Question 1

_____ 4.The basis in property acquired by inheritance is normally its fair market value at the date of the decedent's death.

Accepted Answer

A) True 
 B)False

Question 2

The first and last years of MACRS depreciation deductions for a 5-year asset costing $10,000 using the half-year convention are:

Accepted Answer

A) $2,000 and $2,000 
B) $2,000 and $1,152 
C) $2,000 and $576 
D) $2,000 and $1,000

Question 3

Table 1: Sanjuro Corporation (a calendar-year corporation)purchased and placed in service the following assets during 2013:
  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 wishes to maximize its overall depreciation deduction for 2013 and is willing to make any necessary elections.
-Refer to the information in Table 1.What is Sanjuro Corporation's maximum total cost recovery deduction for 2013?
a.$512,550
b.$1,193,830
c.$1,731,707
d.$2,175,000

Accepted Answer

The answer of Table 1: Sanjuro Corporation (a calendar-year corporation)purchased...

Question 4

_____ 17.The lease inclusion amount in the table increases the deduction a person may take for business use of a leased automobile.

Accepted Answer

A) True 
 B)False

Question 5

The after-tax cost of an asset

Accepted Answer

A) Is higher for taxpayers with higher tax rates 
B) Is lower for taxpayers with lower discount rates 
C) Is higher for taxpayers with lower discount rates 
D) Is not affected by the taxpayer's tax rate

Question 6

_____ 1.The costs of all assets with useful lives extending at least 2 or more years must be capitalized with costs allocated over these useful lives.

Accepted Answer

A) True 
 B)False

Question 7

The only acceptable convention for MACRS realty is

Accepted Answer

A) Mid-week 
B) Mid-month 
C) Mid-quarter 
D) Half-year

Question 8

Table 1: Sanjuro Corporation (a calendar-year corporation)purchased and placed in service the following assets during 2013:
  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 wishes to maximize its overall depreciation deduction for 2013 and is willing to make any necessary elections.
-Refer to the information in Table 1.What is Sanjuro Corporation's cost recovery deduction for the warehouse for 2015 if it is sold in November of 2015?
a.$62,818
b.$54,966
c.$48,170
d.$3,724

Accepted Answer

The answer of Table 1: Sanjuro Corporation (a calendar-year corporation)purchased...

Question 9

Table 1: Sanjuro Corporation (a calendar-year corporation)purchased and placed in service the following assets during 2013:
  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 wishes to maximize its overall depreciation deduction for 2013 and is willing to make any necessary elections.
-Refer to the information in Table 1.What is Sanjuro Corporation's cost recovery deduction for the office equipment for 2014 assuming the necessary elections were made to maximize overall depreciation in 2013?

Accepted Answer

A) $134,695 
B) $78,595 
C) $31,680 
D) 0

Question 10

Table 1: Sanjuro Corporation (a calendar-year corporation)purchased and placed in service the following assets during 2013:
  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 wishes to maximize its overall depreciation deduction for 2013 and is willing to make any necessary elections.
-Refer to the information in Table 1.What is Sanjuro Corporation's maximum deduction for cost recovery for the automobile for 2015?

Accepted Answer

A) $1,875 
B) $2,950 
C) $3,050 
D) $5,100

Question 11

_____ 6.The mid-year and mid-month are acceptable conventions for depreciating personalty.

Accepted Answer

A) True 
 B)False

Question 12

Table 1: Sanjuro Corporation (a calendar-year corporation)purchased and placed in service the following assets during 2013:
  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 wishes to maximize its overall depreciation deduction for 2013 and is willing to make any necessary elections.
-Refer to the information in Table 1.What is Sanjuro Corporation's maximum deduction for cost recovery for the warehouse for 2014?

Accepted Answer

A) $62,818 
B) $55,052 
C) $49,809 
D) $44,566

Question 13

_____ 13.Bonus depreciation and Section 179 expensing cannot be taken on the same asset.C

Accepted Answer

A) True 
 B)False

Question 14

Bangor Company incurred $70,000 of research costs in year 1.In May of year 2,it began to sell the products developed through this research.Which of the following is correct regarding these expenditures?

Accepted Answer

A) Bangor can deduct $9,333 in year 2. 
B) Bangor can deduct $35,000 of the costs in each of years 1 and 2 
C) Bangor can deduct all $70,000 in year 2. 
D) Bangor cannot deduct the expenditures unless it abandons the project.

Question 15

_____ 3.A donee's basis in a gift is always equal to the donor's basis.

Accepted Answer

A) True 
 B)False

Exam 6: Property Acquisitions and Cost Recovery Deductions

_____ 4.The basis in property acquired by inheritance is normally its fair market value at the date of the decedent's death.

The first and last years of MACRS depreciation deductions for a 5-year asset costing $10,000 using the half-year convention are:

_____ 17.The lease inclusion amount in the table increases the deduction a person may take for business use of a leased automobile.

The after-tax cost of an asset

_____ 1.The costs of all assets with useful lives extending at least 2 or more years must be capitalized with costs allocated over these useful lives.

The only acceptable convention for MACRS realty is

_____ 6.The mid-year and mid-month are acceptable conventions for depreciating personalty.

_____ 13.Bonus depreciation and Section 179 expensing cannot be taken on the same asset.C

Bangor Company incurred $70,000 of research costs in year 1.In May of year 2,it began to sell the products developed through this research.Which of the following is correct regarding these expenditures?

_____ 3.A donee's basis in a gift is always equal to the donor's basis.