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Exam 8: Depreciation, cost Recovery, amortization, and Depletion

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Question 21

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Antiques may be eligible for cost recovery if they are used in a trade or business.

A) True
B) False

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Question 22

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The inclusion amount for a leased automobile is adjusted by a business usage percentage.

A) True
B) False

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Question 23

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All listed property is subject to the substantiation requirements of § 274.

On July 17,2015,Kevin places in service a used automobile that cost $25,000.The car is used 80% for business and 20% for personal use.In 2016,he used the automobile 40% for business and 60% for personal use.Determine the cost recovery recapture for 2016.

On May 2,2015,Karen placed in service a new sports utility vehicle that cost $60,000 and has a gross vehicle weight of 6,300 lbs.The vehicle is used 60% for business and 40% for personal use.Determine the cost recovery for 2015.Karen wants to maximize her deductions.

The luxury auto cost recovery limits applies to all automobiles.

Diane purchased a factory building on April 15,1993,for $5,000,000.She sells the factory building on February 2,2015.Determine the cost recovery deduction for the year of the sale.

Residential rental real estate includes property where 80% or more of the net rental revenues are from nontransient dwelling units.

Discuss the reason for the inclusion amount with respect to leased automobiles.

Mary purchased a new five-year class asset on March 7,2015.The asset was listed property (not an automobile) .It was used 60% for business and the rest of the time for personal use.The asset cost $900,000.Mary made the § 179 election.The income from the business before the § 179 deduction was $600,000.Mary also takes additional first-year depreciation (if available) .Determine the total deductions with respect to the asset for 2015.

Rustin bought used 7-year class property on May 15,2015,for $728,000.Rustin elects § 179 and straight-line cost recovery.Rustin's taxable income would not create a limitation for purposes of the § 179 deduction.Determine the maximum cost recovery deduction Rustin can claim for 2015.

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.

Cora purchased a hotel building on May 17,2015,for $3,000,000.Determine the cost recovery deduction for 2016.

Martin is a sole proprietor of a sandwich business.On March 4,2015,Martin purchased and placed in service new seven-year class assets costing $560,000.Martin's business reports taxable income for the year,before any deductions associated with the purchased assets,of $160,000.Martin also received $30,000 of interest income for the year,which is not related to the business.Martin wants his adjusted gross income for the year to be as low as possible.With this objective in mind,determine how Martin should recover the cost of the acquired assets.

A purchased trademark is a § 197 intangible.

Norm purchases a new sports utility vehicle (SUV) on October 12,2015,for $60,000.The SUV has a gross vehicle weight of 6,200 lbs.It is used 100% of the time for business and it is the only business asset acquired by Norm during 2015.Compute the maximum deduction with respect to the SUV for 2015.Norm does not take additional first-year depreciation (if available).

Rick purchased a uranium interest for $10,000,000 on January 3,2015,when recoverable reserves were estimated at 200,000 units.A total of 10,000 units were extracted in 2015 and 7,000 units were sold in 2015.Gross income from the property was $2,800,000 and taxable income without the allowance for depletion was $1,000,000.Determine the depletion deduction for 2015.

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

A taxpayer may elect to use the alternative depreciation system (ADS) to compute depreciation for earnings and profits.

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