Question 1

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
A)$0.
B)$200.
C)$160.
D)$800.

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 2

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
A)$13,000.
B)$38,000.
C)$25,000.
D)$33,000.

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 3

Unless an election is made to expense or defer and amortize research and experimental expenditures,these costs must be capitalized.

Accepted Answer

According to IRS regulations, unless an election is made to expense or defer and amortize research and experimental expenditures, these costs must be capitalized.

Question 4

Most taxpayers elect to expense R&E expenditures because of the immediate tax benefit.

Accepted Answer

Most taxpayers choose to expense research and experimentation (R&E) expenditures because it allows them to immediately deduct the expenses from their taxable income, resulting in a lower tax liability. This is a common tax planning strategy.

Question 5

In April of 2014,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 2015,his business use of the property dropped to 40%.Which of the following statements is true?
A)The change does not affect Brandon's previous depreciation.
B)Brandon must recapture $2,100 as ordinary income.
C)Brandon must recapture $4,200 as ordinary income.
D)Brandon must amend the previous tax return and recompute depreciation.

Accepted Answer

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

Question 6

Greta,a calendar-year taxpayer,acquires 5-year tangible personal property in 2015 and places the property in service on the following schedule:  Greta elects to expense the maximum under Section 179,and selects the property placed into service on November 8.Her business 's taxable income before section 179 is $190,000.What is the total cost recovery deduction (depreciation and Sec.179)for 2015?

Accepted Answer

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

Question 7

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 acquired in connection with the acquisition of a business is not amortizable over a 60-month period. Instead, it is subject to annual impairment tests to determine whether there has been a decrease in value.

Question 8

On June 30,2015,Temika purchased office furniture (7-year property)costing $22,000 and computers (5-year property)with a cost of $19,000.She uses Sec.179.Her business income is $190,000 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 2015 ?

Accepted Answer

The answer of On June 30,2015,Temika purchased office furniture (7-year...

Question 9

In January of 2015,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 2015?

Accepted Answer

The answer of In January of 2015,Brett purchased a Porsche...

Question 10

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?
A)deduction for lease payments of $4,782
B)deduction for lease payments of $4,800
C)deduction for lease payments of $6,000
D)deduction for lease payment of $8,982

Accepted Answer

The answer of On January l Grace leases and places...

Question 11

Everest Corp.acquires a machine (seven-year property)on January 10,2015 at a cost of $212,000.Everest makes the election to expense the maximum amount under Sec.179.
a.Assume that the taxable income from trade or business is $500,000.  b.Assume instead that the taxable income from trade or business is $10,000.

Accepted Answer

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

Question 12

In August 2015,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 2015,Tianshu acquires and places into...

Question 13

Mehmet,a calendar-year taxpayer,acquires 5-year tangible personal property in 2015 and does not use Sec.179.Mehmet places the property in service on the following schedule:  What is the total depreciation for 2015?

Accepted Answer

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

Question 14

Amounts paid in connection with the acquisition of a business which represent a covenant not to compete are amortizable over the covenant's remaining life.

Accepted Answer

The answer of Amounts paid in connection with the acquisition...

Question 15

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...

Question 16

During the year 2015,a calendar year taxpayer,Marvelous Munchies,a chain of specialty food shops,purchased equipment as follows:  Assume the property is all 5-year property.What is the maximum depreciation that may be deducted for the assets this year,2015,assuming the alternative depreciation system is not chosen?

Accepted Answer

The answer of During the year 2015,a calendar year taxpayer,Marvelous...

Question 17

In July of 2015,Pat acquired a new automobile for $28,000 and used the automobile 80% for business.No election is made regarding Sec.179.Assuming her business use remains at 80%,Pat can take a maximum depreciation deduction in 2015 of
A)$2,528.
B)$3,160.
C)$5,600.
D)$4,480.

Accepted Answer

The maximum depreciation deduction for the first year is $5,600 (28,000 x 20%). Since no election is made regarding Sec.179, the deduction is taken over the 5-year recovery period. The deduction for 2015 is 20% of $5,600, or $1,120. Since the automobile was used 80% for business, the maximum depreciation deduction for 2015 is $1,120 x 80%, or $896.

Question 18

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 19

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 23,2015.
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 year...

Question 20

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 23,2015.
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 2014?

Accepted Answer

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

Quiz 20: Depreciation,cost Recovery,amortization,and Depletion

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

Unless an election is made to expense or defer and amortize research and experimental expenditures,these costs must be capitalized.

Most taxpayers elect to expense R&E expenditures because of the immediate tax benefit.

In April of 2014,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 2015,his business use of the property dropped to 40%.Which of the following statements is true?

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

In January of 2015,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 2015?

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?

Mehmet,a calendar-year taxpayer,acquires 5-year tangible personal property in 2015 and does not use Sec.179.Mehmet places the property in service on the following schedule: What is the total depreciation for 2015?

Amounts paid in connection with the acquisition of a business which represent a covenant not to compete are amortizable over the covenant's remaining life.

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?

In July of 2015,Pat acquired a new automobile for $28,000 and used the automobile 80% for business.No election is made regarding Sec.179.Assuming her business use remains at 80%,Pat can take a maximum depreciation deduction in 2015 of

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?