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Exam 8: Depreciation Cost Recovery Amortization and Depletion

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Question 51

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Rod paid $1,950,000 for a new warehouse on April 14,2016.He sold the warehouse on September 29,2021.Determine the cost recovery deduction for 2016 and 2021.

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2016: $1,950,000 × ....

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Question 52

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Howard's business is raising and harvesting peaches.On March 10,2016,Howard purchased 10,000 new peach trees at a cost of $60,000.Howard does not make an election to expense assets under § 179 and does not take additional first-year depreciation (if available) .Determine the cost recovery deduction for 2016.

A) $1,532
B) $3,000
C) $12,000
D) $31,500
E) None of the above

F) None of the above
G) All of the above

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Question 53

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Alice purchased office furniture on September 20,2015,for $100,000.On October 10,2015,she purchased business computers for $80,000.Alice placed all of the assets in service on January 15,2016.Alice did not elect to expense any of the assets under § 179,did not elect straight-line cost recovery,and did not take additional first-year depreciation (if available) .Determine the cost recovery deduction for the business assets for 2016. 222222222222

On June 1,2016,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.

Once the more-than-50% business usage test is passed for listed property,it still matters if the business usage for the property drops to 50% or less during the recovery period.

James purchased a new business asset (three-year personalty) on July 23,2016,at a cost of $40,000.James takes additional first-year depreciation but does not elect Section 179 expense on the asset.Determine the cost recovery deduction for 2016.

The amortization period for $58,000 of startup expenses is 180 months.

In 2016,Marci is considering starting a new business.Marci incurs the following costs associated with this venture. Advertising $ 5,000 Travel 10,000 Market surveys 8,000 Professional services 30,000 Interest expense 2,000 Taxes 1,000 Marci started the new business on January 5,2017.Determine the deduction for Marci's startup costs for 2016.

The cost of a covenant not to complete for 10 years incurred in connection with the acquisition of a business is amortized over 10 years.

On April 15,2016,Sam placed in service a storage facility (a single-purpose agricultural structure)costing $80,000.Sam also purchased and planted fruit trees costing $40,000.Sam does not elect to expense any of the acquisitions under § 179,and he elects not to take additional first-year depreciation (if available).Determine Sam's cost recovery from these two items for 2016.

Diane purchased a factory building on April 15,1993,for $5,000,000.She sells the factory building on February 2,2016.Determine the cost recovery deduction for the year of the sale.

Tom purchased and placed in service used office furniture on January 3,2016,for $40,000.Tom's accountant depreciated the furniture using straight-line depreciation over 10 years for financial reporting purposes.The accountant also used the same depreciation amounts when filing Tom's income tax returns.On January 10,2021,Tom sold the furniture.Determine the tax basis of the furniture at the time of the sale.

On July 17,2016,Kevin places in service a used automobile that cost $25,000.The car is used 80% for business and 20% for personal use.In 2017,he used the automobile 40% for business and 60% for personal use.Determine the cost recovery recapture for 2017.

All personal property placed in service in 2016 and used in a trade or business qualifies for additional first-year depreciation.

The luxury auto cost recovery limits applies to all automobiles.

The "luxury auto" cost recovery limits change if mid-quarter cost recovery is used.

The cost recovery period for 3-year class property is 4 years.

If startup expenses total $53,000,$51,000 of those costs are amortized over 180 months.

If an automobile is placed in service in 2016,the limitation for cost recovery in 2018 will be based on the cost recovery limits for the year 2016.

The § 179 limit for a sports utility vehicle with a GVW of 7,000 pounds will not apply if the sports utility vehicle is used as a taxi.