Question 1

Costs that qualify as research and experimental expenditures include all of the following except

Accepted Answer

A) depreciation of laboratory equipment. 
B) management studies. 
C) costs incurred in developing product improvements. 
D) costs of obtaining a patent such as attorney fees.

Question 2

Any Section 179 deduction that is not allowed currently due to the taxable income limitation may be carried over and deducted in future years.

Accepted Answer

A) True 
 B)False

Question 3

In July of 2016,Pat acquired a new automobile for $28,000 and used the automobile 80% for business.Pat can take a maximum depreciation deduction in 2016 of

Accepted Answer

A) $8,928. 
B) $2,528. 
C) $22,400. 
D) $13,440.

Question 4

The election to use ADS is made on a year-by-year,property-class by property-class basis for real and personal property.

Accepted Answer

A) True 
 B)False

Question 5

On April 12,2015,Suzanne bought a computer for $20,000 for business use.This was the only purchase for that year.Suzanne used the most accelerated depreciation method available but did not elect Sec.179.Bonus depreciation was not available.Suzanne sells the machine in 2016.The depreciation on the computer for 2016 is

Accepted Answer

A) $2,000. 
B) $3,200. 
C) $4,000. 
D) $6,400.

Question 6

On August 11,2016,Nancy acquired and placed into service residential rental property,which cost $430,000;the cost of the land has been excluded.Nancy annually elects the maximum allowed Sec.179 deduction.The total depreciation for the year is (rounded)

Accepted Answer

A) $5,865. 
B) $4,141. 
C) $5,117. 
D) $15,636.

Question 7

Richards Corporation reports taxable income exceeding $1 million per year.In 2016 it acquired and placed in service $1,600,000 of new equipment.The equipment,its only property addition this year,is five-year property and was shipped directly from the factory.What is the maximum tax deduction it can take this year with respect to this new equipment?

Accepted Answer

A) $1,160,000 
B) $800,000 
C) $720,000 
D) $1,050,000

Question 8

William purchases nonresidential real property costing $300,000 and places it in service in March 2015.What is Lincoln's 2016 depreciation on the property?

Accepted Answer

A) $6,099 
B) $7,692 
C) $8,637 
D) $10,908

Question 9

Atiqa took out of service and sold a residential rental property on October 31 of this year.She had originally acquired the property in July ten years ago.The building (excluding the value of the land)cost $1,000,000.How much is her current year depreciation deduction?

Accepted Answer

A) $30,300 
B) $36,360 
C) $18,182 
D) $28,785

Question 10

When depreciating 5-year property,the final year of depreciation will be year

Accepted Answer

A) 3) 
B) 4) 
C) 5) 
D) 6)

Question 11

Kenrick is an employee of the Theta Corp.sales department.He uses his automobile 75% for making sales calls.He can deduct depreciation on his auto by reporting on Form 4562 (Depreciation and Amortization).

Accepted Answer

A) True 
 B)False

Question 12

This year Bauer Corporation incurs the following costs in development of new products:  No benefits are realized from the research expenditures until next year.If Bauer Corporation elects to expense the research expenditures,the deduction is

Accepted Answer

A) $10,000 this year and $175,000 next year. 
B) $175,000 next year. 
C) $175,000 this year. 
D) $215,000 this year.

Question 13

A taxpayer owns an economic interest in an oil and gas property.She is allowed to deduct the smaller of cost depletion or percentage depletion.

Accepted Answer

A) True 
 B)False

Question 14

On January l Grace leases and places into service an automobile with a FMV of $39,000.The business use of the automobile is 60%.The "inclusion amount" for the initial year of the lease from the IRS tables is $20.The annual lease payments are $8,000.What are the tax consequences of this lease?

