Question 1

Bert,a self-employed attorney,is considering either purchasing or leasing a $50,000 automobile for use in his business.What are the issues he should consider in making his decision?

Accepted Answer

The answer of Bert,a self-employed attorney,is considering either purchasing or...

Question 2

In the current year George,a college professor,acquired a computer system (5-year property)for $1,000 and used the computer 80% for teaching and research-related activities and the remaining 20% for personal use.Because George's employer provides him with a computer in his office at the university,the employer does not require him to have a computer at home.No election was made regarding Sec.179.The maximum depreciation deduction is

Accepted Answer

A)In order for an employee to take a deduction for listed property used in employment-related activities,the property must be used more than 50% for trade or business and must be for the convenience of the employer and be required as a condition of employment.Since George is not required to purchase a computer for home,no depreciation is allowed.

Question 3

If the business usage of listed property is less than or equal to 50% of its total usage,depreciation is calculated using the

Accepted Answer

If the business usage of listed property is less than or equal to 50% of its total usage, it does not qualify for MACRS, and thus the alternative depreciation system must be used.

Question 4

Mehmet,a calendar-year taxpayer,acquires 5-year tangible personal property in 2016 and does not use Sec.179.The property does not qualify for bonus depreciation.Mehmet places the property in service on the following schedule:
  What is the total depreciation for 2016?

Accepted Answer

The answer of Mehmet,a calendar-year taxpayer,acquires 5-year tangible personal property...

Question 5

Greta,a calendar-year taxpayer,acquires 5-year tangible personal property in 2016 and places the property in service on the following schedule:
  Greta elects to expense the maximum under Sec.179,and selects the property placed into service on November 8.The property is not eligible for bonus depreciation.Her business 's taxable income before Sec.179 is $790,000.What is the total cost recovery deduction (depreciation and Sec.179)for 2016?

Accepted Answer

The answer of Greta,a calendar-year taxpayer,acquires 5-year tangible personal property...

Question 6

In April of 2015,Brandon acquired five-year listed property (not an automobile)for $30,000 and used it 70% for business.No election was made regarding Sec.179 and bonus depreciation was not available.In 2016,his business use of the property dropped to 40%.Which of the following statements is true?

Accepted Answer

Brandon must recapture $2,100 as ordinary income because the business use of the property dropped below 50%, requiring a recapture of excess depreciation taken in prior years.

Question 7

In July of 2016,Pat acquired a new automobile for $28,000 and used the automobile 80% for business.Pat can take a maximum depreciation deduction in 2016 of

Accepted Answer

The maximum depreciation deduction for 2016 is $8,928. This is calculated by multiplying the cost of the automobile ($28,000) by the percentage of business use (80%) and then multiplying that result by the depreciation rate for the first year (33.33%).

Question 8

In January of 2016,Brett purchased a Porsche for $100,000 to be used in his business.Brett drove the car 83 percent of the time for business.What is the maximum amount that Brett may deduct in 2016?

Accepted Answer

The answer of In January of 2016,Brett purchased a Porsche...

Question 9

On May 1,2008,Empire Properties Corp. ,a calendar year taxpayer,purchased an apartment building for $1,000,000,of which $400,000 was allocable to the land.The corporation sold the property this year on September 23,2016.
a.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2008?
b.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2015?

Accepted Answer

The answer of On May 1,2008,Empire Properties Corp. ,a calendar...

Question 10

On June 30,2016,Temika purchased office furniture (7-year property)costing $400,000 and computers (5-year property)with a cost of $250,000.She uses Sec.179,but the assets do not qualify for bonus depreciation.Her business income is $790,000 without considering Sec.179.How should she allocate the 179 election in order to maximize her total cost recovery deductions (depreciation and Sec.179)for 2016 ?

Accepted Answer

The answer of On June 30,2016,Temika purchased office furniture (7-year...

Question 11

Enrico is a self-employed electrician.In May of the current year,Enrico acquired a used van (5-year property)for $12,000.He used the van 30% for business.The maximum depreciation deduction for is

Accepted Answer

The maximum depreciation deduction is calculated by taking the cost of the van ($12,000) and multiplying it by the business use percentage (30%), then applying the applicable depreciation rate for 5-year property. However, since the business use is less than 50%, Enrico must use the straight-line method under the Alternative Depreciation System (ADS). The deduction is $12,000 x 30% x 20% (ADS rate for 5-year property) = $720. However, the maximum deduction is limited to $360 due to the business use percentage.

Question 12

On January l Grace leases and places into service an automobile with a FMV of $39,000.The business use of the automobile is 60%.The "inclusion amount" for the initial year of the lease from the IRS tables is $20.The annual lease payments are $8,000.What are the tax consequences of this lease?

Accepted Answer

The correct answer is A. The deduction for lease payments is $4,782. This is calculated as follows:Lease payments x Business use percentage x Inclusion amount = Deduction for lease payments$8,000 x 60% x $20 = $4,782

Question 13

During the year 2016,a calendar year taxpayer,Marvelous Munchies,a chain of specialty food shops,purchased equipment as follows:
  Assume the property is all 5-year property,but does not qualify for bonus depreciation.What is the maximum depreciation that may be deducted for the assets this year,2016,assuming the alternative depreciation system is not chosen?

Accepted Answer

The answer of During the year 2016,a calendar year taxpayer,Marvelous...

