Question 1

Used property is eligible for bonus depreciation.

Accepted Answer

Used property acquired and placed in service after September 27, 2017 is eligible for 100% bonus depreciation.

Question 2

To increase their depreciation deduction on automobiles, taxpayers should elect §179 expense.

Accepted Answer

The answer of To increase their depreciation deduction on automobiles,...

Question 3

Limits are placed on the depreciation of luxury automobiles.

Accepted Answer

The IRS places limits on the amount of depreciation that can be taken on luxury automobiles for tax purposes. This is to prevent individuals and businesses from abusing the tax deduction for luxury vehicles.

Question 4

Businesses deduct percentage depletion when they sell the natural resource and they deduct cost depletion in the year they produce or extract the natural resource.

Accepted Answer

Businesses can deduct percentage depletion when they sell the natural resource and cost depletion when they produce or extract it.

Question 5

Which of the following business assets is not depreciated?
A) Automobile
B) Building
C) Patent
D) Machinery
E) All of the assets are depreciated.

Accepted Answer

Patents are not depreciated as they are considered to have a finite useful life and are instead amortized over their useful life. Depreciation is only applicable to tangible assets such as automobiles, buildings, and machinery.

Question 6

Depletion is the method taxpayers use to recover their capital investment in natural resources.

Accepted Answer

Depletion is an accounting method used to recover the cost of natural resources by deducting a portion of the asset's capitalized cost as an expense each period. It is a recognized and accepted practice used by taxpayers to deduct from their taxable income the reserves, minerals, timber, and other natural resources that they sell or extract during the year.

Question 7

An example of an asset that is both personal-use and personal property is: A) A computer used solely to email company employees regarding company activities. B) A storage building used by the CEO to store personal records. C) A computer used solely to monitor the CEOs investments and to complete her Form 1040. D)

A company airplane used by the CEO for business travel.P1P1_E E) All of the assets are personal-use and personal property.

Accepted Answer

A computer used solely to monitor the CEO's investments and to complete her Form 1040 is considered both personal-use (as it is used for personal financial management and tax preparation) and personal property (as it is a tangible asset owned by an individual).

Question 8

Taxpayers may always expense a portion of start-up costs and organizational expenditures.

Accepted Answer

Taxpayers may only expense up to $5,000 of start-up costs and $5,000 of organizational expenditures in the first year of business. Any remaining costs must be amortized over a period of 180 months.

Question 9

Which of the following is not usually included in an asset's tax basis?
A) Purchase price
B) Sales tax
C) Shipping
D) Installation costs
E) All of the choices are included in an asset's tax basis.

Accepted Answer

All of the choices listed (purchase price, sales tax, shipping, and installation costs) are typically included in an asset's tax basis. The tax basis of an asset is essentially its cost for tax purposes, which includes the purchase price and all expenses incurred to acquire, produce, or improve the asset and make it ready for use.

Question 10

Goodwill and customer lists are examples of §197 amortizable assets.

Accepted Answer

Goodwill and customer lists are both considered intangible assets that can be amortized over time under section 197 of the Internal Revenue Code.

Question 11

The manner in which a business amortizes a patent or copyright is the same whether the business directly purchases the patent or copyright or whether it self-creates the intangible.

Accepted Answer

When a business purchases a patent or copyright, the cost is capitalized and amortized over its useful life. However, if the business self-creates the intangible, only the costs that can be directly attributed to the creation process (like legal fees for a patent) are capitalized and amortized; many initial costs (like research and development) are expensed as incurred.

Question 12

Businesses may immediately expense research and experimentation expenditures, or they may elect to capitalize these costs and amortize them using the straight-line method over a period of not less than 60 months.

Accepted Answer

This is true according to the current tax laws in the United States. However, businesses should consult with their tax advisors to ensure compliance with all applicable regulations.

Question 13

In general, major integrated oil and gas producers may take the greater of cost or percentage depletion.

Accepted Answer

Major integrated oil and gas producers are generally allowed to use only cost depletion and not percentage depletion. Percentage depletion is not available to companies that refine more than 75,000 barrels per day or produce more than 50,000 barrels per day.

Question 14

All assets subject to amortization have the same recovery period.

Accepted Answer

Different assets can have different recovery periods, depending on their type and useful life.

Question 15

If the business-use percentage for listed property falls below 50 percent, the only adjustment isthat all future depreciation must be calculated under the straight-line method.

Accepted Answer

If the business-use percentage for listed property falls below 50 percent, not only must all future depreciation be calculated under the straight-line method, but the taxpayer may also have to recapture (include in income) any excess depreciation taken in previous years over the amount that would have been allowed using the straight-line method.

Question 16

An office desk is an example of:
A) Personal property.
B) Personal-use property.
C) Real property.
D) Business property.
E) Personal property and business property.

Accepted Answer

An office desk is considered personal property because it is movable and not permanently attached to the land or buildings. If it is used in a business context, it also qualifies as business property.

Question 17

The alternative depreciation system requires both a slower method of recovery and longer recovery periods.

Accepted Answer

The answer of The alternative depreciation system requires both a...

Question 18

Business assets that tend to be used for both business and personal purposes are referred to as listed property.

Accepted Answer

Listed property includes assets such as vehicles, computers, and cell phones that may be used for both business and personal purposes.

Question 19

Cost depletion is available to all natural resource producers.

Accepted Answer

Cost depletion is a method of calculating depletion and is available to all natural resource producers.

Question 20

The method for tax amortization is always the straight-line method.

Accepted Answer

The answer of The method for tax amortization is always...

Quiz 2: Property Acquisition and Cost Recovery