Question 1

Which averaging conventions are used for MACRS depreciation?

Accepted Answer

The answer of Which averaging conventions are used for MACRS...

Question 2

When would it be advisable to use the alternative depreciation system? Which properties must be depreciated by the alternative depreciation system?

Accepted Answer

The answer of When would it be advisable to use...

Question 3

Explain the basic procedure for determining the net cost of a depreciable asset using net cash flow with a five-year MACRS life and no salvage value.

Accepted Answer

The answer of Explain the basic procedure for determining the...

Question 4

Soledad left her son Juan property valued at $700,000 when she died.Soledad paid $825,000 for the property but its adjusted basis when she died was $450,000.Juan did not want the building so he authorized the administrator to sell the building 6 months after Soledad's death for $650,000.Due to the decline in value of a number of Soledad's other assets after her death,the administrator elected the alternate valuation date for the assets.What is the realized and recognized gain or loss on the sale of the asset? Explain your answer.

Accepted Answer

The answer of Soledad left her son Juan property valued...

Question 5

The cost of an asset with a useful life exceeding one year can be

Accepted Answer

The cost of an asset with a useful life exceeding one year can be expensed immediately if it is a routine repair or maintenance expense. It can be capitalized until disposal if it is a fixed asset that will be used for a long time. It can also be capitalized with part of the costs deducted annually if it is an intangible asset like a patent or a trademark. Therefore, all of the above options are possible depending on the asset.

Question 6

Calvin gave his son ABC stock valued at $100,000 that he purchased for $50,000; he gave his daughter EFG stock valued at $100,000 that he purchased for $150,000.Calvin paid $30,000 in gift taxes on each of these gifts.What are the son's and daughter's bases in the stock received?

Accepted Answer

The answer of Calvin gave his son ABC stock valued...

Question 7

Josephine Company purchases five-year MACRS property in mid-year for $12,000.What is its after-tax cost of this asset if it has a 35 percent tax rate and uses a 6 percent discount rate for project evaluation? No Section 179 expensing or bonus depreciation is claimed for this property.

Accepted Answer

The answer of Josephine Company purchases five-year MACRS property in...

Question 8

What are listed properties?

Accepted Answer

The answer of What are listed properties?...

Question 9

What is the purpose of the lease inclusion amount for automobiles?

Accepted Answer

The answer of What is the purpose of the lease...

Question 10

What is the difference in after-tax cost of a five-year machine costing $10,000 that is depreciated using MACRS depreciation versus the alternative depreciation system? The taxpayer is in the 35 percent tax bracket and uses a 6 percent discount rate for evaluation.No Section 179 expensing or bonus depreciation is claimed for this property

Accepted Answer

The answer of What is the difference in after-tax cost...

Question 11

The after-tax cost of an asset

Accepted Answer

The answer of The after-tax cost of an asset
...

Question 12

What are the permissible tax treatments for research and experimentation expenditures?

Accepted Answer

The answer of What are the permissible tax treatments for...

Question 13

If a business acquired a new machine in 2014,explain how it could have recovered its cost most efficiently.How does this differ from the maximum cost recovery deduction if the new machine is instead acquired in 2015?

Accepted Answer

The answer of If a business acquired a new machine...

Question 14

What limitations applied to the use of Section 179 expensing in 2014? What changes took effect on January 1,2015?

Accepted Answer

The answer of What limitations applied to the use of...

Question 15

Jeremy purchased an asset for $12,000 at the beginning of the year.Assuming the asset is depreciated over three years on a straight-line basis,no averaging conventions apply,Jeremy's tax rate is 35 percent,and he uses a 6 percent discount rate,what is the after-tax cost of the asset?

Accepted Answer

The answer of Jeremy purchased an asset for $12,000 at...

Question 16

What is the difference between cost and percentage depletion?

Accepted Answer

The answer of What is the difference between cost and...

Question 17

Joan gives an asset valued at $12,000 with a basis of $10,000 to Mary; Joan dies six-months later leaving an asset valued at $10,000 with a basis of $12,000 to Larry.What are Mary's and Larry's bases in these assets?

Accepted Answer

The answer of Joan gives an asset valued at $12,000...

Question 18

What is a mixed-use asset? What adjustment must be made for depreciating a mixed-use asset?

Accepted Answer

The answer of What is a mixed-use asset? What adjustment...

Question 19

William has decided to purchase a large apartment complex.He pays $100,000 cash,obtains a loan on the property for $500,000,and assumes the first mortgage balance of $250,000.He also gives the sellers $100,000 of marketable securities that he purchased three years ago for $125,000.He paid a finder's fee of $5,000,legal fees of $6,000,and transfer taxes of $12,000.What is William's acquisition basis for the building? Does he have any other tax consequences as a result of this purchase?

Accepted Answer

The answer of William has decided to purchase a large...

Question 20

What is the difference between depreciation,depletion,and amortization?

Accepted Answer

The answer of What is the difference between depreciation,depletion,and amortization?...

Quiz 6: Property Acquisitions and Cost Recovery Deductions