Deck 10: Cost Recovery on Property: Depreciation,depletion,and Amortization

Question 1

The Section 179 expense deduction is allowed on all depreciable and tangible property used in a trade or business.

Answer 1

False

Question 2

Pedro purchased used delivery equipment costing $80,000 and used computers costing $90,000 (the only assets purchased)that are used in his business.He may allocate his section 179 deduction to either or both assets.

Answer 2

True

Question 3

MACRS eliminates several sources of potential conflict between the IRS and taxpayers concerning an asset's useful life and the calculation of the depreciation deduction.

Answer 3

True

Question 4

Match each statement with the correct term below.
a.Computers, and automobiles.
b.Used to recover the investment in intangible assets.
c.Used to recover the investment in long-lived tangible business-use assets.
d.An attempt to stimulate capital investment by small businesses.
e.Used to recover the investment in assets that waste away through extraction.
Listed property

Question 5

Match each statement with the correct term below.
a.Computers, and automobiles.
b.Used to recover the investment in intangible assets.
c.Used to recover the investment in long-lived tangible business-use assets.
d.An attempt to stimulate capital investment by small businesses.
e.Used to recover the investment in assets that waste away through extraction.
Depletion

Question 6

The earlier the depreciation deduction can be taken,the greater the present value of the tax savings will be to the taxpayer.

Question 7

While Congress has enacted several different depreciation methods,all currently owned assets are depreciated using the method in effect when the asset was placed in service.

Question 8

Match each statement with the correct term below.
a.The depreciation method for real estate.
b.A term used synonymously with the term depreciation.
c.The depreciation system for assets placed in service after 1986.
d.The initial basis of an asset minus the amount of capital recovered.
e.The term used to describe the amount multiplied by the MACRS percentages to calculate the annual depreciation deduction.
f.A provision intended to provide relief to small companies by allowing an immediate deduction for small purchases of business equipment and by simplifying record keeping.
MACRS

Question 9

Match each statement with the correct term below.
a.The depreciation method for real estate.
b.A term used synonymously with the term depreciation.
c.The depreciation system for assets placed in service after 1986.
d.The initial basis of an asset minus the amount of capital recovered.
e.The term used to describe the amount multiplied by the MACRS percentages to calculate the annual depreciation deduction.
f.A provision intended to provide relief to small companies by allowing an immediate deduction for small purchases of business equipment and by simplifying record keeping.
Straight line

Question 10

Match each statement with the correct term below.
a.Computers, and automobiles.
b.Used to recover the investment in intangible assets.
c.Used to recover the investment in long-lived tangible business-use assets.
d.An attempt to stimulate capital investment by small businesses.
e.Used to recover the investment in assets that waste away through extraction.
Amortization

Question 11

Match each statement with the correct term below.
a.Computers, and automobiles.
b.Used to recover the investment in intangible assets.
c.Used to recover the investment in long-lived tangible business-use assets.
d.An attempt to stimulate capital investment by small businesses.
e.Used to recover the investment in assets that waste away through extraction.
Section 179

Question 12

Match each statement with the correct term below.
a.Computers, and automobiles.
b.Used to recover the investment in intangible assets.
c.Used to recover the investment in long-lived tangible business-use assets.
d.An attempt to stimulate capital investment by small businesses.
e.Used to recover the investment in assets that waste away through extraction.
Depreciation

Question 13

Sally purchased new equipment for her consulting business.She allocates the Section 179 deduction among the new assets.One piece of equipment cost $350,000 and was allocated one-half of the allowable Section 179 deduction and therefore has a depreciable basis of $100,000.

