Question 1

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

Accepted Answer

False

Question 2

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

Accepted Answer

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

Question 3

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 4

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

Accepted Answer

Depreciation is the systematic allocation of the cost of an asset over its useful life, and the purpose of depreciation is to match the cost of the asset to the revenue it generates. Therefore, the basis of an asset (i.e., its original cost or other initial basis) must be reduced by the depreciation allowable.

Question 5

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

Accepted Answer

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

Question 6

The Section 179 expensing election is available on an annual basis for property purchased during the year.

Accepted Answer

The Section 179 expensing election can be made each year for qualifying property purchased during that year.

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

According to the IRS, any Section 179 deduction that is not allowed currently due to the taxable income limitation may be carried over and deducted in future years.

Question 8

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 9

MACRS recovery property includes tangible personal and real property that is used in a trade or business.

Accepted Answer

MACRS recovery property includes both tangible personal property and real property that is used in a trade or business, as defined by the Internal Revenue Service.

Question 10

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 IRS guidelines for MACRS depreciation, 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.

Question 11

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 statement is true according to IRS guidelines.

Question 12

Intangible assets are subject to MACRS depreciation.

Accepted Answer

Intangible assets are not subject to MACRS (Modified Accelerated Cost Recovery System) depreciation.

Question 13

Section 179 allows taxpayers to immediately expense up to $25,000 (for 2014),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 (for 2014), not $25,000, subject to limitations, for qualifying property placed into service in a trade or business.

Question 14

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

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.

Question 15

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 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.

Question 16

Under MACRS,tangible personal property used in trade or business purchased and placed into service on March 1,2014 should be depreciated for 10 months in 2014.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 at the midpoint of the year, resulting in 6 months of depreciation for the first year, regardless of the actual month placed in service.

Question 17

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

Accepted Answer

According to IRS rules, if an asset that was previously used for business purposes and claimed under Section 179 is later converted to personal use, there will be a recapture of the tax benefits previously claimed.

Question 18

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

Accepted Answer

The answer of Depreciable property includes business,investment,and personal-use assets....

Question 19

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 20

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....

Quiz 20: Depreciation cost Recovery amortization and Depletion