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Exam 26: Depreciation, cost Recovery, amortization, and Depletion

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Question 31

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In July of 2017,Pat acquired a new automobile for $28,000 and used the automobile 80% for business.In 2018 his business use of the auto was 70%.Pat's depreciation deduction for 2018 will be

A) $6,272.
B) $5,100.
C) $3,570.
D) $4,080.

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Question 32

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Intangible drilling and development costs (IDCs)may be deducted as an expense or may be capitalized.

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Question 33

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Under the MACRS system,the same convention that applies in the year of acquisition (e.g. ,half-year,mid-quarter,or mid-month)also applies in the year of disposition.

Fariq purchases and places in service in 2017 personal property costing $2,051,000.The property does not qualify for bonus depreciation.What is the maximum Sec.179 deduction that Fariq can deduct,ignoring any taxable income limitation?

Chahana acquired and placed in service $665,000 of equipment on August 1,2017 for use in her sole proprietorship.The equipment is 5-year recovery property.No other acquisitions are made during the year.Chahana elects to expense the maximum amount under Sec.179.Assuming the property does not qualify for bonus depreciation,Chahana's total deductions for the year (including Sec.179 and depreciation) are

A large SUV is placed in service in 2017.MACRS depreciation on an SUV weighing over 6,000 pounds is limited to $11,160 for the first year placed in service.

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

If at least 50% of the aggregate basis of all new personal property for the tax year is placed in service during the last three months of the year,the mid-quarter convention is required.

When a taxpayer leases an automobile for 100% business purposes,the entire lease payment is deductible.

In July of 2017,Pat acquired a new automobile for $28,000 and used the automobile 80% for business.Pat can take a maximum depreciation deduction in 2017 of

The client is a corporation which uses high-tech equipment to manufacture its product.Because of the high level of wear and tear due to long production runs and frequent technology changes,the client usually replaces the equipment every two years.According to IRS guidance,the MACRS life of the equipment is five years.In order to accelerate depreciation deductions,which tax depreciation option should the client elect?

On May 1,2012,Empire Properties Corp. ,a calendar-year taxpayer,purchased an office building for $1,000,000,of which $400,000 was allocable to the land.The corporation sold the property this year on September 23,2017. a.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2012? b.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2017?

A purchaser of the assets of a business must allocate the purchase price to the individual assets in accordance with the written agreement between the purchaser and the seller.Which of the following assets would be least preferred for purposes of allocating value from the purchaser point of view?

The MACRS system requires that residential rental property and nonresidential real property be depreciated using the straight-line method.

If the business usage of listed property is less than or equal to 50% of its total usage,depreciation is calculated using the

Joan bought a business machine for $15,000.In a later year,she sold the machine for $12,800 when the total allowable depreciation is $8,500.The depreciation actually taken on the tax returns totaled $8,000.Joan must recognize a gain (or loss) of

Section 179 allows taxpayers to immediately expense up to $510,000 for 2017 of the cost of real and personal property placed into service in a trade or business,subject to limitations.

Once the business use of listed property falls to 50% or below,the alternative depreciation system must be used for the current year and all subsequent years,even if the business use percentage increases to more than 50% in a subsequent year.

Arthur uses a Chevrolet Suburban (GVWR 7,500 pounds) 100% for business.He acquired and placed the vehicle in service in his business in January of the current year.The vehicle cost $65,000.The maximum deduction allowed this year is

A taxpayer owns an economic interest in an oil and gas property.She is allowed to deduct the smaller of cost depletion or percentage depletion.