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Exam 10: Property Acquisition and Cost Recovery

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Question 51

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In general, a taxpayer should select longer-lived property for the §179 immediate expensing election.

A) True
B) False

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Question 52

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Simmons LLC purchased an office building and land several years ago for $250,000. The purchase price was allocated as follows: $200,000 to the building and $50,000 to the land. The property was placed in service on October 2. If the property is disposed of on February 27 during the 10^th year, calculate Simmons' maximum depreciation in the 10^th year:

A) $641
B) $909
C) $5,128
D) $7,346
E) None of these

F) B) and E)
G) B) and C)

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Question 53

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Kristine sold two assets on March 20^th of the current year. The first was machinery with an original basis of $51,000, currently in the fourth year of depreciation, and under the half-year convention. The second was furniture with an original basis of $16,000 placed in service during the fourth quarter, currently in the third year of depreciation, and under the mid-quarter convention. What is Kristine's depreciation expense for the current year, rounded to the nearest whole number?

Jaussi purchased a computer several years ago for $2,200 and used it for personal purposes. On November 10^th of the current year, when the fair market value of the computer was $800, Jaussi converted it to business use. What is Jaussi's tax basis for the computer?

During August of the prior year, Julio purchased an apartment building that he used as a rental property. The basis was $1,400,000. Calculate the maximum depreciation expense during the current year.

Daschle LLC completed some research and development during June of the current year. The related costs were $60,000. If Daschle wants to capitalize and amortize the costs as quickly as possible, what is the total amortization expense Daschle may deduct during the current year?

Roth, LLC purchased only one asset during the current year. Roth placed in service computer equipment (5-year property) on November 1^st with a basis of $42,500. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).

All taxpayers may use the §179 immediate expensing election on certain property.

Tax cost recovery methods include depreciation, amortization, and depletion.

Teddy purchased only one asset during the current year. Teddy placed in service machinery (7-year property) on October 1^st with a basis of $76,500. Calculate the maximum depreciation expense, rounded to the nearest whole number (ignoring §179 and bonus depreciation).

All assets subject to amortization have the same recovery period.

Deirdre's business purchased two assets during the current year (a full 12-month tax year) . Deirdre placed in service computer equipment (5-year property) on January 20 with a basis of $15,000 and machinery (7-year property) on October 1 with a basis of $15,000. Calculate the maximum depreciation expense, rounded to a whole number (ignoring §179 and bonus depreciation) :

Eddie purchased only one asset during the current year. Eddie placed in service furniture (7-year property) on May 1^st with a basis of $26,500. Calculate the maximum depreciation expense, rounded to the nearest whole number (ignoring §179 and bonus depreciation).

Tom Tom LLC purchased a rental house and land during the current year for $150,000. The purchase price was allocated as follows: $100,000 to the building and $50,000 to the land. The property was placed in service on May 22. Calculate Tom Tom's maximum depreciation for this first year:

The method for tax amortization is always the straight-line method.

If a taxpayer places only one asset (a building) in service during the fourth quarter of the year, the mid-quarter convention must be used.

The MACRS depreciation tables automatically switch to the straight-line method when the straight-line method yields a higher annual depreciation amount than the declining balance method.

Columbia LLC only purchased one asset this year. Columbia LLC placed in service on October 9, 2016 machinery and equipment (7-year property) with a basis of $2,150,000. Assume that Columbia has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (but ignoring bonus expensing) for the year, rounded to the nearest whole number. Assume the 2015 §179 limits are identical to 2016.

The 200 percent or double declining balance method is allowable for five and seven-year property.

Taxpayers may always expense a portion of start-up costs and organizational expenditures.