Question 14

Match each statement with the correct term below.
a.The depreciation method for real estate.
b.A term used synonymously with the term depreciation.
c.The depreciation system for assets placed in service after 1986.
d.The initial basis of an asset minus the amount of capital recovered.
e.The term used to describe the amount multiplied by the MACRS percentages to calculate the annual depreciation deduction.
f.A provision intended to provide relief to small companies by allowing an immediate deduction for small purchases of business equipment and by simplifying record keeping.
Section 179 expense

Question 15

Match each statement with the correct term below.
a.The depreciation method for real estate.
b.A term used synonymously with the term depreciation.
c.The depreciation system for assets placed in service after 1986.
d.The initial basis of an asset minus the amount of capital recovered.
e.The term used to describe the amount multiplied by the MACRS percentages to calculate the annual depreciation deduction.
f.A provision intended to provide relief to small companies by allowing an immediate deduction for small purchases of business equipment and by simplifying record keeping.
Adjusted basis

Question 16

MACRS applies to new and used depreciable personal property used for the production of income.

Question 17

If more than 40% of the depreciable basis of personal property is placed is service during the last three months of the tax year,the taxpayer must use the mid-quarter convention.

Question 18

The mid-year convention is used for personal property only.

Question 19

Match each statement with the correct term below.
a.The depreciation method for real estate.
b.A term used synonymously with the term depreciation.
c.The depreciation system for assets placed in service after 1986.
d.The initial basis of an asset minus the amount of capital recovered.
e.The term used to describe the amount multiplied by the MACRS percentages to calculate the annual depreciation deduction.
f.A provision intended to provide relief to small companies by allowing an immediate deduction for small purchases of business equipment and by simplifying record keeping.
Depreciable basis

Question 20

Match each statement with the correct term below.
a.The depreciation method for real estate.
b.A term used synonymously with the term depreciation.
c.The depreciation system for assets placed in service after 1986.
d.The initial basis of an asset minus the amount of capital recovered.
e.The term used to describe the amount multiplied by the MACRS percentages to calculate the annual depreciation deduction.
f.A provision intended to provide relief to small companies by allowing an immediate deduction for small purchases of business equipment and by simplifying record keeping.
Capital recovery

Question 21

In 2013,Sanford Corporation purchases and places in service $2,050,000 of equipment for its manufacturing business.What portion of the $2,050,000 may Sanford elect to treat as a Section 179 expense?

A)$ 50,000
B)$ 100,000
C)$ 450,000
D)$ 500,000
E)$ 2,000,000

Question 22

Which of the following would be allowed a depreciation deduction?
I)Inventory.
II)Land acquired as an investment.
III)Residence used as rental property.
IV)Airplane used by company controller to attend accounting conference.

A)Only statement III is correct.
B)Only statement IV is correct
C)Statements III and IV are correct.
D)Statements II, III, and IV are correct.
E)All of the assets are depreciable.

Question 23

Periodic capital recovery deductions for tax purposes include
I)Depletion.
II)Amortization.
III)Depreciation.
IV)Proration.

A)Statements I and III are correct.
B)Only statement I is correct.
C)Statements I, II and III are correct.
D)Statements I, II, and IV are correct.
E)Statements I, II, III, and IV are correct.

Question 24

To compute cost depletion,you must know the basis subject to depletion,the recoverable quantity of the natural resource,and the quantity of the natural resource sold during the year.

Question 25

Davis,Inc.,a motorcycle wheel manufacturer,purchased a new spoke machine in 2013 for $200,000.What are the tax effects of this purchase?
I)If taxable income is $100,000,then $100,000 can be expensed in 2013.
II)No Section 179 election is allowed if Davis decides to use a $200,000 depreciable basis.
III)If Davis had purchased a total of $2,400,000 of equipment in 2013,the corporation can deduct only $100,000 of the purchases in 2013 through use of the Section 179 election.

A)Only statement I is correct.
B)Statements I and II are correct.
C)Statements II and III are correct.
D)Statements I and III are correct.
E)Statements I, II, and III are correct.

Question 26

Qualified Section 179 property for a retail store includes
I)Store shelving.
II)Company auto used by salesmen.
III)Sidewalks in front of the store.
IV)Delivery van owned by the store.

