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Exam 10: Property Acquisition and Cost Recovery

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Question 41

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During April of the current year, Ronen purchased a warehouse that he used for business purposes. The basis was $1,617,000. Calculate the maximum depreciation deduction during the current year. (Use MACRS Table 5.)(Round final answer to the nearest whole number.)

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Question 42

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Taylor LLC purchased an automobile for $55,000 on July 5, 2020. What is Taylor's maximum depreciation deduction for 2020 (including bonus depreciation) if its business use percentage is 100 percent?

A) $10,100
B) $11,000
C) $18,100
D) $55,000
E) None of the choices are correct.

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

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Question 43

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Property expensed under the §179 immediate expensing election is not included in the 40 percent test to determine whether the mid-quarter convention must be used.

Assume that Yuri acquires a competitor's assets on May 1 ^st. The purchase price was $500,000. Of that amount, $325,000 is allocated to tangible assets and $175,000 is allocated to goodwill (a §197 intangible asset). What is Yuri's amortization deduction for the current year? (Round final answer to the nearest whole number.)

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 1) (Round final answer to the nearest whole number.)

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.

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.

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.)

Patin Corporation began business on September 23 ^rd of the current year. It incurred $40,000 of start-up costs and $60,000 of organizational expenditures. How much total amortization may be deducted in the first year? (Round final answer to the nearest whole number.)

Billie Bob purchased a used camera (five-year property) for use in his sole proprietorship in the prior year. The basis of the camera was $2,400. Billie Bob used the camera in his business 60 percent of the time during the first year. During the second year, Billie Bob used the camera 40 percent for business use. Calculate Billie Bob's depreciation deduction during the second year, assuming the sole proprietorship had a loss during the year. (Billie Bob did not place the asset in service in the last quarter.) (Use MACRS Table 1.)

Eddie purchased only one asset during the current year. On May 1^st Eddie placed in service furniture (seven-year property)with a basis of $26,500. Calculate the maximum depreciation deduction, rounded to the nearest whole number (ignoring §179 and bonus depreciation). (Use MACRS Table 1.)

Which of the following would be considered an improvement rather than routine maintenance?

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. (UseMACRS Table 3.)

Suvi, Incorporated purchased two assets during the current year (a full 12-month tax year) .On August 10 Suvi placed in service computer equipment (five-year property) with a basis of $20,000 and on November 18 placed in service machinery (seven-year property) with a basis of $10,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation) . (Use MACRS Table 1.) (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 $63,000. 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?

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?

Olney LLC only purchased one asset this year. Olney LLC placed in service on July 19, 2020, machinery and equipment (seven-year property)with a basis of $1,330,000. Assume that Olney has sufficient income to avoid any limitations. Calculate the maximum depreciation deduction, including §179 expensing (but ignoring bonus depreciation). (Use MACRS Table 1.)

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.)

Assume that Bethany acquires a competitor's assets on March 31 ^st. The purchase price was $150,000. Of that amount, $125,000 is allocated to tangible assets and $25,000 is allocated to goodwill (a §197 intangible asset) . What is Bethany's amortization deduction for the current year? (Round final answer to the nearest whole number.)

Arlington LLC purchased an automobile for $71,000 on July 5, 2020. What is Arlington's depreciation deduction for 2020 if its business-use percentage is 70 percent? (Ignore any possible bonus depreciation.) (Use Exhibit 10-10.)