Question 1

Delta Freight Company purchases 10 delivery vans on April 4, 2014, at a total cost of $366,000. Delta uses the regular MACRS system on all of its delivery vans the delivery vans are 5-year MACRS property and are not limited by listed property rules). Delta's annual income is $15,000 before the depreciation deduction. What is Delta's maximum cost recovery deduction on the vans in 2014?
A) $15,000
B) $69,200
C) $73,200
D) $85,200
E) $91,200

Accepted Answer

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Question 2

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 2014. It was the only piece of depreciable property placed in service during 2014. The paper shredder is 7-year MACRS property, the Section 179 election to expense was not exercised. What is Mountain View's 2014 depreciation deduction on the paper shredder?
A) $714
B) $2,498
C) $2,812
D) $2,980

Accepted Answer

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Question 3

The Boatright Accounting Firm places the following property in service during the 2014 tax year:  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. Boatright will report 2014 taxable income in the amount of $5,000 before consideration of depreciation on their 2014 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) $34,500
B) $45,650
C) $50,219
D) $100,564
E) $210,219

Accepted Answer

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Question 4

The Ross CPA Firm places the following property in service during the 2014 tax year:  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 will report 2014 taxable income in the amount of $20,000 before consideration of depreciation on their 2014 property acquisitions. What is Ross' maximum depreciation from these additions?
A) $20,000
B) $25,000
C) $29,694
D) $34,780
E) $45,432

Accepted Answer

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Question 5

Wellington Company purchases a new warehouse on August 24, 1994, for $1,000,000 exclusive of the cost allocated to the land). What is the 2014 MACRS depreciation deduction?
A) $11,900
B) $25,640
C) $31,740
D) $48,694

Accepted Answer

The correct answer is C because the MACRS depreciation deduction for the year 2014 is $31,740.

Question 6

Lindale Rentals places an apartment building in service on November 22, 2014. The building's depreciable basis is $3,300,000. What is Lindale Homes' 2014 depreciation deduction on the property?
A) $ 7,507
B) $ 15,015
C) $ 59,994
D) $104,990

Accepted Answer

The apartment building is residential rental property, which is depreciated over 27.5 years using the straight-line method and the mid-month convention. For 2014, only 1.5 months of depreciation is allowed (November 22 to December 31). The annual depreciation is $3,300,000 / 27.5 = $120,000. For 1.5 months, the depreciation is $120,000 * (1.5/12) = $15,015.

Question 7

Wellington Apartments purchases an apartment building on November 9, 2014, for $1,000,000 exclusive of the cost allocated to the land). What is the 2014 MACRS depreciation deduction?
A) $ 3,970
B) $ 4,550
C) $ 7,580
D) $36,364
E) $45,500

Accepted Answer

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Question 8

The Lovell Accounting Firm places the following new property in service during the 2014 tax year:  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. Lovell will report 2014 taxable income in the amount of $10,000 before consideration of depreciation on their 2014 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) $10,000
B) $25,000
C) $49,719
D) $50,219
E) $60,219

Accepted Answer

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Question 9

The Cox Accounting Firm places the following property in service during the 2014 tax year:  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 2014 taxable income in the amount of $100,000 before consideration of depreciation on their 2014 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) $45,555
B) $50,000
C) $56,003
D) $81,003
E) $89,000

Accepted Answer

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Question 10

Why might a taxpayer elect to depreciate assets using the Alternative Depreciation System ADS)? I. The taxpayer desires rapid write off of assets. II. The taxpayer may be close to being subject to the alternative minimum tax. III. The taxpayer is experiencing a low income time period.
A) Statements I and III are correct.
B) Only statement I is correct.
C) Statements II and III are correct.
D) Statements I and II are correct.
E) Statements I, II, and III are correct.

Accepted Answer

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Question 11

Tucker Estates places an apartment building in service on November 22, 2011. The building's depreciable basis is $3,300,000. Tucker Estates sells the building on March 5, 2014. What is Tucker Estates' 2014 depreciation deduction on the property?
A) $ 15,015
B) $ 21,828
C) $ 24,998
D) $119,988

Accepted Answer

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Question 12

On August 3, 2014, 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 and makes the election to use the straight-line method over the MACRS recovery period. What is Yang's 2014 cost recovery deduction?
A) $ 500
B) $ 1,500
C) $ 3,000
D) $20,000
E) $21,000

Accepted Answer

Yang uses the straight-line method over the MACRS recovery period for 7-year property. The half-year convention applies, so she can deduct 1/14th of the cost in the first year: $21,000 / 14 = $1,500.

Question 13

Chestnut Furniture Company purchases a delivery van on June 14, 2014, at a cost of $30,000. The delivery van has a 5-year MACRS life and an ADS recovery period of 5 years. What is Chestnut's minimum cost recovery deduction on the van in 2014?
A) $ - 0 -
B) $ 3,000
C) $ 4,500
D) $ 6,000
E) $26,850

Accepted Answer

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Question 14

Jim places a new lift truck 7-year MACRS property) into service on January 16, 2014. He pays $30,000 for the truck. This is the only business asset placed into service during this year. Jim does not desire to use the Section 179 election. How much depreciation may Jim deduct for 2014?
A) $ - 0 -
B) $ 4,287
C) $ 6,000
D) $ 8,574
E) $15,000

Accepted Answer

For 7-year MACRS property, the first-year depreciation rate is 14.29%. Therefore, $30,000 x 14.29% = $4,287.

