Question 1

In 2014,Marci is considering starting a new business.Marci had the following costs associated with this venture:
 $\begin{array}{lr}
\text { Advertising } & \$ 5,000 \
\text { Travel } & 10,000 \
\text { Market surveys } & 8,000 \
\text { Professional services } & 30,000 \
\text { Interest expense } & 2,000 \
\text { Taxes } & 1,000
\end{array}$ Marci started the new business on January 5,2015.Determine the deduction for Marci's startup costs for 2014.

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Question 2

Discuss the effect on the cost recovery method of a taxpayer election if the uniform capitalization rules apply to a farming business.

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Question 3

Discuss the requirements in order for startup expenditures to be amortized under § 195.

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Question 4

Discuss the reason for the inclusion amount with respect to leased automobiles.

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Question 5

Discuss the difference between the half-year convention and the mid-quarter convention.

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Question 6

Joe purchased a new five-year class asset on June 1,2014.The asset is listed property (not an automobile).It was used 55% for business and 45% for the production of income.The asset cost $100,000.Joe made the § 179 election.Joe's taxable income would not create a limitation for purposes of the § 179 deduction.Joe does not take additional first­year depreciation (if available).Determine Joe's total cost recovery (including the § 179 deduction)for the year.

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Question 7

On June 1,2014,Gabriella purchased a computer and peripheral equipment (five-year property)for $25,000.She used the assets 40% for business,50% for the production of income,and 10% for personal use.These are the only assets Gabriella purchased during the current year.Determine her total cost recovery deduction for the current year.

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Question 8

Discuss the tax consequences of listed property being used for the production of income compared to being used in a trade or business.

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Question 9

Norm purchases a new sports utility vehicle (SUV)on October 12,2014,for $60,000.The SUV has a gross vehicle weight of 6,200 lbs.It is used 100% of the time for business and it is the only business asset acquired by Norm during 2014.Compute the maximum deduction with respect to the SUV for 2014.Norm does take additional first- year depreciation (if available).

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Question 10

Discuss the criteria used to determine whether a building is residential or nonresidential realty.Also explain the tax consequences resulting from this determination if the property is placed in service in 2014.

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Question 11

Rick purchased a uranium interest for $10,000,000 on January 3,2014,when recoverable reserves were estimated at 200,000 units.A total of 10,000 units were extracted in 2013 and 7,000 units were sold in 2014.Gross income from the property was $2,800,000 and taxable income without the allowance for depletion was $1,000,000.Determine the depletion deduction for 2014.

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Question 12

On July 15,2014,Mavis paid $275,000 for leasehold improvements on a commercial building she was leasing.Determine the maximum total cost recovery from the improvements in 2014.

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Question 13

Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.

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Question 14

Nora purchased a new automobile on July 20,2013,for $29,000.The car was used 60% for business and 40% for personal use.In 2014,the car was used 30% for business and 70% for personal use.Nora elects not to take additional first-year depreciation.Determine the cost recovery recapture and the cost recovery deduction for 2014.

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Question 15

Discuss the tax implications of a seller allocating the selling price to goodwill or a covenant not to compete.

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Quiz 8: Depreciation, cost Recovery, amortization, and Depletion