13

The lease inclusion amount increases the deduction a person may take for business use of a leased automobile.

Accepted Answer

A) True 
 B)False

Question 14

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

Question 15

Soledad left her son Juan property valued at $700,000 when she died. Soledad paid $825,000 for the property but its adjusted basis was only $450,000 when she died. Juan did not want the building so he authorized the administrator to complete the sale of the building 6 months after Soledad's death for $650,000. Due to the decline in value of a number of Soledad's other assets after her death, the administrator elected the alternate valuation date for the assets. What is the realized and recognized gain or loss on the sale of the asset? Explain your answer.

Accepted Answer

The answer of Soledad left her son Juan property valued...

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:
-Peter received his uncle's coin collection as a gift when it was valued at $150,000. Over the years, the uncle had purchased the coins for a total of $75,000. The uncle paid a $15,000 gift tax on the gift. What is Peter's basis in the coin collection?

Accepted Answer

A)  $75,000 
B)  $82,500 
C)  $90,000 
D)  $150,000

Question 17

If more than 40 percent of all personalty purchased during the year is placed in service during the last quarter of the year, the mid-quarter convention must be used.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Section 179 expensing does not apply to used property.

Accepted Answer

A) True 
 B)False

Question 20

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:
-Gribble Corporation acquires the Dibble Corporation for $7,200,000. On appraisal, the assets of Dibble Corporation have a fair market value of $6,800,000. The excess of the purchase price over the fair market value of the assets:

Accepted Answer

A)  Can be apportioned to the assets based on their relative fair market value. 
B)  Is goodwill that is amortized over 15 years. 
C)  Is goodwill that is amortized over 40 years. 
D)  Must be capitalized until Dibble is sold.

Exam 7: Property Acquisitions and Cost Recovery Deductions

Lopez Corporation is a calendar-year taxpayer. What is the MACRS depreciation percentage deduction for the last year for a 7-year asset acquired May 12 under the mid-quarter convention.

Useful lives for realty include all of the following except:

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: -Listed property limitations

What is the adjusted basis of an asset?

What is the difference between depreciation, depletion, and amortization?

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

When would it be advisable to use the alternative depreciation system? Which properties must be depreciated by the alternative depreciation system?

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

Momee Corporation, a calendar-year corporation, bought only one asset in 2013, a crane it purchased for $700,000 on November 24. It disposed of the asset in April, 2018. What is its depreciation deduction for this asset in 2018 if cost recovery was determined using only regular MACRS?

The lease inclusion amount increases the deduction a person may take for business use of a leased automobile.

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?

If more than 40 percent of all personalty purchased during the year is placed in service during the last quarter of the year, the mid-quarter convention must 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: -The after-tax cost of an asset increases if

Section 179 expensing does not apply to used property.