FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 8: Depreciation, Cost Recovery, Amortization, and Depletion

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Essay

Review LaterAdd Note

Review Later

Nora purchased a new automobile on July 20, 2013, for $29,000. The car was used 60% for business and 40% for personal use. In 2014, the car was used 30% for business and 70% for personal use. Nora elects not to take additional first-year depreciation. Determine the cost recovery recapture and the cost recovery deduction for 2014.

Correct Answer

verified

Cost recovery in 2013:
MACRS ($29,000 × ...

View Answer

Show Answer

Question 22

True/False

Review LaterAdd Note

Review Later

Property which is classified as personalty may be depreciated.

A) True
B) False

Correct Answer

verified

Show Answer

Question 23

True/False

Review LaterAdd Note

MACRS depreciation is used to compute earnings and profits.

On June 1, 2014, Gabriella purchased a computer and peripheral equipment (five-year property) for $25,000. She used the assets 40% for business, 50% for the production of income, and 10% for personal use. These are the only assets Gabriella purchased during the current year. Determine her total cost recovery deduction for the current year.

Audra acquires the following new five-year class property in 2014: $\begin{array} { l l r } \text { Asset } & \text { Acquisition Date } & \text { Cost } \\\text { A } & \text { January 10 } & \$ 106,000 \\\text { B } & \text { Juy 5 } & 70,000 \\\text { C} & \text { November 15 } & 300,000 \\\text { Total } & &\$ 470,000\end{array}$ Audra's taxable income from her business would not create a limitation for purposes of the § 179 deduction. Audra does not take additional first-year depreciation (if available). Determine her total cost recovery deduction (including the § 179 deduction) for the year.

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 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.

On May 2, 2014, Karen placed in service a new sports utility vehicle that cost $60,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used 60% for business and 40% for personal use. Determine the cost recovery for 2014. Karen wants to maximize her deductions.

Augie purchased one new asset during the year (five-year property) on November 10, 2014, at a cost of $650,000. She would like to use the § 179 election if available. The income from the business before the cost recovery deduction and the § 179 deduction was $600,000. Determine the total cost recovery deduction with respect to the asset for 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.

The basis of cost recovery property must be reduced by at least the cost recovery allowable.

Intangible drilling costs must be capitalized and written off through depletion.

A purchased trademark is a § 197 intangible.

On July 17, 2014, Kevin places in service a used automobile that cost $25,000. The car is used 80% for business and 20% for personal use. In 2015, he used the automobile 40% for business and 60% for personal use. Determine the cost recovery recapture for 2015.

In a farming business, if the uniform capitalization rules are not used, cost is recovered using the ADS straight-line method.

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.

The cost of a covenant not to complete for 10 years incurred in connection with the acquisition of a business is amortized over 10 years.

All listed property is subject to the substantiation requirements of § 274.

Discuss the tax implications of a seller allocating the selling price to goodwill or a covenant not to compete.

George purchases used seven-year class property at a cost of $200,000 on April 20, 2014. Determine George's cost recovery deduction for 2014 for alternative minimum tax purposes, assuming George does not elect § 179.