Question 1

Under the MACRS system,automobiles and computers are classified as seven-year property.

Accepted Answer

Under the MACRS system, automobiles are classified as five-year property, while computers are also classified as five-year property.

Question 2

Because Jim and his family enjoy camping,he bought a pickup truck last year for personal use.The truck cost $40,000.Jim is starting a landscaping business this year and will now be using the truck in the business full-time.Based on online searches,similar trucks are selling for $32,000.When determining his business income,Jim will be able to calculate depreciation on the truck,using the $40,000 cost as basis.

Accepted Answer

False

Question 3

MACRS recovery property includes tangible personal and real property that is used in a trade or business.

Accepted Answer

MACRS recovery property does include tangible personal and real property that is used in a trade or business.

Question 4

If personal-use property is converted to trade or business use,the basis for depreciation is the lesser of adjusted basis or FMV on the date of conversion.

Accepted Answer

This is true according to IRS guidelines. When personal-use property is converted to business use, the owner must determine the basis for depreciation based on the lesser of the adjusted basis (the amount paid for the property plus any improvements and minus any depreciation taken) or the fair market value of the property on the date of conversion.

Question 5

Sec.179 tax benefits are recaptured if at any time an asset is converted to personal use.

Accepted Answer

If an asset that was claimed for Sec. 179 tax benefits is converted to personal use at any point, the tax benefits must be recaptured.

Question 6

A calendar-year taxpayer places in service one new piece of equipment this year on March 1.The asset cost $600,000.For this first year,the taxpayer will base the depreciation deduction on 10 months.

Accepted Answer

The answer of A calendar-year taxpayer places in service one...

Question 7

Section 179 allows taxpayers to immediately expense up to $1,020,000 for 2019 of the cost of real and personal property placed into service in a trade or business,subject to limitations.

Accepted Answer

The answer of Section 179 allows taxpayers to immediately expense...

Question 8

On its tax return,a corporation will use the same depreciation,amortization and depletion methods used in its financial statements issued to shareholders.

Accepted Answer

Corporations can use different methods for tax purposes than those used in financial statements, often to take advantage of tax benefits.

Question 9

If at least 50% of the aggregate basis of all new personal property for the tax year is placed in service during the last three months of the year,the mid-quarter convention is required.

Accepted Answer

The answer of If at least 50% of the aggregate...

Question 10

Any Section 179 deduction that is not allowed currently due to the taxable income limitation may be carried over and deducted in future years.

Accepted Answer

The statement is true. Any Section 179 deduction that is not allowed currently due to the taxable income limitation may be carried over and deducted in future years.

Question 11

In computing MACRS depreciation in the year of disposition of personal property used in a trade or business,the half-year convention must be applied to the amounts in the tables if the half-year convention was used in the year the asset was placed into service.

Accepted Answer

According to IRS rules, if the half-year convention was used in the year the asset was placed into service, then the half-year convention must also be applied in the year of disposition when computing MACRS depreciation for personal property used in a trade or business.

Question 12

The Section 179 expensing election is available on an annual basis for property purchased during the year.

Accepted Answer

The Section 179 expensing election is an annual deduction that can be taken for qualifying property purchased during that year.

Question 13

The basis of an asset must be reduced by the depreciation allowable.

Accepted Answer

This is true according to tax regulations. Depreciation is a tax deduction that allows businesses to recover the cost of assets over time, and as a result, the basis of the asset must be reduced by the depreciation expense claimed.

Question 14

Intangible assets are subject to MACRS depreciation.

Accepted Answer

Intangible assets are not physical in nature and therefore cannot be depreciated using MACRS. They may be amortized over their useful life instead.

Question 15

Under the MACRS rules,salvage value is not considered in the computation of the cost-recovery or depreciation amount.

Accepted Answer

Under the MACRS rules, salvage value is not considered in the computation of the cost-recovery or depreciation amount.

Question 16

Land,buildings,equipment,and common stock are examples of tangible property.

Accepted Answer

Common stock is not a tangible property; it is an intangible asset representing ownership in a company.

Question 17

Depreciable property includes business,investment,and personal-use assets.

Accepted Answer

Depreciable property includes business and investment assets, but not personal-use assets, as they are not used to generate income.

Question 18

Under the MACRS system,depreciation rates for real property must always use the mid-month convention in the year of acquisition.

Accepted Answer

The MACRS system requires the mid-month convention for real property, meaning depreciation starts in the middle of the month of acquisition.

Question 19

In order for an asset to be depreciated in the year of purchase,it must be placed in service before year's end.

Accepted Answer

The asset must be placed in service and ready for use in the business before the end of the year in order for it to be depreciated in that year. If the asset is not ready for use until the following year, the depreciation will commence for that year.

Question 20

With respect to options to accelerate depreciation deductions for new qualifying assets,a taxpayer must elect into Sec.179 expensing,but elect out of bonus depreciation.

Accepted Answer

A taxpayer must elect into Sec.179 expensing, but elect out of bonus depreciation to accelerate depreciation deductions for new qualifying assets.

Quiz 26: Depreciation,cost Recovery,amortization,and Depletion