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Exam 9: Property Acquisition and Cost Recovery

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Question 31

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Arlington LLC purchased an automobile for $40,000 on July 5,2012.What is Arlington's depreciation expense for 2012 if its business use percentage is 75 percent (ignore any possible bonus depreciation) ?

A) $2,370
B) $3,160
C) $6,000
D) $8,000
E) None of these

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

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Question 32

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Wheeler LLC purchased two assets during the current year.It placed in service computer equipment (5-year property) on November 16 with a basis of $15,000 and furniture (7-year property) on April 20 with a basis of $11,000.Calculate the maximum depreciation expense,rounding to a whole number (ignoring §179 and bonus depreciation) :

A) $1,285
B) $2,714
C) $4,572
D) $5,200
E) None of these

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

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Question 33

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

Jorge purchased a copyright for use in his business in the current year.The purchase occurred on July 15^th and the purchase price was $75,000.If the patent has a remaining life of 75 months,what is the total amortization expense Jorge may deduct during the current year?

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 1-year non-compete agreement) .Given,that the non-compete agreement expires on September 30^th of year 2,what is Brittany's amortization expense for the second year,rounded to the nearest whole number?

Tom Tom LLC purchased a rental house and land during the current year for $150,000.The purchase price was allocated as follows: $100,000 to the building and $50,000 to the land.The property was placed in service on May 22.Calculate Tom Tom's maximum depreciation for this first year:

Tasha LLC purchased furniture (7-year property) on April 20 with a basis of $20,000 and used the mid-quarter convention.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,rounding to a whole number:

Crouch LLC placed in service on May 19,2013 machinery and equipment (7-year property) with a basis of $2,200,000.Assume that Crouch has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including §179 expensing (but ignoring bonus expensing) :

The MACRS recovery period for automobiles and computers is:

The basis for a personal use asset converted to business use is the lesser of the asset's cost basis or fair market value on the date of the transfer or conversion.

The 200 percent or double declining balance method is allowable for five and seven year property.

Lenter LLC placed in service on April 29,2013 machinery and equipment (7-year property) with a basis of $600,000.Assume that Lenter has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including section 179 expensing (but ignoring bonus expensing) :

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

The mid-month convention applies to real property in the year of acquisition and disposition.

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.

Sairra,LLC purchased only one asset during the current year.It placed in service furniture (7-year property) on April 16 with a basis of $25,000.Calculate the maximum depreciation expense for the current year,rounding to a whole number (ignoring §179 and bonus depreciation) :

Cost depletion is available to all natural resource producers.

Suvi,Inc.purchased two assets during the current year.It placed in service computer equipment (5-year property) on August 10 with a basis of $20,000 and machinery (7-year property) on November 18 with a basis of $10,000.Calculate the maximum depreciation expense,rounded to a whole number (ignoring §179 and bonus depreciation) :

All taxpayers may use the §179 immediate expensing election on certain property.

The §179 immediate expensing election phases out based upon a taxpayer's taxable income.The §179 phase out is based upon the amount of property placed in service during the year.