Question 15

The Anderson Accounting Firm places the following property in service during the 2014 tax year:  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 2014 taxable income in the amount of $20,000 before consideration of depreciation on their 2014 property acquisitions. What is the maximum combined amount of cost recovery expense that may be obtained under this set of fact circumstances?
A) $28,001
B) $56,003
C) $150,000
D) $170,001
E) $178,001

Accepted Answer

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Question 16

During 2014, Duncan Company purchases and places in service office equipment with a cost of $40,000. The equipment is 7-year MACRS property with an ADS recovery period of 10 years. Duncan desires to avoid the AMT. What is its minimum 2014 depreciation deduction?
A) $ 2,000
B) $ 2,857
C) $ 3,000
D) $ 4,000
E) $ 5,714

Accepted Answer

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Question 17

On July 17, 2014, Elise purchases office furniture 7-year property) costing $50,000 for use in her business. She wishes to use the Section 179 election. Her taxable income before the depreciation deduction is $25,000. What is the maximum total cost recovery deduction Elise can take for the current year?
A) $7,145
B) $24,287
C) $23,573
D) $28,573
E) $29,462

Accepted Answer

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Question 18

Greenville Floral places a new tractor 7-year MACRS) into service on January 8, 2014. They pay $28,000 for the tractor. This is the only business asset placed into service during this year. Greenville Floral wants to minimize the amount of depreciation deductible in 2014. What is Greenville Floral's cost recovery for 2014?
A) $ 1,400
B) $ 2,000
C) $ 2,999
D) $ 4,000
E) $ 4,001

Accepted Answer

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Question 19

The Reed CPA Firm places the following property in service during the 2014 tax year:  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 will report 2014 taxable income in the amount of $5,000 before consideration of depreciation on their 2014 property acquisitions. What is Reed' maximum depreciation from these additions?
A) $5,000
B) $45,432
C) $25,000
D) $39,780
E) $34,780

Accepted Answer

The answer of The Reed CPA Firm places the following...

Question 20

During 2014, Williams Company purchases and places in service office equipment with a cost of $40,000. The equipment is 7-year MACRS property. What is its 2014 depreciation deduction for purposes of the alternative minimum tax?
A) $ 2,000
B) $ 2,857
C) $ 3,000
D) $ 4,000
E) $ 5,714

Accepted Answer

For the alternative minimum tax (AMT), the depreciation of 7-year property uses the 150% declining balance method. In the first year, the depreciation rate is 10.71% for 7-year property. Therefore, $40,000 * 10.71% = $4,284. However, since the equipment was placed in service during the year, the half-year convention applies, resulting in $4,284 / 2 = $2,142. This is closest to option B, $2,857, which accounts for rounding differences.

Quiz 10: Cost Recovery on Property: Depreciation, Depletion, and Amortization

Wellington Company purchases a new warehouse on August 24, 1994, for $1,000,000 exclusive of the cost allocated to the land) . What is the 2014 MACRS depreciation deduction?

Lindale Rentals places an apartment building in service on November 22, 2014. The building's depreciable basis is $3,300,000. What is Lindale Homes' 2014 depreciation deduction on the property?

Wellington Apartments purchases an apartment building on November 9, 2014, for $1,000,000 exclusive of the cost allocated to the land) . What is the 2014 MACRS depreciation deduction?

Why might a taxpayer elect to depreciate assets using the Alternative Depreciation System ADS) ? I. The taxpayer desires rapid write off of assets. II. The taxpayer may be close to being subject to the alternative minimum tax. III. The taxpayer is experiencing a low income time period.

Tucker Estates places an apartment building in service on November 22, 2011. The building's depreciable basis is $3,300,000. Tucker Estates sells the building on March 5, 2014. What is Tucker Estates' 2014 depreciation deduction on the property?

On August 3, 2014, 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 and makes the election to use the straight-line method over the MACRS recovery period. What is Yang's 2014 cost recovery deduction?

Chestnut Furniture Company purchases a delivery van on June 14, 2014, at a cost of $30,000. The delivery van has a 5-year MACRS life and an ADS recovery period of 5 years. What is Chestnut's minimum cost recovery deduction on the van in 2014?

Jim places a new lift truck 7-year MACRS property) into service on January 16, 2014. He pays $30,000 for the truck. This is the only business asset placed into service during this year. Jim does not desire to use the Section 179 election. How much depreciation may Jim deduct for 2014?

During 2014, Duncan Company purchases and places in service office equipment with a cost of $40,000. The equipment is 7-year MACRS property with an ADS recovery period of 10 years. Duncan desires to avoid the AMT. What is its minimum 2014 depreciation deduction?

During 2014, Williams Company purchases and places in service office equipment with a cost of $40,000. The equipment is 7-year MACRS property. What is its 2014 depreciation deduction for purposes of the alternative minimum tax?