Question 1

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 as per the tax laws.

Question 2

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

Accepted Answer

True. MACRS is based on the assumption that the property being depreciated will have no salvage value at the end of its useful life, so salvage value is not part of the calculation.

Question 3

Intangible assets are subject to MACRS depreciation.

Accepted Answer

Intangible assets, such as patents, copyrights, and goodwill, are not subject to MACRS depreciation. They are generally amortized over their useful lives, which can vary depending on the specific asset.

Question 4

The mid-quarter convention applies to personal and real property.

Accepted Answer

The answer of The mid-quarter convention applies to personal and...

Question 5

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

Accepted Answer

Depreciation is an expense that represents the reduction in value of an asset over time. As a result, the basis of an asset must be reduced by the depreciation allowable. This reduces the value of the asset on the balance sheet to reflect its true value.

Question 6

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

Accepted Answer

The answer of Under the MACRS system,automobiles and computers are...

Question 7

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

This is true according to IRS regulations. Any Section 179 deduction that is disallowed due to taxable income limitation can be carried forward and claimed in future tax years.

Question 8

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 the MACRS depreciation rules, the half-year convention must be applied in the year of disposition if it was used in the year the asset was placed into service. This means that only half of the depreciation amount can be deducted in the year of disposition.

Question 9

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

The answer of On its tax return,a corporation will use...

Question 10

Personal property used in a rental activity held for investment qualifies for the Section 179 expensing election.

Accepted Answer

Only property used in a trade or business qualifies.

Question 11

Under MACRS,tangible personal property used in trade or business purchased and placed into service on March 1,2013 should be depreciated for 10 months in 2013.Assume the business uses a calendar tax year.

Accepted Answer

Under MACRS, tangible personal property is typically depreciated using the half-year convention, meaning it is assumed to be placed in service in the middle of the year, resulting in 6 months of depreciation for the first year, regardless of the actual month placed in service.

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 indeed available on an annual basis for property purchased during the year.

Question 13

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

According to the IRS rules, an asset must be placed in service before the end of the tax year in order to be eligible for depreciation in that year. If the asset is not placed in service until the following year, depreciation will begin in that year instead.

Question 14

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

Accepted Answer

Recovery property typically refers to business and investment assets, not personal-use assets, which are not eligible for depreciation or recovery under tax laws.

Question 15

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

Accepted Answer

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

Question 16

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

Accepted Answer

The answer of Under the MACRS system,depreciation rates for real...

Question 17

Under the MACRS system,if the aggregate basis of all personal property placed in service during the last three months of the year exceeds 40% of the cost of all personal property placed in service during the tax year,the mid-quarter convention is required.

Accepted Answer

This statement is true according to the MACRS rules. If more than 40% of personal property is placed in service during the last three months of the year, the mid-quarter convention must be used, which affects the depreciation calculation.

Question 18

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

Accepted Answer

If an asset is converted to personal use, the Sec.179 tax benefits are recaptured, which means the taxpayer must pay taxes on the amount they previously deducted.

Question 19

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 20

Section 179 allows taxpayers to immediately expense up to $500,000 (for 2013),subject to limitations,of the cost of real and personal property placed into service in a trade or business.

Accepted Answer

Section 179 allows taxpayers to immediately expense up to $500,000 of personal property, but real property is generally not eligible for Section 179 expensing.

Quiz 10: Depreciation, cost Recovery, amortization, and Depletion