Question 1

On June 1,2014,James places in service a new automobile that cost $40,000.The car is used 60% for business and 40% for personal use.(Assume this percentage is maintained for the life of the car. )James does not take additional first-year depreciation (if available).Determine the cost recovery deduction for 2014.

Accepted Answer

A) $1,776 
B) $1,896 
C) $4,800 
D) $8,000 
E) None of these

Question 2

Discuss the criteria used to determine whether a building is residential or nonresidential realty.Also explain the tax consequences resulting from this determination if the property is placed in service in 2014.

Accepted Answer

The answer of Discuss the criteria used to determine whether...

Question 3

Rick purchased a uranium interest for $10,000,000 on January 3,2014,when recoverable reserves were estimated at 200,000 units.A total of 10,000 units were extracted in 2013 and 7,000 units were sold in 2014.Gross income from the property was $2,800,000 and taxable income without the allowance for depletion was $1,000,000.Determine the depletion deduction for 2014.

Accepted Answer

The answer of Rick purchased a uranium interest for $10,000,000...

Question 4

The key date for calculating cost recovery is the date the asset is placed in service.

Accepted Answer

A) True 
 B)False

Question 5

Cost depletion is determined by multiplying the depletion cost per unit by the number of units sold.

Accepted Answer

A) True 
 B)False

Question 6

Doug purchased a new factory building on January 15,1989,for $400,000.On March 1,2014,the building was sold.Determine the cost recovery deduction for the year of the sale assuming he did not use the MACRS straight- line method.

Accepted Answer

A) $0 
B) $1,587 
C) $2,645 
D) $12,696 
E) None of these

Question 7

A purchased trademark is a § 197 intangible.

Accepted Answer

A) True 
 B)False

Question 8

Bhaskar purchased a new factory building on September 10,2014,for $3,700,000.Five hundred thousand of the purchase price was allocated to the land.He elected the alternative depreciation system (ADS).Determine the cost recovery deduction for 2015.

Accepted Answer

A) $23,328 
B) $80,000 
C) $82,048 
D) $92,500 
E) None of these

Question 9

On January 15,2014,Vern purchased the rights to a mineral interest for $3,500,000.At that time it was estimated that the recoverable units would be 500,000.During the year,40,000 units were mined and 25,000 units were sold for $800,000.Vern incurred expenses during 2014 of $500,000.The percentage depletion rate is 22%.Determine Vern's depletion deduction for 2014.

Accepted Answer

A) $150,000 
B) $175,000 
C) $176,000 
D) $200,000 
E) $250,000

Question 10

Discuss the tax consequences of listed property being used for the production of income compared to being used in a trade or business.

Accepted Answer

The answer of Discuss the tax consequences of listed property...

Question 11

Jim acquires a new seven-year class asset on September 20,2013,for $80,000.He placed the asset in service on October 5,2013.He does not elect to expense any of the asset under § 179 or elect straight­line,cost recovery.He takes additional first-year depreciation.He sells the asset on August 25,2014.This is the only asset he acquires in 2013.Determine Jim's cost recovery in 2013 and 2014.

Accepted Answer

The answer of Jim acquires a new seven-year class asset...

Question 12

On May 30,2014,Jane signed a 20-year lease on a factory building to use for her business.The lease begins on June 1,2014.In August 2014,Jane paid $300,000 for leasehold improvements to the building.Determine Jane's total deduction with respect to the leasehold improvements for 2014.

Accepted Answer

A) $2,889 
B) $4,173 
C) $4,815 
D) $25,000 
E) None of these

Question 13

Residential rental real estate includes property where 80% or more of the net rental revenues are from nontransient dwelling units.

Accepted Answer

A) True 
 B)False

Question 14

On August 20,2013,May signed a 10-year lease on a building for her business.On November 28,2014,May paid $80,000 for leasehold improvements to the building.She does not take additional first-year depreciation (if available)and does not elect § 179 expensing.What is May's cost recovery deduction for the improvement in 2014?

Accepted Answer

The answer of On August 20,2013,May signed a 10-year lease...

Question 15

Diane purchased a factory building on April 15,1994,for $5,000,000.She sells the factory building on February 2,2014.Determine the cost recovery deduction for the year of the sale.

Accepted Answer

A) $16,025 
B) $19,838 
C) $26,458 
D) $158,750 
E) None of these

Question 16

If a taxpayer uses regular MACRS for all property,an alternative minimum tax adjustment is made with respect to the depreciation on all property,regardless of the class life.

Accepted Answer

A) True 
 B)False

Question 17

Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.

Accepted Answer

The answer of Discuss the beneficial tax consequences of an...

Question 18

When lessor owned leasehold improvements are abandoned because of the termination of the lease,a loss can be taken for the unrecovered basis.

