Question 1

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 2018.

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Question 2

In 2018, Marci is considering starting a new business. Marci incurs the following costs associated with this venture.
  
Marci started the new business on January 5, 2019. Determine the deduction for Marci's startup costs for 2018.

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Question 3

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 4

Rustin bought 7-year class property on May 15, 2018, for $1,228,000. Rustin elects § 179 and straight-line cost recovery, but not additional first-year depreciation.. Rustin's taxable income would not create a limitation for purposes of the § 179 deduction. Determine the maximum cost recovery deduction Rustin can claim for 2018.

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Question 5

Polly purchased a new hotel on July 20, 2018, for $6,000,000. On January 20, 2025, the building was sold. Determine the cost recovery deduction for the year of the sale.

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Question 6

Martin is a sole proprietor of a sandwich business. On March 4, 2018, Martin purchased and placed in service new seven-year class assets costing $580,000. Martin's business reports taxable income for the year, before any deductions associated with the purchased assets, of $160,000. Martin also received $30,000 of interest income for the year, which is not related to the business. Martin wants his adjusted gross income for the year to be as low as possible. With this objective in mind, determine how Martin should recover the cost of the acquired assets.

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Question 7

On June 1, 2018, 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 reason for the inclusion amount with respect to leased automobiles.

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Question 9

Nora purchased a new automobile on July 20, 2017, for $29,000. The car was used 60% for business and 40% for personal use. In 2018, 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 2018.

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Question 10

On July 15, 2018, Mavis paid $275,000 for improvements on a commercial building she owns. Determine the maximum total cost recovery from the improvements in 2018.

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Question 11

Norm purchases a new sports utility vehicle (SUV) on October 12, 2018, 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 2018. Compute the maximum deduction with respect to the SUV for 2018. Norm does not take additional first-year depreciation.

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Question 12

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

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Question 13

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

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Question 14

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

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Question 15

On April 5, 2018, Orange Corporation purchased, and placed in service, seven-year class assets costing $1,030,000 and five-year class assets costing $140,000. Orange elects to expense the maximum amount under § 179. Orange does not take additional first-year depreciation. Assume taxable income is not a limitation. Determine Orange Corporation's maximum cost recovery with respect to the assets for 2018.

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Question 16

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

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Question 17

Sid bought a new $1,320,000 seven-year class asset on August 2, 2018. On December 2, 2018, he purchased $800,000 of used five-year class assets. If Sid elects § 179 and does not take additional first-year depreciation, what is the maximum cost recovery deduction for these purchases for 2018?

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Question 18

Lindsey purchased a uranium interest for $10,000,000 on January 3, 2018, when recoverable reserves were estimated at 200,000 units. A total of 10,000 units were extracted in 2018 and 7,000 units were sold in 2018. Gross income from the property was $2,800,000 and taxable income without the allowance for depletion was $1,000,000. Determine her depletion deduction for 2018.

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Question 19

On August 20, 2018, May placed in service a building for her business. On November 28, 2018, May paid $80,000 for improvements to the building. What is May's cost recovery deduction for the building improvements in 2018?

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Question 20

Audra acquires the following new five-year class property in 2018:
  
Audra elects § 179 treatment for Asset C. Audra's taxable income from her business would not create a limitation for purposes of the § 179 deduction. Audra does not claim any available additional first-year depreciation deduction. Determine her total cost recovery deduction (including the § 179 deduction) for the year.

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Quiz 8: Depreciation, Cost Recovery, Amortization, and Depletion