Question 1

Once the more-than-50% business usage test is passed for listed property, it does matter if the business usage for the property drops to 50% or less during the recovery period.

Accepted Answer

The answer of Once the more-than-50% business usage test is...

Question 2

Any § 179 expense amount that is carried forward is subject to the business income limitation in the carryforward year.

Accepted Answer

Any § 179 expense amount that is carried forward to a future year is subject to the business income limitation in that year. This means that if the business's taxable income in the carryforward year is less than the total § 179 expense carried forward, the deduction may be limited.

Question 3

If a used $35,000 automobile used 100% for business in the first year (2014) fails the 50% business usage test in the second year, no cost recovery will be recaptured.

Accepted Answer

The total cost recovery deduction for the first year would be $3,160 (§ 280F limit)which is less than $7,000 ($35,000 × 20%).The cost recovery in the first year using straight­line would be $3,160 (§ 280F limit)which is less than $3,500 ($35,000 × 10%).Therefore,there is no cost recovery recapture.

Question 4

If an automobile is placed in service in 2014, the limitation for cost recovery in 2016 will be based on the cost recovery limits for the year 2014.

Accepted Answer

An automobile's cost recovery limitation is based on the year it was placed in service, not the current year.

Question 5

The basis of an asset on which $20,000 has been expensed under § 179 will be reduced by $20,000, even if $20,000 cannot be expensed in the current year because of the taxable income limitation.

Accepted Answer

The basis of an asset is reduced by the full amount expensed under § 179, regardless of any taxable income limitations. This reduction in basis is not dependent on the amount actually deducted in the current year.

Question 6

The § 179 deduction can exceed $25,000 in 2014 if the taxpayer had a § 179 amount which exceeded the taxable income limitation in the prior year.

Accepted Answer

The § 179 amount eligible for expensing in a carryforward year is limited to the lesser of (1)the statutory dollar amount ($25,000 in 2014)reduced by the cost of § 179 property placed in service in excess of $200,000 in the carryforward year or (2)the business income limitation in the carryforward year.

Question 7

A taxpayer may elect to use the alternative depreciation system (ADS) to compute depreciation for earnings and profits.

Accepted Answer

This statement is true. A taxpayer may elect to use the alternative depreciation system (ADS) for tax purposes, which could affect the calculation of earnings and profits.

Question 8

Property used for the production of income is not eligible for § 179 expensing.

Accepted Answer

This is because § 179 only allows for the expensing of tangible property used in a trade or business, and property used for the production of income is not considered to be in a trade or business.

Question 9

Under the alternative depreciation system (ADS), the half-year convention must be used for personalty.

Accepted Answer

Under the alternative depreciation system (ADS), the half-year convention is not required; instead, ADS generally uses the straight-line method over longer recovery periods without conventions like the half-year convention.

Question 10

The inclusion amount for a leased automobile is adjusted by a business usage percentage.

Accepted Answer

The inclusion amount for a leased automobile is calculated based on the fair market value of the vehicle, as well as the business usage percentage. This means that if the car is used solely for business purposes, the inclusion amount will be lower than if it is also used for personal use.

Question 11

The costs of qualified leasehold improvements qualify for additional first-year depreciation.

Accepted Answer

The costs of qualified leasehold improvements made to an interior portion of a commercial building by a tenant can qualify for 100% bonus depreciation in the year they are placed in service. This provision was included in the Tax Cuts and Jobs Act of 2017 (TCJA).

Question 12

For personal property placed in service in 2014, the § 179 maximum deduction is limited to $25,000.

Accepted Answer

This is true according to the IRS guidelines for tax year 2014. However, it is important to note that this limit may have changed in subsequent tax years.

Question 13

The statutory dollar cost recovery limits under § 280F for passenger automobiles are changed if mid­quarter cost recovery is used.

Accepted Answer

The § 280F limits apply to all passenger automobiles,regardless of the MACRS convention used.

Question 14

Taxable income for purposes of § 179 limited expensing is computed by including the MACRS deduction.

Accepted Answer

Taxable income for purposes of § 179 limited expensing is computed by including the MACRS deduction.

Question 15

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.

Accepted Answer

The answer of If a taxpayer uses regular MACRS for...

Question 16

MACRS depreciation is used to compute earnings and profits.

Accepted Answer

The answer of MACRS depreciation is used to compute earnings...

Question 17

The statutory dollar cost recovery limits under § 280F does apply to all automobiles.

Accepted Answer

The statutory cost recovery limits under § 280F apply only to automobiles which meet the definition of a passenger automobile (e.g. ,do not apply to a taxi).