Accepted Answer

A) True 
 B)False

Question 19

Rustin bought used 7-year class property on May 15,2014,for $72,000.Rustin elects § 179 and straight­line cost recovery.Rustin's taxable income would not create a limitation for purposes of the § 179 deduction.Determine the maximum write-off Rustin can take in 2014.

Accepted Answer

The answer of Rustin bought used 7-year class property on...

Question 20

If more than 40% of the value of property,other than real property,is placed in service during the last quarter,all of the property placed in service in the second quarter will be allowed 7.5 months of cost recovery.

Accepted Answer

A) True 
 B)False

Exam 8: Depreciation, cost Recovery, amortization, and Depletion

Discuss the criteria used to determine whether a building is residential or nonresidential realty.Also explain the tax consequences resulting from this determination if the property is placed in service in 2014.

The key date for calculating cost recovery is the date the asset is placed in service.

Cost depletion is determined by multiplying the depletion cost per unit by the number of units sold.

Doug purchased a new factory building on January 15,1989,for $400,000.On March 1,2014,the building was sold.Determine the cost recovery deduction for the year of the sale assuming he did not use the MACRS straight- line method.

A purchased trademark is a § 197 intangible.

Bhaskar purchased a new factory building on September 10,2014,for $3,700,000.Five hundred thousand of the purchase price was allocated to the land.He elected the alternative depreciation system (ADS) .Determine the cost recovery deduction for 2015.

Discuss the tax consequences of listed property being used for the production of income compared to being used in a trade or business.

On May 30,2014,Jane signed a 20-year lease on a factory building to use for her business.The lease begins on June 1,2014.In August 2014,Jane paid $300,000 for leasehold improvements to the building.Determine Jane's total deduction with respect to the leasehold improvements for 2014.

Residential rental real estate includes property where 80% or more of the net rental revenues are from nontransient dwelling units.

Diane purchased a factory building on April 15,1994,for $5,000,000.She sells the factory building on February 2,2014.Determine the cost recovery deduction for the year of the sale.

If a taxpayer uses regular MACRS for all property,an alternative minimum tax adjustment is made with respect to the depreciation on all property,regardless of the class life.

Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.

When lessor owned leasehold improvements are abandoned because of the termination of the lease,a loss can be taken for the unrecovered basis.

Rustin bought used 7-year class property on May 15,2014,for $72,000.Rustin elects § 179 and straightline cost recovery.Rustin's taxable income would not create a limitation for purposes of the § 179 deduction.Determine the maximum write-off Rustin can take in 2014.

If more than 40% of the value of property,other than real property,is placed in service during the last quarter,all of the property placed in service in the second quarter will be allowed 7.5 months of cost recovery.

Exam 8: Depreciation, cost Recovery, amortization, and Depletion

Discuss the criteria used to determine whether a building is residential or nonresidential realty.Also explain the tax consequences resulting from this determination if the property is placed in service in 2014.

The key date for calculating cost recovery is the date the asset is placed in service.

Cost depletion is determined by multiplying the depletion cost per unit by the number of units sold.

Doug purchased a new factory building on January 15,1989,for $400,000.On March 1,2014,the building was sold.Determine the cost recovery deduction for the year of the sale assuming he did not use the MACRS straight- line method.

A purchased trademark is a § 197 intangible.

Bhaskar purchased a new factory building on September 10,2014,for $3,700,000.Five hundred thousand of the purchase price was allocated to the land.He elected the alternative depreciation system (ADS) .Determine the cost recovery deduction for 2015.

Discuss the tax consequences of listed property being used for the production of income compared to being used in a trade or business.

On May 30,2014,Jane signed a 20-year lease on a factory building to use for her business.The lease begins on June 1,2014.In August 2014,Jane paid $300,000 for leasehold improvements to the building.Determine Jane's total deduction with respect to the leasehold improvements for 2014.

Residential rental real estate includes property where 80% or more of the net rental revenues are from nontransient dwelling units.

Diane purchased a factory building on April 15,1994,for $5,000,000.She sells the factory building on February 2,2014.Determine the cost recovery deduction for the year of the sale.

If a taxpayer uses regular MACRS for all property,an alternative minimum tax adjustment is made with respect to the depreciation on all property,regardless of the class life.

Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.

When lessor owned leasehold improvements are abandoned because of the termination of the lease,a loss can be taken for the unrecovered basis.

Rustin bought used 7-year class property on May 15,2014,for $72,000.Rustin elects § 179 and straight­line cost recovery.Rustin's taxable income would not create a limitation for purposes of the § 179 deduction.Determine the maximum write-off Rustin can take in 2014.

If more than 40% of the value of property,other than real property,is placed in service during the last quarter,all of the property placed in service in the second quarter will be allowed 7.5 months of cost recovery.

Rustin bought used 7-year class property on May 15,2014,for $72,000.Rustin elects § 179 and straightline cost recovery.Rustin's taxable income would not create a limitation for purposes of the § 179 deduction.Determine the maximum write-off Rustin can take in 2014.