A)Only statement I is correct.
B)Only statement III is correct.
C)Statements I and IV are correct.
D)Statements II and III are correct.
E)Statements I, II, and IV are correct.

Question 27

To be considered predominately used in a trade or business under the listed property rules,more than 75% of an asset's total use for each taxable year must be related to the taxpayer's trade or business.

Question 28

Which of the following assets would be allowed a depreciation deduction?
I)A truck used to provide transportation to a job site.
II)A car used for personal purposes.
III)An apartment building rented out for the production of rental income.
IV)A personal-use computer of the taxpayer.

A)Only statement II is correct.
B)Statements II and IV are correct.
C)Only statement I is correct.
D)Statements I and III are correct.
E)All of the assets are depreciable.

Question 29

Felix purchases the franchise rights to a new sports team and will be able to amortize the cost over the 15-year amortization period for intangibles.

Question 30

Watson Company purchases used equipment (5-year MACRS property)for $2,350,000 on July 8,2013.What is Watson' maximum allowable cost recovery deduction for 2013 on the equipment if this is the only purchase of equipment for 2013?
(Watson elects out of bonus depreciation.)

A)$ 590,000
B)$ 750,000
C)$ 860,000
D)$2,000,000
E)$2,350,000

Question 31

Which of the following statements related to the Section 179 election to expense is (are)true?
I)A Section 179 deduction can be claimed on tangible personal property
II)A Section 179 deduction can be claimed on property held for the production of income.
III)A Section 179 deduction can be claimed on real property.
IV)A Section 179 deduction is allowed only for assets used in trade or business.

A)Only statement I is true.
B)Only statements I and II are true.
C)Only statements I, II, and III are true.
D)Only statements I and IV are true.
E)All of the statements are true.

Question 32

Sorensen Corporation purchases eqipment in 2013 for $2,200,000.Sorensen has substantial taxable income and desires to minimize this amount to the fullest extent possible.How much can Sorensen deduct under Section 179?

A)$ 200,000
B)$ 300,000
C)$ 500,000
D)$1,800,000
E)$2,000,000

Question 33

In most cases,the taxpayer may continue to use percentage (statutory)depletion after the initial basis has been fully recovered.In other words,the taxpayer's depletion deduction can exceed the cost of the depletable asset.

Question 34

During 2013,Witt Processing Corporation places $2,435,000 of Section 179 property in service for use in its business.What is the amount of Witt Processing's maximum Section 179 deduction for 2013?

A)$ 65,000
B)$135,000
C)$250,000
D)$435,000
E)$500,000

Question 35

The Section 179 election promotes which of the following tax concept(s)or doctrine(s)?
I)Claim of Right Doctrine.
II)Administrative Convenience Concept.
III)Tax benefit rule.
IV)Substance-Over-Form Doctrine.

A)Only statement I is correct.
B)Only statement II is correct.
C)Statements I, II, and IV are correct.
D)Statements II and IV are correct.
E)Statements I, II, III, and IV are correct.

Question 36

Which of the following assets would not be allowed a depreciation deduction?
I)A business computer used to process payroll and maintain a company's general ledger.
II)A personal residence of a taxpayer.
III)A building rented out for the production of rental income.
IV)A yacht rented to a fishing party.

A)Only statement II is correct.
B)Statements II and IV are correct.
C)Only statement I is correct.
D)Statements I and III are correct.
E)All of the assets are depreciable.

Question 37

In May 2013,Preston purchases 5-year MACRS property costing $150,000 and 7-year MACRS property costing $140,000.Preston's income is $100,000.If Preston wishes to maximize his total 2013 cost recovery deduction,what will his total cost recovery deduction be on the properties purchased in 2013?
(Preston elects out of bonus depreciation.)

A)$ 50,006
B)$130,006
C)$135,716
D)$143,200
E)$290,000

Question 38

Under current law,taxpayers must use regular MACRS.