Accepted Answer

A) deduction for lease payments of $4,782 
B) deduction for lease payments of $4,800 
C) deduction for lease payments of $6,000 
D) deduction for lease payment of $8,982

Question 15

Sophie owns an unincorporated manufacturing business.In 2016,she purchases and places in service $2,017,000 of qualifying five-year equipment for use in her business.the equipment does not qualify for bonus depreciation.Her taxable income from the business before any Sec.179 deduction is $450,000.Sophie's elects to expense the maximum under Sec.179.What is Sophie's maximum total cost recovery deduction for 2016?

Accepted Answer

A) $403,400 
B) $450,000 
C) $754,800 
D) $797,800

Question 16

On October 2,2016,Dave acquired and placed into service 5-year business equipment costing $70,000.No other acquisitions were made during the year.Dave does not use Sec.179 expensing,and the property does not qualify for bonus depreciation.The depreciation for this year is using the most accelerated method possible is

Accepted Answer

A) $0. 
B) $3,500. 
C) $7,000. 
D) $14,000.

Question 17

If personal-use property is converted to trade or business use,the basis for depreciation is the lesser of adjusted basis or FMV on the date of conversion.

Accepted Answer

A) True 
 B)False

Question 18

Maria,a sole proprietor,has several items of office furniture and equipment which are depreciable.All were acquired before this year.She is not required to report her depreciation deduction on form 4562.

Accepted Answer

A) True 
 B)False

Question 19

In calculating depletion of natural resources each period,

Accepted Answer

A) cost depletion must be used. 
B) percentage depletion must be used. 
C) the greater of cost depletion or percentage depletion must be used. 
D) the smaller of cost depletion or percentage depletion must be used.

Question 20

If a new luxury automobile is used 100% for business and placed in service in 2016,the maximum MACRS depreciation on the vehicle for 2016 is $11,160.

Accepted Answer

A) True 
 B)False

Exam 10: Depreciation, cost Recovery, amortization, and Depletion

Costs that qualify as research and experimental expenditures include all of the following except

Any Section 179 deduction that is not allowed currently due to the taxable income limitation may be carried over and deducted in future years.

In July of 2016,Pat acquired a new automobile for $28,000 and used the automobile 80% for business.Pat can take a maximum depreciation deduction in 2016 of

The election to use ADS is made on a year-by-year,property-class by property-class basis for real and personal property.

On August 11,2016,Nancy acquired and placed into service residential rental property,which cost $430,000;the cost of the land has been excluded.Nancy annually elects the maximum allowed Sec.179 deduction.The total depreciation for the year is (rounded)

William purchases nonresidential real property costing $300,000 and places it in service in March 2015.What is Lincoln's 2016 depreciation on the property?

Atiqa took out of service and sold a residential rental property on October 31 of this year.She had originally acquired the property in July ten years ago.The building (excluding the value of the land) cost $1,000,000.How much is her current year depreciation deduction?

When depreciating 5-year property,the final year of depreciation will be year

Kenrick is an employee of the Theta Corp.sales department.He uses his automobile 75% for making sales calls.He can deduct depreciation on his auto by reporting on Form 4562 (Depreciation and Amortization).

This year Bauer Corporation incurs the following costs in development of new products: No benefits are realized from the research expenditures until next year.If Bauer Corporation elects to expense the research expenditures,the deduction is

A taxpayer owns an economic interest in an oil and gas property.She is allowed to deduct the smaller of cost depletion or percentage depletion.

On January l Grace leases and places into service an automobile with a FMV of $39,000.The business use of the automobile is 60%.The "inclusion amount" for the initial year of the lease from the IRS tables is $20.The annual lease payments are $8,000.What are the tax consequences of this lease?

If personal-use property is converted to trade or business use,the basis for depreciation is the lesser of adjusted basis or FMV on the date of conversion.

Maria,a sole proprietor,has several items of office furniture and equipment which are depreciable.All were acquired before this year.She is not required to report her depreciation deduction on form 4562.

In calculating depletion of natural resources each period,

If a new luxury automobile is used 100% for business and placed in service in 2016,the maximum MACRS depreciation on the vehicle for 2016 is $11,160.