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Exam 10: Property Acquisition and Cost Recovery

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Question 51

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Potomac LLC purchased an automobile for $31,800 on August 5, 2020. What is Potomac's depreciation deduction for 2020? (Ignore any possible bonus depreciation.) (Use MACRS Table 1 and Exhibit 10-10.)

A) $10,100
B) $4,544
C) $6,360
D) $31,800
E) None of the choices are correct.

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

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Question 52

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

A) True
B) False

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Question 53

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Columbia LLC only purchased one asset this year. Columbia LLC placed in service on July 9, 2020, machinery and equipment (seven-year property)with a basis of $2,750,000. Assume that Columbia has sufficient income to avoid any limitations. Calculate the maximum depreciation deduction, including §179 expensing (but ignoring bonus depreciation)for the year. (Use MACRS Table 1.)

The mid-month convention applies to real property in the year of acquisition and disposition.

Lenter LLC placed in service on April 29, 2020, machinery and equipment (seven-year property) with a basis of $1,600,000. Assume that Lenter has sufficient income to avoid any limitations. Calculate the maximum depreciation deduction including §179 expensing (but ignoring bonus expensing) . (Use MACRS Table 1.)

Jasmine started a new business in the current year. She incurred $10,000 of start-up costs. How much of the start-up costs can be immediately deducted (excluding amounts amortized over 180 months) for the year?

Jasmine started a new business in the current year. She incurred $26,000 of start-up costs. How much of the start-up costs can be immediately deducted (excluding amounts amortized over 180 months) for the year?

Crouch LLC placed in service on May 19, 2020, machinery and equipment (seven-year property) with a basis of $3,200,000. Assume that Crouch has sufficient income to avoid any limitations. Calculate the maximum depreciation deduction including §179 expensing (but ignoring bonus depreciation) . (Use MACRS Table 1.)

The basis for a personal-use asset converted to business use is the lesser of the asset's cost basis or fair market value on the date of the transfer or conversion.

Wheeler LLC purchased two assets during the current year (a full 12-month tax year) .On November 16 Wheeler placed in service computer equipment (five-year property) with a basis of $15,000 and on April 20 placed in service furniture (seven-year property) with a basis of $11,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation) . (Use MACRS Table 2.) (Round final answer to the nearest whole number.)

Which is not an allowable method under MACRS?

Timothy purchased a new computer for his consulting practice on October 15 ^th of the current year. The basis of the computer was $4,000. During the Thanksgiving holiday, he decided the computer didn't meet his business needs and gave it to his college-aged son in another state. The computer was never used for business purposes again. Timothy had $50,000 of taxable income before depreciation. What is Timothy's total cost recovery deduction with respect to the computer during the current year?

An office building was purchased several years agoon December 9th for $2,500,000. The purchase price was allocated as follows: building $1,900,000, landscaping $100,000, and land $500,000. During the current year, the 10^th year, the building was sold on March 10^th. Calculate the maximum depreciation deduction for the real property during the current year, rounded to the nearest whole number. (Use MACRS Table 5.)

Northern LLC only purchased one asset this year. In 2020, Northern LLC placed in service on September 6^th machinery and equipment (seven-year property)with a basis of $3,200,000. Assume that Northern has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (ignore any potential bonus expensing). (Use MACRS Table 1.)

Yasmin purchased two assets during the current year. On May 26 ^th Yasmin placed in service computer equipment (five-year property)with a basis of $29,000 and on December 9 ^th placed in service machinery (seven-year property)with a basis of $29,000. Calculate the maximum depreciation deduction (ignoring §179 and bonus depreciation). (Use MACRS Table 2.)(Round final answer to the nearest whole number.)

The §179 immediate expensing election phases out based upon the amount of tangible personal property a taxpayer places in service during the year.

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. (Use MACRS Table 3.)

BoxerLLC has acquired various types of assets recently used 100 percent in its trade or business. Below is a list of assets acquired during 2019 and 2020: Boxer did not elect §179 expense and elected out of bonus depreciation in 2019, but would like to take advantage of the §179 expense and bonus depreciation for 2020 (assume that taxable income is sufficient). Calculate Boxer's maximum depreciation deduction for 2020. (Use MACRS Table 1, MACRS Table 5, and Exhibit 10-10.)(Round final answer to the nearest whole number.)

Jorge purchased a copyright for use in his business in the current year. The purchase occurred on July 15^th and the purchase price was $75,000. If the copyright has a remaining life of 75 months, what is the total amortization amount Jorge may deduct during the current year? (Assume this is not an asset acquisition to which §197 applies.)

Lax LLC purchased only one asset during the current year (a full 12-month tax year) .On August 26 Lax placed in service computer equipment (five-year property) with a basis of $20,000. Calculate the maximum depreciation expense for the current year (ignoring §179 and bonus depreciation) . (Use MACRS Table 1.)