Question 39

Under the computation of the alternative minimum tax,the Alternative Depreciation System may be used but is not required.

Question 40

Which of the following would not be allowed a depreciation deduction?
I)Inventory.
II)Business equipment.
III)Land acquired as an investment.
IV)Cattle used in a dairy herd.

A)Only statement I is correct.
B)Statements I and III are correct.
C)Statements I, III and IV are correct.
D)Only statement IV is correct.
E)All of the assets are depreciable.

Question 41

During 2013,Linda has a $12,000 net loss from her beauty salon.Her spouse,Bart,earns $23,000 as a tennis professional.During 2013,Bart purchases $15,000 of Section 179 equipment for his business.What is the amount of Linda and Bart's Section 179 deduction for 2013?

A)$ - 0 -
B)$ 4,000
C)$11,000
D)$15,000
E)$23,000

Question 42

The mid-month convention under MACRS provides that

A)Depreciation is allowable for the month of disposition only if the property is disposed of in the last one-half of that month.
B)Depreciation is allowable for the month of acquisition of qualified property only if the property is placed in service in the first one-half of that month.
C)One half of the year-of-acquisition depreciation is allowed regardless of when the property is placed in service during the year. One-half year's depreciation is allowable for the year of disposition.
D)The cost recovery deduction is based on the number of months the property was in service in the year of acquisition. Therefore, one-half month's cost recovery is allowable for the month in which the property is placed in service and for the month of disposition.

Question 43

Cruz Copy Shop purchases a new copy machine in July 2013 for $30,000.No other depreciable assets are placed in service in 2013.Since Cruz Copy Shop expects to be in a much higher tax bracket in future years,it desires to minimize its current cost recovery amount to the fullest extent possible.What is the amount of Cruz Copy Shop's MACRS straight-line depreciation for 2013?

A)$1,500
B)$2,143
C)$3,000
D)$3,213
E)$4,500

Question 44

What is the Alternative Depreciation System (ADS)recovery period for a light general purpose truck?

A)3 years.
B)5 years.
C)6 years.
D)10 years.
E)12 years.

Question 45

What is the MACRS recovery period for a warehouse placed in service on August 31,2013?

A)10 years.
B)27.5 years.
C)31.5 years.
D)39 years.
E)40 years.

Question 46

In 2013,Henry purchases $2,050,000 of equipment with a useful life of 7 years.The taxable income of the business is $100,000.What is Henry's maximum depreciation deduction in 2013?
(Henry elects out of bonus depreciation.)

A)$335,000
B)$378,655
C)$500,000
D)$678,640
E)$721,495

Question 47

Which of the following is not part of the modified accelerated cost recovery system (MACRS)?

A)Salvage value is ignored.
B)Used property can use MACRS.
C)Straight-line depreciation is allowed.
D)Sum-of-the-years digits depreciation is allowed.
E)All of the above are part of MACRS.

Question 48

What is the MACRS recovery period for a video game used in an arcade?

A)3 years.
B)5 years.
C)6 years.
D)7 years.
E)10 years.

Question 49

To compute depreciation using MACRS on an asset purchased today,you need to know
I)the asset's depreciable basis.
II)the recovery period of the asset.
III)the first and last year convention that applies to the asset's class.
IV)whether you want to minimize or maximize the current year's depreciation.

A)Only statement II is correct.
B)Statements I and II are correct.
C)Statements I, III, and IV are correct.
D)Statements II and III are correct.
E)Statements I, II, III, and IV are correct.

Question 50

In 2013,Oscar purchases $2,300,000 of equipment.The taxable income of the business is $100,000.What is Oscar's maximum Section 179 deduction in 2013?

A)$100,000
B)$200,000
C)$300,000
D)$400,000
E)$500,000

Question 51

Sophia purchases a completely furnished condominium in Breckenridge,Colorado.She uses the condo as a rental property.Which of the following assets are subject to periodic cost recovery?
I)Land.
II)Furniture.
III)Building.
IV)Trout fishing equipment.
V)Kitchen appliances.