Question 18

If a new car that is used predominantly in business is placed in service in 2014, the statutory dollar cost recovery limit under § 280F will depend on whether the taxpayer takes MACRS or straight­line depreciation.

Accepted Answer

The statutory cost recovery limits apply regardless of whether MACRS or straight-line apply.

Question 19

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

Accepted Answer

All listed property, which includes items like cars and computers used for both personal and business purposes, must be substantiated according to the requirements outlined in IRS Section 274.

Question 20

The § 179 limit for a sports utility vehicle with a GVW of 7,000 pounds will not apply if the sports utility vehicle is used as a taxi.

Accepted Answer

The answer of The § 179 limit for a sports...

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

Once the more-than-50% business usage test is passed for listed property, it does matter if the business usage for the property drops to 50% or less during the recovery period.

Any § 179 expense amount that is carried forward is subject to the business income limitation in the carryforward year.

If a used $35,000 automobile used 100% for business in the first year (2014) fails the 50% business usage test in the second year, no cost recovery will be recaptured.

If an automobile is placed in service in 2014, the limitation for cost recovery in 2016 will be based on the cost recovery limits for the year 2014.

The basis of an asset on which $20,000 has been expensed under § 179 will be reduced by $20,000, even if $20,000 cannot be expensed in the current year because of the taxable income limitation.

The § 179 deduction can exceed $25,000 in 2014 if the taxpayer had a § 179 amount which exceeded the taxable income limitation in the prior year.

A taxpayer may elect to use the alternative depreciation system (ADS) to compute depreciation for earnings and profits.

Property used for the production of income is not eligible for § 179 expensing.

Under the alternative depreciation system (ADS), the half-year convention must be used for personalty.

The inclusion amount for a leased automobile is adjusted by a business usage percentage.

The costs of qualified leasehold improvements qualify for additional first-year depreciation.

For personal property placed in service in 2014, the § 179 maximum deduction is limited to $25,000.

The statutory dollar cost recovery limits under § 280F for passenger automobiles are changed if midquarter cost recovery is used.

Taxable income for purposes of § 179 limited expensing is computed by including the MACRS deduction.

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.

MACRS depreciation is used to compute earnings and profits.

The statutory dollar cost recovery limits under § 280F does apply to all automobiles.

If a new car that is used predominantly in business is placed in service in 2014, the statutory dollar cost recovery limit under § 280F will depend on whether the taxpayer takes MACRS or straightline depreciation.

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

The § 179 limit for a sports utility vehicle with a GVW of 7,000 pounds will not apply if the sports utility vehicle is used as a taxi.

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

Once the more-than-50% business usage test is passed for listed property, it does matter if the business usage for the property drops to 50% or less during the recovery period.

Any § 179 expense amount that is carried forward is subject to the business income limitation in the carryforward year.

If a used $35,000 automobile used 100% for business in the first year (2014) fails the 50% business usage test in the second year, no cost recovery will be recaptured.

If an automobile is placed in service in 2014, the limitation for cost recovery in 2016 will be based on the cost recovery limits for the year 2014.

The basis of an asset on which $20,000 has been expensed under § 179 will be reduced by $20,000, even if $20,000 cannot be expensed in the current year because of the taxable income limitation.

The § 179 deduction can exceed $25,000 in 2014 if the taxpayer had a § 179 amount which exceeded the taxable income limitation in the prior year.

A taxpayer may elect to use the alternative depreciation system (ADS) to compute depreciation for earnings and profits.

Property used for the production of income is not eligible for § 179 expensing.

Under the alternative depreciation system (ADS), the half-year convention must be used for personalty.

The inclusion amount for a leased automobile is adjusted by a business usage percentage.

The costs of qualified leasehold improvements qualify for additional first-year depreciation.

For personal property placed in service in 2014, the § 179 maximum deduction is limited to $25,000.

The statutory dollar cost recovery limits under § 280F for passenger automobiles are changed if mid­quarter cost recovery is used.

Taxable income for purposes of § 179 limited expensing is computed by including the MACRS deduction.

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.

MACRS depreciation is used to compute earnings and profits.

The statutory dollar cost recovery limits under § 280F does apply to all automobiles.

If a new car that is used predominantly in business is placed in service in 2014, the statutory dollar cost recovery limit under § 280F will depend on whether the taxpayer takes MACRS or straight­line depreciation.

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

The § 179 limit for a sports utility vehicle with a GVW of 7,000 pounds will not apply if the sports utility vehicle is used as a taxi.

The statutory dollar cost recovery limits under § 280F for passenger automobiles are changed if midquarter cost recovery is used.

If a new car that is used predominantly in business is placed in service in 2014, the statutory dollar cost recovery limit under § 280F will depend on whether the taxpayer takes MACRS or straightline depreciation.