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Exam 10: Property Acquisition and Cost Recovery

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Question 51

Multiple Choice

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Which of the allowable methods allows the most accelerated depreciation?

A) 150 percent declining balance
B) 200 percent declining balance
C) Straight line
D) Sum of the years digits
E) None of the methods would allow accelerated depreciation.

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

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Question 52

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The manner in which a business amortizes a patent or copyright is the same whether the business directly purchases the patent or copyright or whether it self-creates the intangible.

A) True
B) False

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Question 53

Multiple Choice

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Tax cost recovery methods do not include:

Like financial accounting,most acquired business property must be capitalized for tax purposes.

Taxpayers use the half-year convention for all assets.

Which of the following depreciation conventions are not used under MACRS?

Cost depletion is available to all natural resource producers.

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 expensed (excluding amounts amortized over 180 months) for the year?

If a machine (seven-year property)being depreciated using the half-year convention is disposed of during the seventh year,a taxpayer must multiply the appropriate depreciation percentage from the MACRS table percentage by 50 percent to calculate the depreciation expense properly.

Santa Fe purchased the rights to extract turquoise on a tract of land over a five-year period.Santa Fe paid $300,000 for extraction rights.A geologist estimates that Santa Fe will recover 5,000 pounds of turquoise.During the current year,Santa Fe extracted 1,500 pounds of turquoise,which it sold for $200,000.What is Santa Fe's cost depletion expense for the current year?

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

An asset's capitalized cost basis includes only the actual purchase price; whereas expenses to purchase,prepare the asset for use,and begin using the asset are immediately expensed.

Alexandra purchased a $35,000 automobile during 2017.The business use was 70 percent.What is the allowable depreciation for the current year (ignore any possible bonus depreciation)?  Exhibit 10-8 in the text

Sairra,LLC purchased only one asset during the current year (a full 12-month tax year) .Sairra placed in service furniture (7-year property) on April 16 with a basis of $25,000.Calculate the maximum depreciation expense for the current year? (ignoring §179 and bonus depreciation) .(Use MACRS Table 1 in the text) (Round final answer to the nearest whole number)

How is the recovery period of an asset determined?

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.(Use MACRS Table 3 in the text)

Beth's business purchased only one asset during the current year (a full 12-month tax year) .Beth placed in service machinery (7-year property) on December 1 with a basis of $50,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation) .(Use MACRS Table 2 in the text)

Which of the following assets is eligible for bonus depreciation?

The §179 immediate expensing election phases out based upon a taxpayer's taxable income.

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