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Exam 10: Property Acquisition and Cost Recovery

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Question 41

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Used property is eligible for bonus depreciation.

A) True
B) False

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Question 42

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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.

A) True
B) False

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Question 43

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Kristine sold two assets on March 20th of the current year.The first was machinery with an original basis of $51,000, currently in the fourth year of depreciation, and depreciated under the half-year convention.The second was furniture with an original basis of $16,000, placed in service during the fourth quarter, currently in the third year of depreciation, and depreciated under the mid-quarter convention.What is Kristine's depreciation deduction for the current year if the depreciation recovery period is seven years? (Use MACRS Table 1 and Table 2 and Exhibit 10-6.)(Round final answer to the nearest whole number.)

PC Mine purchased a platinum deposit for $3,500,000.It estimated it would extract 17,000 ounces of platinum from the deposit.PC mined the platinum and sold it, reporting gross receipts of $500,000 and $8 million for Years 1 and 2, respectively.During Years 1 and 2, PC reported net income (loss)from the platinum deposit activity in the amount of ($100,000)and $3,800,000, respectively.In Years 1 and 2, PC actually extracted 2,000 and 8,000 ounces of platinum.What is PC's depletion deduction for Years 1 and 2 if the applicable percentage depletion for platinum is 22 percent? (Round final answer to the nearest whole number.)

Which is not an allowable method under MACRS?

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

Which of the following assets is eligible for §179 expensing?

Depletion is the method taxpayers use to recover their capital investment in natural resources.

Assume that Brittany acquires a competitor's assets on September 30^th of Year 1 for $350,000.Of that amount, $300,000 is allocated to tangible assets and $50,000 is allocated equally to two §197 intangible assets (goodwill and a one-year noncompete agreement) .Given that the noncompete agreement expires on September 30^th of Year 2, what is Brittany's amortization deduction for the second year? (Round final answer to the nearest whole number.)

Daschle LLC completed some research and development during June of the current year.The related costs were $60,000.If Daschle wants to capitalize and amortize the costs as quickly as possible, what is the total amortization amount Daschle may deduct during the current year?

If a taxpayer places only one asset (a building)in service during the fourth quarter of the year, the mid-quarter convention must be used.

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 deduction during the current year.(Use MACRS Table 3.)

All assets subject to amortization have the same recovery period.

Tax cost recovery methods do not include:

Which of the allowable methods allows the most accelerated depreciation?

An office desk is an example of:

Tasha LLC purchased furniture (seven-year property) on April 20 for $20,000 and used the half-year convention to depreciate it.Tasha did not take §179 or bonus depreciation in the year it acquired the furniture.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.(Use MACRS Table 2 and Exhibit 10-6.) (Round final answer to the nearest whole number.)

Alexandra purchased a $55,000 automobile during 2019.The business use was 70 percent.What is the allowable depreciation for the current year? (Ignore any possible bonus depreciation.)(Use Exhibit 10-10.)

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.)

Which of the following assets is not eligible for bonus depreciation?