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Exam 9: Property Acquisition and Cost Recovery

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Question 21

Multiple Choice

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Which of the allowable methods allows the most accelerated depreciation?

A) 150 percent declining balance
B) 200 percent declining balance
C) Straight line
D) Sum of the years digits
E) None of these allow accelerated depreciation

F) C) and D)
G) A) and D)

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Question 22

Multiple Choice

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Which is not an allowable method under MACRS?

A) 150 percent declining balance
B) 200 percent declining balance
C) Straight line
D) Sum of the years digits
E) All of these are allowable methods under MACRS

F) A) and B)
G) B) and E)

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Question 23

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The method for tax amortization is always the straight-line method.

Business assets that tend to be used for both business and personal purposes are referred to as listed property.

Roth, LLC purchased only one asset during the current year. Roth placed in service computer equipment (5-year property) on November 1st with a basis of $42,500. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).

Tasha LLC purchased furniture (7-year property) on April 20 with a basis of $20,000 and used the mid-quarter convention. During the current year, which is the fourth year Tasha LLC owned the property, the property was disposed of on December 15. Calculate the maximum depreciation expense, rounding to a whole number:

The §179 immediate expensing election phases out based upon a taxpayer's taxable income.

An office building was purchased on December 9th several years ago for $2,500,000. The purchase price was allocated as follows: building $1,900,000, landscaping $100,000, and land $500,000. During the current year, the 10th year, the building was sold on March 10th. Calculate the maximum depreciation expense for the real property during the current year, rounded to the nearest whole number.

Businesses deduct percentage depletion when they sell the natural resource and they deduct cost depletion in the year they produce or extract the natural resource.

The manner in which a business amortizes a patent or copyright is the same whether the business directly purchases the patent or copyright or whether it self-creates the intangible.

If tangible personal property is depreciated using the half-year convention and is disposed of during the first quarter of a subsequent year, the taxpayer must use the mid-quarter convention for the year of disposition.

Clay LLC placed in service machinery and equipment (7-year property) with a basis of $2,450,000 on June 6, 2014. Assume that Clay has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (ignoring any possible bonus expensing) , rounded to a whole number. Assume that the 2013 §179 limits are extended to 2014:

Geithner LLC patented a process it developed in the current year. The patent is expected to create benefits for Geithner over a 10 year period. The patent was issued on April 15th and the legal costs associated with the patent were $43,000. In addition, Geithner had unamortized research expenditures of $15,000 related to the process. What is the total amortization expense Geithner may deduct during the current year?

Which of the following business assets is not depreciated?

Anne LLC purchased computer equipment (5-year property) on August 29 with a basis of $30,000 and used the half-year convention. During the current year, which is the fourth year Anne LLC owned the property, the property was disposed of on January 15. Calculate the maximum depreciation expense:

Littman LLC placed in service on July 29, 2014 machinery and equipment (7-year property) with a basis of $600,000. Littman's income for the current year before any depreciation expense was $100,000. Which of the following statements is true to maximize Littman's total depreciation expense for 2014? (Assume that the 2013 §179 limits are extended to 2014.)

If the business use percentage for listed property falls below 50 percent, the only adjustment is all future depreciation must be calculated under the straight-line method.

An office desk is an example of:

Deirdre's business purchased two assets during the current year. Deirdre placed in service computer equipment (5-year property) on January 20 with a basis of $15,000 and machinery (7-year property) on October 1 with a basis of $15,000. Calculate the maximum depreciation expense, rounded to a whole number (ignoring §179 and bonus depreciation) :

During August of the prior year, Julio purchased an apartment building that he used as a rental property. The basis was $1,400,000. Calculate the maximum depreciation expense during the current year.