Question 1

YumYum Corporation (a calendar-year corporation) moved into a new office building adjacent to its manufacturing plant in 2019.It purchased and placed in service the following assets during 2019: $\begin{array}{ccr}
\underline{\text {Date Acquired}}&
\underline{\text {Asset Description}}&\underline{\text {Cost}}\
\text { March 4 } & \text { New Office Building } & \$ 850,000 \
\text { March 15 } & \text { New Computer Equipment } & 45,000 \
\text { March 25 } & \text { New Office Furniture } & \$ 25,000 \
\text { August 20 } & \text { Used Machinery } & \$ 120,000 \
\text { December 15 } & \text { New Automobile } & \$ 30.000
\end{array}$

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 Corporation made all elections available to maximize its overall depreciation deduction for 2019, what is YumYum's maximum depreciation deduction for the office building in 2019?

Accepted Answer

A) $17,281 
B) $24,472 
C) $28.302 
D) $29,622

Question 2

Zachary purchased a new car on August 1, 2018 for $14,500.His records indicate that he uses the car 45 percent for business and 55 percent for personal use.What are his cost recovery deductions for 2018 and 2019?

Accepted Answer

A) $653; $1,305 
B) $1,377; $2,205 
C) $6,625; $6,525 
D) $14,500; $0

Question 3

Harris Corporation (a calendar-year taxpayer), acquired a 5-year asset costing $10,000 on October 2nd.What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?

Accepted Answer

A) $3,500 and $138 
B) $2,500 and $426 
C) $1,500 and $706 
D) $500 and $958

Question 4

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 5

Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2019: $\begin{array}{lcr}
\underline{\text {Date Acquired}}&
\underline{\text {Asset Description}}&
\underline{\text {Cost}}\
\text { February 18}& \text { Warehouse Building } & \$ 2,450,000 \
 \text { June 2 }  & \text { Automobile } & 30,000 \
\text { August } 18& \text { Computer Equipment } & 220,000 \
\text { September } 20  & \text { Machinery } & 1,050,000 \
\text { December } 15& \text { Office Equipment } & 885,000
\end{array}$

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 2019.To maximize its total cost recovery deduction, what was Sanjuro Corporation's cost recovery deduction for the office equipment for 2019?

Accepted Answer

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

Question 6

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 7

Conrad Corporation has a June 30 year end.What is the MACRS depreciation percentage deduction for the first year for a 5-year asset acquired October 15 under the mid-quarter convention.

Accepted Answer

A) 35% 
B) 25% 
C) 15% 
D) 5%

Question 8

The first and last years of MACRS depreciation deductions for a 7-year asset costing $20,000 using the half-year convention are:

Accepted Answer

A) $4,000 and $1,152 
B) $2,858 and $892 
C) $2,000 and $576 
D) $1,428 and $1,428

Question 9

Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2019: $\begin{array}{lcr}
\underline{\text {Date Acquired}}&
\underline{\text {Asset Description}}&
\underline{\text {Cost}}\
\text { February 18}& \text { Warehouse Building } & \$ 2,450,000 \
 \text { June 2 }  & \text { Automobile } & 30,000 \
\text { August } 18& \text { Computer Equipment } & 220,000 \
\text { September } 20  & \text { Machinery } & 1,050,000 \
\text { December } 15& \text { Office Equipment } & 885,000
\end{array}$

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 2019.To maximize its total cost recovery deduction, what was Sanjuro Corporation's cost recovery deduction for the automobile for 2019?

