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

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Question 41

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Jack purchases land which he plans on developing as a golf course.The land costs $20,000,000 and the cost of clearing the land,earthmoving,constructing hazards,bunkers and greens,and installing irrigation systems will cost an additional $6,000,000.What tax issues should Jack consider?

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Are the costs of constructing ...

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Question 42

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Because Jim and his family enjoy camping,he bought a pickup truck last year for personal use.The truck cost $40,000.Jim is starting a landscaping business this year and will now be using the truck in the business full-time.Based on online searches,similar trucks are selling for $32,000.When determining his business income,Jim will be able to calculate depreciation on the truck,using the $40,000 cost as basis.

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On its tax return,a corporation will use the same depreciation,amortization and depletion methods used in its financial statements issued to shareholders.

If the business use of listed property decreases to 50% or less of the total usage,the property is subject to depreciation recapture.

William purchases nonresidential real property costing $300,000 and places it in service in March 2016.What is Lincoln's 2017 depreciation on the property?

Bert,a self-employed attorney,is considering either purchasing or leasing a $50,000 automobile for use in his business.What are the issues he should consider in making his decision?

When depreciating 5-year property,the final year of depreciation will be year

A calendar-year taxpayer places in service one new piece of equipment this year on March 1.The asset cost $600,000.For this first year,the taxpayer will base the depreciation deduction on 10 months.

On May 1,2008,Empire Properties Corp. ,a calendar-year taxpayer,purchased an apartment 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 2008? b.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2017?

The basis of an asset must be reduced by the depreciation allowable.

Expenditures that enlarge a building,any elevator or escalator,any structural component that benefits a common area or the internal structural framework are not considered qualified leasehold improvement property.

Sophie owns an unincorporated manufacturing business.In 2017,she purchases and places in service $2,037,000 of qualifying five-year equipment for use in her business.The equipment does not qualify for bonus depreciation.Her taxable income from the business before any Sec.179 deduction is $450,000.Sophie elects to expense the maximum under Sec.179.What is Sophie's maximum total cost recovery deduction for 2017?

For real property placed in service after 1986,depreciation under the MACRS system is calculated using the

Intangible assets are subject to MACRS depreciation.

Personal property used in a rental activity held for investment qualifies for the Section 179 expensing election.

Jimmy acquires an oil and gas property interest for $600,000.Jimmy expects to recover 200,000 barrels of oil.Intangible drilling and development costs are $160,000 and are charged to expense.Other expenses are $40,000.During the year,25,000 barrels of oil are sold for $800,000.Jimmy's depletion deduction is

Greta,a calendar-year taxpayer,acquires 5-year tangible personal property in 2017 and places the property in service on the following schedule: Greta elects to expense the maximum under Sec.179,and selects the property placed into service on November 8.The property is not eligible for bonus depreciation.Her business's taxable income before Sec.179 is $790,000.What is the total cost recovery deduction (depreciation and Sec.179)for 2017?

Trenton Corporation places in service $10 million of equipment on June 1,2017.The equipment is five-year property,and it is not "used" property.What is the maximum cost recovery deduction Trenton Corporation is allowed this year with respect to this property?

On April 12,2016,Suzanne bought a computer for $20,000 for business use.This was the only purchase for that year.Suzanne used the most accelerated depreciation method available but did not elect Sec.179.Bonus depreciation was not available.Suzanne sells the machine in 2017.The depreciation on the computer for 2017 is

On August 11,2017,Nancy acquired and placed into service residential rental property,which cost $430,000; the cost of the land has been excluded.Nancy annually elects the maximum allowed Sec.179 deduction.The total depreciation for the year is (rounded)