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Exam 10: Property Acquisition and Cost Recovery

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Question 61

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An office building was purchased several years agoon December 9th 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 10^th year, the building was sold on March 10^th. Calculate the maximum depreciation deduction for the real property during the current year, rounded to the nearest whole number. (Use MACRS Table 5.)

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$10,149.
The asset's recovery period is ...

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Question 62

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Poplock LLC purchased a warehouse and land during the current year for $350,000. The purchase price was allocated as follows: $275,000 to the building and $75,000 to the land. The property was placed in service on August 12. Calculate Poplock's maximum depreciation for this first year. (Use MACRS Table 5.) (Round final answer to the nearest whole number.)

A) $2,648
B) $3,371
C) $3,751
D) $4,774
E) None of the choices are correct.

F) C) and D)
G) B) and D)

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Question 63

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Beth's business purchased only one asset during the current year (a full 12-month tax year) . On December 1 Beth placed in service machinery (seven-year property) with a basis of $50,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation) . (Use MACRS Table 2.)

The MACRS depreciation tables automatically switch to the straight-line method when the straight-line method yields a higher annual depreciation amount than the declining balance method.

Bonnie Jo purchased a used camera (five-year property) for use in her sole proprietorship. The basis of the camera was $3,600. Bonnie Jo used the camera in her business 70 percent of the time and used it for personal purposes the rest of the time during the first year. Calculate Bonnie Jo's depreciation deduction during the first year, assuming the sole proprietorship had a loss during the year. (Bonnie did not place the property in service in the last quarter.) (Use MACRS Table 1.)

Real property is depreciated using the straight-line method.

Tax depreciation is currently calculated under what system?

How is the recovery period of an asset determined?

Lax LLC purchased only one asset during the current year (a full 12-month tax year) .On August 26 Lax placed in service computer equipment (five-year property) with a basis of $20,000. Calculate the maximum depreciation expense for the current year (ignoring §179 and bonus depreciation) . (Use MACRS Table 1.)

An office desk is an example of:

All assets subject to amortization have the same recovery period.

Bonnie Jo purchased a used camera (five-year property) for use in her sole proprietorship. The basis of the camera was $2,400. Bonnie Jo used the camera in her business 60 percent of the time and used it for personal purposes the rest of the time during the first year. Calculate Bonnie Jo's depreciation deduction during the first year, assuming the sole proprietorship had a loss during the year. (Bonnie did not place the property in service in the last quarter.) (Use MACRS Table 1.)

Santa Fe purchased the rights to extract turquoise on a tract of land over a five-year period. Santa Fe paid $300,000 for extraction rights. A geologist estimates that Santa Fe will recover 5,000 pounds of turquoise. During the current year, Santa Fe extracted 1,500 pounds of turquoise, which it sold for $200,000. What is Santa Fe's cost depletion deduction for the current year?

Roth LLC purchased only one asset during the current year. On August 1^st Roth placed in service office equipment (seven-year property)with a basis of $42,500. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation). (Use MACRS Half-Year Convention Table.)(Round final answer to the nearest whole number.)

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

BoxerLLC has acquired various types of assets recently used 100 percent in its trade or business. Below is a list of assets acquired during 2019 and 2020: Boxer did not elect §179 expense and elected out of bonus depreciation in 2019, but would like to take advantage of the §179 expense and bonus depreciation for 2020 (assume that taxable income is sufficient). Calculate Boxer's maximum depreciation deduction for 2020. (Use MACRS Table 1, MACRS Table 5, and Exhibit 10-10.)(Round final answer to the nearest whole number.)

The alternative depreciation system requires both a slower method of recovery and longer recovery periods.

Which of the following is not usually included in an asset's tax basis?

To increase their depreciation deduction on automobiles, taxpayers should elect §179 expense.

Crouch LLC placed in service on May 19, 2020, machinery and equipment (seven-year property) with a basis of $3,200,000. Assume that Crouch has sufficient income to avoid any limitations. Calculate the maximum depreciation deduction including §179 expensing (but ignoring bonus depreciation) . (Use MACRS Table 1.)