Question 14

Enrico is a self-employed electrician.In May of the current year,Enrico acquired a used van (5-year property)for $12,000.He used the van 80% for business and 20% for personal purposes.Enrico does not take any Sec.179 deduction.The maximum depreciation deduction for is

Accepted Answer

The maximum depreciation deduction is calculated using the Modified Accelerated Cost Recovery System (MACRS) for 5-year property. Since Enrico uses the van 80% for business, the depreciable basis is $12,000 * 80% = $9,600. Using the MACRS 200% declining balance method, the first-year depreciation rate is 20%. Therefore, the maximum depreciation deduction is $9,600 * 20% = $1,920.

Question 15

If a company acquires goodwill in connection with the acquisition of a business,the goodwill is amortizable over a 60-month period.

Accepted Answer

Goodwill is no longer amortized for financial reporting purposes under Generally Accepted Accounting Principles (GAAP) in the United States. However, it may still be subject to amortization for tax purposes.

Question 16

In August 2016,Tianshu acquires and places into service 7-year business equipment (tangible personal property qualifying under Sec.179)for $70,000.This is the only asset that she purchased during the year;her taxable income from her trade or business is $23,000.She decides to limit her 179 election to the maximum amount currently deductible in her business for the current year.What is her maximum cost recovery (Sec.179 and depreciation)deduction for 2015?

Accepted Answer

The answer of In August 2016,Tianshu acquires and places into...

Question 17

Everest Corp.acquires a machine (seven-year property)on January 10,2016 at a cost of $2,022,000.Everest makes the election to expense the maximum amount under Sec.179.
a.Assume that the taxable income from trade or business is $1,500,000.
  b.Assume instead that the taxable income from trade or business is $400,000.

Accepted Answer

The answer of Everest Corp.acquires a machine (seven-year property)on January...

Question 18

On May 1,2012,Empire Properties Corp. ,a calendar year taxpayer,purchased an office building for $1,000,000,of which $400,000 was allocable to the land.The corporation sold the property this year on September 23,2016.
a.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2012?
b.What was the corporation's depreciation for the building,using statutory percentages under MACRS
for 2016?

Accepted Answer

The answer of On May 1,2012,Empire Properties Corp. ,a calendar...

Question 19

Arthur uses a Chevrolet Suburban (GVWR 7,500 pounds)100% for business.He acquired and placed the vehicle in service in his business in January of the current year.The vehicle cost $65,000.The maximum deduction allowed this year is

Accepted Answer

D)The vehicle weighs more than 6,000 GVWR so it is not subject to the auto limitations.The maximum deductions for year 1 include $25,000 Sec.179 expensing and $8,000 MACRS depreciation on the adjusted basis ([$65,000 - 25,000] × 20%).

Question 20

Jack purchases land which he plans on developing as a golf course.The land costs $20,000,000 and the cost of clearing the land,earthmoving,constructing hazards,bunkers and greens,and installing irrigation systems will cost an additional $6,000,000.What tax issues should Jack consider?

Accepted Answer

The answer of Jack purchases land which he plans on...

Quiz 10: Depreciation, cost Recovery, amortization, and Depletion

Bert,a self-employed attorney,is considering either purchasing or leasing a $50,000 automobile for use in his business.What are the issues he should consider in making his decision?

If the business usage of listed property is less than or equal to 50% of its total usage,depreciation is calculated using the

Mehmet,a calendar-year taxpayer,acquires 5-year tangible personal property in 2016 and does not use Sec.179.The property does not qualify for bonus depreciation.Mehmet places the property in service on the following schedule: What is the total depreciation for 2016?

In April of 2015,Brandon acquired five-year listed property (not an automobile) for $30,000 and used it 70% for business.No election was made regarding Sec.179 and bonus depreciation was not available.In 2016,his business use of the property dropped to 40%.Which of the following statements is true?

In July of 2016,Pat acquired a new automobile for $28,000 and used the automobile 80% for business.Pat can take a maximum depreciation deduction in 2016 of

In January of 2016,Brett purchased a Porsche for $100,000 to be used in his business.Brett drove the car 83 percent of the time for business.What is the maximum amount that Brett may deduct in 2016?

Enrico is a self-employed electrician.In May of the current year,Enrico acquired a used van (5-year property) for $12,000.He used the van 30% for business.The maximum depreciation deduction for is

On January l Grace leases and places into service an automobile with a FMV of $39,000.The business use of the automobile is 60%.The "inclusion amount" for the initial year of the lease from the IRS tables is $20.The annual lease payments are $8,000.What are the tax consequences of this lease?

Enrico is a self-employed electrician.In May of the current year,Enrico acquired a used van (5-year property) for $12,000.He used the van 80% for business and 20% for personal purposes.Enrico does not take any Sec.179 deduction.The maximum depreciation deduction for is

If a company acquires goodwill in connection with the acquisition of a business,the goodwill is amortizable over a 60-month period.

Arthur uses a Chevrolet Suburban (GVWR 7,500 pounds) 100% for business.He acquired and placed the vehicle in service in his business in January of the current year.The vehicle cost $65,000.The maximum deduction allowed this year is

Jack purchases land which he plans on developing as a golf course.The land costs $20,000,000 and the cost of clearing the land,earthmoving,constructing hazards,bunkers and greens,and installing irrigation systems will cost an additional $6,000,000.What tax issues should Jack consider?