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

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Question 41

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On March 1,2017,Lana leases and places in service a passenger automobile.The lease will run for five years and the payments are $500 per month.During 2017,she uses her car 60% for business and 40% for personal activities.Assuming the dollar amount from the IRS table for auto leases is $70,determine Lana's gross income attributable to the lease.

A) $0
B) $35
C) $59
D) $70
E) None of the above

F) A) and C)
G) A) and D)

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Question 42

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Cost depletion is determined by multiplying the depletion cost per unit by the number of units sold.

A) True
B) False

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Question 43

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Augie purchased one new asset during the year (five-year property) on November 10,2017,at a cost of $660,000.She would like to use the § 179 election and will also take additional first-year depreciation.The income from the business before the cost recovery deduction and the § 179 deduction was $600,000.Determine the total cost recovery deduction with respect to the asset for 2017.

Bonnie purchased a new business asset (five-year property) on March 10,2017,at a cost of $30,000.She also purchased a new business asset (seven-year property) on November 20,2017,at a cost of $13,000.Bonnie did not elect to expense either of the assets under § 179,nor did she elect straight-line cost recovery.Bonnie takes additional first-year depreciation.Determine the cost recovery deduction for 2017 for these assets.

Intangible drilling costs must be capitalized and recovered through depletion.

Polly purchased a new hotel on July 20,2017,for $6,000,000.On January 20,2024,the building was sold.Determine the cost recovery deduction for the year of the sale.

Alice purchased office furniture on September 20,2016,for $100,000.On October 10,2016,she purchased business computers for $80,000.Alice placed all of the assets in service on January 15,2017.Alice did not elect to expense any of the assets under § 179,did not elect straight-line cost recovery,and did not take additional first-year depreciation.Determine the cost recovery deduction for the business assets for 2017. ​

If more than 40% of the value of property,other than real property,is placed in service during the last quarter,all of the property placed in service in the second quarter will be allowed 7.5 months of cost recovery.

Audra acquires the following new five-year class property in 2017: Audra elects § 179 treatment for Asset C.Audra's taxable income from her business would not create a limitation for purposes of the § 179 deduction.Audra claims the full available additional first-year depreciation deduction.Determine her total cost recovery deduction (including the § 179 deduction) for the year.

If an automobile is placed in service in 2017,the limitation for cost recovery in 2019 will be based on the cost recovery limits for the year 2017.

Tom purchased and placed in service used office furniture on January 3,2017,for $40,000.Tom's accountant depreciated the furniture using straight-line depreciation over 10 years for financial reporting purposes.The accountant also used the same depreciation amounts when filing Tom's income tax returns.On January 10,2022,Tom sold the furniture.Determine the tax basis of the furniture at the time of the sale.

If startup expenses total $53,000,$51,000 of those costs are amortized over 180 months.

Goodwill associated with the acquisition of a business cannot be amortized.

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

On May 30,2016,Jane purchased a factory building to use for her business.In August 2017,Jane paid $300,000 for improvements to the building.Determine Jane's total deduction with respect to the building improvements for 2017.

Discuss the requirements in order for startup expenditures to be amortized under § 195.

Cora purchased a hotel building on May 17,2017,for $3,000,000.Determine the cost recovery deduction for 2018.

On June 1,2017,Irene places in service a new automobile that cost $21,000.The car is used 70% for business and 30% for personal use.(Assume this percentage is maintained for the life of the car.) She does not take additional first-year depreciation.Determine the cost recovery deduction for 2018.

On July 15,2017,Mavis paid $275,000 for improvements on a commercial building she owns.Determine the maximum total cost recovery from the improvements in 2017.

For personal property placed in service in 2017,the § 179 maximum deduction is limited to $510,000.