A)Only statement III is correct.
B)Statements II and III are correct.
C)Statements II, III, IV, and V are correct.
D)Statements I, and III are correct.
E)Statements II, III, and V are correct.

Question 52

Wu Copy Shop purchases a new copy machine in July 2013 for $30,000.No other depreciable assets are placed in service in 2013.Since Wu Copy Shop expects to be in a much higher tax bracket in future years,it desires to minimize its current cost recovery amount to the fullest extent possible.What is the amount of Wu Copy Shop's ADS depreciation for 2013?

A)$1,500
B)$3,000
C)$4,500
D)$5,400
E)$6,000

Question 53

Residential rental real estate placed in service on July 17,2013,is depreciated over

A)39 years, straight-line method, mid-month convention.
B)40 years, straight-line method, mid-month convention.
C)27.5 years, 150%-declining-balance method, mid-year convention.
D)27.5 years, straight-line method, mid-month convention.
E)39 years, 150%-declining-balance method, mid-year convention.

Question 54

Nonresidential commercial realty placed in service on March 2,2012,is depreciated over

A)27.5 years, 200%-declining-balance method, mid-year convention.
B)31.5 years, straight-line method, mid-month convention.
C)31.5 years, 200%-declining-balance method, mid-year convention.
D)39 years, straight-line method, mid-month convention.
E)40 years, straight-line method, mid-month convention.

Question 55

On June 1,2013,AZ Construction Corporation places a $500,000 crane (7 year life)in service.It placed no other assets in service during the year.What is the amount of AZ Construction's maximum depreciation deduction for the crane for 2013?
(AZ elects out of bonus depreciation.)

A)$ 71,450
B)$178,588
C)$185,544
D)$186,301
E)$500,000

Question 56

What is the MACRS recovery period for an office desk?

A)3 years.
B)5 years.
C)6 years.
D)7 years.
E)10 years.

Question 57

MACRS requires the use of one of three conventions.For personal property,the general and most common convention is

A)mid-life
B)mid-quarter.
C)mid-month.
D)mid-year.

Question 58

In 2013,Steve purchases $2,300,000 of equipment.The taxable income of the business is $50,000.What is Steve's maximum Section 179 deduction in 2013?

A)$ 50,000
B)$139,000
C)$361,000
D)$450,000
E)$500,000

Question 59

The mid-year convention under MACRS provides that

A)Depreciation is allowable in the year of acquisition of qualified property only if the property is placed in service in the first one-half of that year.
B)One half of the year-of-acquisition depreciation is allowed regardless of when the property is placed in service during the year. One-half year's depreciation is allowable for the year of disposition.
C)Depreciation is allowable in the year of disposition only if the property is disposed of in the last one-half of that year.
D)The cost recovery deduction is based on the number of months the property was in service in the year of acquisition. Therefore, one-half month's cost recovery is allowable for the month in which the property is place in service and for the month of disposition.

Question 60

Carolyn purchases a new delivery truck (5-year MACRS property)costing $30,000 for use in her floral business on January 5,2013.If Carolyn's taxable income from the floral business before any special elections is $8,000 for 2013,and she elects out of bonus depreciation,what is her maximum allowable cost recovery on the delivery truck in 2013?

A)$ 4,400
B)$ 6,000
C)$12,400
D)$14,000
E)$30,000

Question 61

Weston purchases equipment classified as 7-year property on January 5,2013,at a cost of $80,000.Section 179 was not elected,and he elected out of bonus depreciation.He sells the equipment on February 12,2015.What is Weston's 2015 depreciation deduction?