Accepted Answer

A) $30,000 
B) $18,100 
C) $18,000 
D) $16,100

Question 10

On June 20, 2019 Baker Corporation (a calendar-year taxpayer) acquired 5-year equipment costing $30,000 and on October 28, 2019, 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 2019 is:

Accepted Answer

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

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Martin Corporation acquired 5-year property costing $2,185,000 on September 10, 2019.This is the only property acquired this year.What is Martin's maximum total cost recovery deduction for 2019 is:

Accepted Answer

A) $542,000 
B) $510,000 
C) $2,185,000 
D) $1,000,000

Question 13

Barber Corporation purchased all the assets of TECO Corporation for $1,820,000.An appraisal yielded the following: the building had a fair market value of $1,200,000; equipment a value of $1,000,000; and office equipment a value of $400,000.What is the depreciable basis for the office equipment?

Accepted Answer

A) $400,000 
B) $300,000 
C) $280,000 
D) $250,000

Question 14

The only acceptable convention for MACRS realty is

Accepted Answer

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

Question 15

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 16

The alternative depreciation system uses a straight-line allocation of an asset's cost to determine depreciation expense.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 20

Rodriguez Corporation acquired 7-year property costing $450,000 on October 1, 2019.This is the only property acquired this year and Rodriguez elects to expense the maximum amount under Section 179 without applying bonus depreciation.Rodriguez's income before deducting depreciation is $320,000.What is the maximum amount that Rodriguez can deduct in 2019 for Section 179 expensing?

Accepted Answer

A) $25,000 
B) $130,000 
C) $320,000 
D) $450,000

Exam 7: Property Acquisitions and Cost Recovery Deductions

Zachary purchased a new car on August 1, 2018 for $14,500.His records indicate that he uses the car 45 percent for business and 55 percent for personal use.What are his cost recovery deductions for 2018 and 2019?

Harris Corporation (a calendar-year taxpayer) , acquired a 5-year asset costing $10,000 on October 2^nd.What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?

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?

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?

Conrad Corporation has a June 30 year end.What is the MACRS depreciation percentage deduction for the first year for a 5-year asset acquired October 15 under the mid-quarter convention.

The first and last years of MACRS depreciation deductions for a 7-year asset costing $20,000 using the half-year convention are:

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

Martin Corporation acquired 5-year property costing $2,185,000 on September 10, 2019.This is the only property acquired this year.What is Martin's maximum total cost recovery deduction for 2019 is:

Barber Corporation purchased all the assets of TECO Corporation for $1,820,000.An appraisal yielded the following: the building had a fair market value of $1,200,000; equipment a value of $1,000,000; and office equipment a value of $400,000.What is the depreciable basis for the office equipment?

The only acceptable convention for MACRS realty is

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.

The alternative depreciation system uses a straight-line allocation of an asset's cost to determine depreciation expense.

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

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?

The after-tax cost of an asset increases if

Exam 7: Property Acquisitions and Cost Recovery Deductions

Zachary purchased a new car on August 1, 2018 for $14,500.His records indicate that he uses the car 45 percent for business and 55 percent for personal use.What are his cost recovery deductions for 2018 and 2019?

Harris Corporation (a calendar-year taxpayer) , acquired a 5-year asset costing $10,000 on October 2nd.What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?

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?

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?

Conrad Corporation has a June 30 year end.What is the MACRS depreciation percentage deduction for the first year for a 5-year asset acquired October 15 under the mid-quarter convention.

The first and last years of MACRS depreciation deductions for a 7-year asset costing $20,000 using the half-year convention are:

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

Martin Corporation acquired 5-year property costing $2,185,000 on September 10, 2019.This is the only property acquired this year.What is Martin's maximum total cost recovery deduction for 2019 is:

Barber Corporation purchased all the assets of TECO Corporation for $1,820,000.An appraisal yielded the following: the building had a fair market value of $1,200,000; equipment a value of $1,000,000; and office equipment a value of $400,000.What is the depreciable basis for the office equipment?

The only acceptable convention for MACRS realty is

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.

The alternative depreciation system uses a straight-line allocation of an asset's cost to determine depreciation expense.

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

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?

The after-tax cost of an asset increases if

Harris Corporation (a calendar-year taxpayer) , acquired a 5-year asset costing $10,000 on October 2^nd.What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?