A)$ - 0 -
B)$ 3,498
C)$ 6,996
D)$ 9,794
E)$13,992

Question 62

On July 17,2013,Elise purchases office furniture (7-year property)costing $550,000 for use in her business.She wishes to use the Section 179 election.Her taxable income before the depreciation deduction is $80,000.She elects out of bonus depreciation.What is the maximum total cost recovery deduction Elise can take for the current year?

A)$ 78,595
B)$ 80,000
C)$147,163
D)$151,205
E)$292,870

Question 63

Mountain View Development Co.purchases a new high volume paper shredder for use in their document management department for $20,000 on November 7 of 2013.It was the only piece of depreciable property placed in service during 2013.The paper shredder is 7-year MACRS property,the Section 179 election to expense was not exercised,and it elected out of bonus depreciation.What is Mountain View's 2013 depreciation deduction on the paper shredder?

A)$714
B)$2,498
C)$2,812
D)$2,980

Question 64

The Anderson Accounting Firm places the following property in service during the 2013 tax year:
$\begin{array}{llll}\text { Froperty } & \text { Placed in } & \\\text { Description } & \text { Service } & \text { MACRS Life } & \text { Cost Basis }\\\text { Computers } & \text { Feb } 6 & 5 \text { years } & \$ 80,000 \\\text { Office furniture } & \text { June } 24 & 7 \text { years } & \$ 70,000 \\\text { Fax machine } & \text { Aug } 3 & 5 \text { years } & \$ 100,000 \\\text { Phone system } & \text { Dec } 11 & 5 \text { years } & \$ 50,000\end{array}$
Anderson wants to obtain the maximum possible first year depreciation deduction for these property acquisitions including full utilization of the election to expense property under Section 179.Anderson will report 2013 taxable income in the amount of $100,000 before consideration of depreciation on their 2013 property acquisitions.Anderson does not elect out of bonus depreciation.What is the maximum combined amount of cost recovery expense that may be obtained under this set of fact circumstances?

A)$53,000
B)$136,003
C)$140,000
D)$164,444
E)$200,000

Question 65

The Boatright Accounting Firm places the following property in service during the 2013 tax year:
$\begin{array}{llcc}\text { Froperty } & \text { Placed in } & \\\text { Description } & \text { Service } & \text { MACRS Life } & \text { Cost Basis }\\\text { Computers } & \text { Feb } 6 & 5 \text { years } & \$ 60,000 \\\text { Office furniture } & \text { June } 24 & 7 \text { years } & \$ 110,000 \\\text { Fax machine } & \text { Aug } 3 & 5 \text { years } & \$ 100,000 \\\text { Sidewalk } & \text { Dec } 11 & 15 \text { years } & \$ 50,000\end{array}$
Boatright wants to obtain the maximum possible first year depreciation deduction for these property acquisitions including full utilization of the election to expense property under Section 179,but they elect out of bonus depreciation.Boatright will report 2013 taxable income in the amount of $150,000 before consideration of depreciation on their 2013 property acquisitions.What is the maximum combined amount of depreciation and Section 179 expense that may be obtained under this set of fact circumstances?

A)$47,469
B)$165,500
C)$174,001
D)$276,950
E)$280,800

Question 66

On March 23,2013,Saturn Investments Corporation purchases a $5,000 computer (5-year property)for business-use.On November 27,2013,it pays $4,000 for new office furniture (7-year property).It does not wish to use the Section 179 election to expense and elects out of bonus depreciation.How much depreciation may Saturn deduct on the computer for 2013?

A)$1,000
B)$1,750
C)$2,625
D)$3,325
E)$3,500

Question 67

The Reed CPA Firm places the following property in service during the 2013 tax year:
$\begin{array}{llll}\text { Froperty } & \text { Placed in } \\\text { Description } & \text { Service }& \text {MACRS Life }& \text {Cost Basis }\\\hline\text { Computers } & \text { Feb 6 } & 5 \text { years } & \$ 40,000 \\\text { Office furniture } & \text { June } 24 & 7 \text { years } & \$ 80,000 \\\text { Switchboard system } & \text { Nov 3 } & 5 \text { years } & \$ 130,000\end{array}$
Reed wants to obtain the maximum possible depreciation deduction for these property acquisitions including full utilization of the election to expense property under Section 179.Reed does not elect out of bonus depreciation.Reed will report 2013 taxable income in the amount of $100,000 before consideration of depreciation on their 2013 property acquisitions.What is Reed' maximum depreciation from these additions?

A)$119,500
B)$125,432
C)$126,932
D)$130,000
E)$175,000

Question 68

Shannon purchases equipment classified as 3-year property on December 19,2013,at a cost of $100,000.Section 179 is not elected,it elects out of bonus depreciation and Shannon does not use the straight-line method.Shannon purchased no other depreciable property in 2013.What is the amount of the MACRS depreciation deduction for 2013?

A)$ 5,000
B)$ 8,330
C)$ 20,000
D)$ 33,333

Question 69

The Cox Accounting Firm places the following property in service during the 2013 tax year:
$\begin{array}{llll}\text { Froperty } & \text { Placed in } & \\\text { Description } & \text { Service } & \text { MACRS Life } & \text { Cost Basis }\\\text { Computers } & \text { Feb } 6 & 5 \text { years } & \$ 80,000 \\\text { Office furniture } & \text { June } 24 & 7 \text { years } & \$ 70,000 \\\text { Fax machine } & \text { Aug } 3 & 5 \text { years } & \$ 100,000 \\\text { Phone system } & \text { Dec } 11 & 5 \text { years } & \$ 50,000\end{array}$
Cox wants to obtain the maximum possible first year depreciation deduction for these property acquisitions including full utilization of the election to expense property under Section 179.Cox will report 2013 taxable income in the amount of $100,000 before consideration of depreciation on their 2013 property acquisitions.Cox elects out of bonus depreciation.What is the maximum combined amount of depreciation and Section 179 expense that may be obtained under this set of fact circumstances?

A)$53,000
B)$136,003
C)$140,000
D)$192,575
E)$300,000

Question 70

Ying pays $170,000 for an office building on August 27,2013,to use in his consulting business.He properly allocates $150,000 to the building and $20,000 to the land.What is Ying's 2014 depreciation deduction on the property?

A)$1,124
B)$1,443
C)$1,923
D)$3,846
E)$5,454

Question 71

The Lovell Accounting Firm places the following new property in service during the 2013 tax year:
$\begin{array}{llcc}\text { Froperty } & \text { Placed in } & \\\text { Description } & \text { Service } & \text { MACRS Life } & \text { Cost Basis }\\\text { Computers } & \text { Feb } 6 & 5 \text { years } & \$ 60,000 \\\text { Office furniture } & \text { June } 24 & 7 \text { years } & \$ 110,000 \\\text { Fax machine } & \text { Aug } 3 & 5 \text { years } & \$ 100,000 \\\text { Sidewalk } & \text { Dec } 11 & 15 \text { years } & \$ 50,000\end{array}$
Lovell wants to obtain the maximum possible first year depreciation deduction for these property acquisitions including full utilization of the election to expense property under Section 179,and they do not elect out of bonus depreciation.Lovell will report 2013 taxable income in the amount of $150,000 before consideration of depreciation on their 2013 property acquisitions.What is the maximum combined amount of depreciation and Section 179 expense that may be obtained under this set of fact circumstances?

A)$165,950
B)$167,300
C)$183,409
D)$229,500
E)$226,600

Question 72

Ralph buys a new truck (5-year MACRS property)to use in his landscaping business on May 13,2013,at a cost of $18,000.On November 5,2013,Ralph takes advantage of an end of the season clearance sale to purchase various landscaping equipment (7-year MACRS property)costing $34,000.Assuming that Ralph does not wish to immediately expense any of the cost of the property purchased this year,and he elects out of bonus depreciation,what is his 2013 maximum allowable cost recovery deduction?

A)$ 2,114
B)$ 5,714
C)$ 8,459
D)$ 12,086
E)$ 15,500

Question 73

Rafael bought an apartment building on March 27,1997,at a cost of $2,000,000 (exclusive of the cost allocated to the land).He sells the building on November 3,2013.What is Rafael's cost recovery deduction on the building for 2013 if he wants to take the maximum deduction allowable on the building?

A)$44,870
B)$63,647
C)$66,660
D)$69,690
E)$72,740

Question 74

Aaron purchases a taxicab (5-year MACRS property)for $20,000 on December 3,2013.This is the only business asset Aaron acquires in 2013.He does not desire to use the Section 179 election,and he elects out of bonus depreciation.What is the maximum amount of depreciation that he can deduct in 2013?

A)$ 1,000
B)$ 3,000
C)$ 4,000
D)$ 10,500
E)$ 14,000

Question 75

Serena owns a van that she paid $22,000 for in 2010 and used exclusively for personal purposes until May 9,2013,when she began using the van in her plumbing business.On May 9,2013,a comparable van was selling for $13,000.Serena sells the van on October 28,2015.Assuming that the van is 5-year MACRS property,it is not listed property,and that Serena did not make the Section 179 election to expense on the van,what is her allowable depreciation deduction in 2015?

A)$ 749
B)$1,248
C)$1,267
D)$2,112
E)$2,496

Question 76

The mid-quarter convention under MACRS provides that

A)Depreciation is allowable in the year of acquisition of qualified property only if the property is placed in service in the first one-fourth of that year.
B)One half of the year-of-acquisition depreciation is allowed regardless of when the property is placed in service during the year. One-half year's depreciation is allowable for the year of disposition.
C)The cost recovery deduction is based on the number of months the property was in service in the year of acquisition. Therefore, one-half month's cost recovery is allowable for the month in which the property is place in service and for the month of disposition.
D)Any property placed in service in the last 3 months of a tax year is depreciated using this convention.
E)Depreciation is calculated from the middle of the quarter in which an asset is placed in service through the end of the year.

Question 77

Brent purchases a new warehouse building on May 16,2012,for $6,000,000 (exclusive of the cost of the land).What is Brent's 2013 depreciation deduction?

A)$ - 0 -
B)$ 76,924
C)$ 96,300
D)$119,040
E)$400,000

Question 78

The Ross CPA Firm places the following property in service during the 2013 tax year:
$\begin{array}{llll}\text { Froperty } & \text { Placed in } \\\text { Description } & \text { Service }& \text {MACRS Life }& \text {Cost Basis }\\\hline\text { Computers } & \text { Feb 6 } & 5 \text { years } & \$ 40,000 \\\text { Office furniture } & \text { June } 24 & 7 \text { years } & \$ 80,000 \\\text { Switchboard system } & \text { Nov 3 } & 5 \text { years } & \$ 130,000\end{array}$
Ross wants to obtain the maximum possible depreciation deduction for these property acquisitions including full utilization of the election to expense property under Section 179.Ross elects out of bonus depreciation.Ross will report 2013 taxable income in the amount of $100,000 before consideration of depreciation on their 2013 property acquisitions.What is Ross' maximum depreciation from these additions?

A)$119,500
B)$125,432
C)$126,932
D)$130,000
E)$250,000

Question 79

On August 3,2013,Yang purchases office furniture (7-year property)costing $21,000 for use in her business.She does not wish to use the Section 179 election,elects out of bonus depreciation,and makes the election to use the straight-line method over the MACRS recovery period.What is Yang's 2013 cost recovery deduction?

A)$ 500
B)$ 1,500
C)$ 3,000
D)$20,000
E)$21,000

Question 80

The mid-quarter convention
I)never applies to real estate.
II)is required when more than 30% of the depreciable basis of certain property is placed into service during the last 3 months of the tax year.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.