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

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Question 41

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Cora purchased a hotel building on May 17,2010,for $6,000,000.Determine the cost recovery deduction for 2011.

A) $96,300.
B) $119,040.
C) $138,000.
D) $218,160.
E) None of the above.

F) A) and E)
G) None of the above

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Question 42

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Under the MACRS mid-quarter convention,an asset sold on December 10 will be treated as though it were sold on November 15 for a calendar year taxpayer.

A) True
B) False

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Question 43

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The § 179 deduction can exceed $250,000 in 2010 if the taxpayer had a § 179 amount which exceeded the taxable income limitation in the prior year.

Janet purchased a new car on June 5,2010,at a cost of $18,000.She used the car 80% for business and 20% for personal use in 2010.She used the automobile 40% for business and 60% for personal use in 2011.If Congress reenacts additional first-year depreciation for 2010,Janet elects not to take additional first-year depreciation.Determine Janet's cost recovery recapture for 2011.

Discuss the criteria used to determine whether a building is residential or nonresidential realty.Also explain the tax consequences resulting from this determination if the property is placed in service in 2010.

Diane purchased a factory building on November 15,1993,for $5,000,000.She sells the factory building on February 2,2010.Determine the cost recovery deduction for the year of the sale.

Which of the following assets would be subject to cost recovery?

Rustin bought used 7-year class property on May 15,2010,for $500,000.Rustin elects § 179 and straight-line cost recovery.Rustin's taxable income would not create a limitation for purposes of the § 179 deduction.If Congress reenacts additional first-year depreciation for 2010,Rustin elects not to take additional first-year depreciation.Determine the write-off Rustin can take in 2010.

All eligible real estate under MACRS is permitted a full month of cost recovery in the month of disposition.

Norm purchases a new sports utility vehicle (SUV)on October 12,2010,for $50,000.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 2010.Compute the maximum deduction with respect to the SUV for 2010.If Congress reenacts additional first-year depreciation for 2010,Norm elects not to take additional first-year depreciation.

Taxpayers may elect to use the straight-line method under MACRS for personality.

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

Bonnie purchased a new business asset (five-year property) on March 10,2010,at a cost of $20,000.She also purchased a new business asset (seven-year property) on November 20,2010,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.If Congress reenacts additional first-year depreciation for 2010,Bonnie did elect not to take additional first-year depreciation.Determine the cost recovery deduction for 2010 for these assets.

Orange Corporation begins business on April 2,2010.The corporation has startup expenditures of $54,000.If Orange Corporation elects § 195,determine the total amount that Orange may deduct in 2010.

The only asset Bill purchased during 2010 was a new seven-year class asset.The asset,which was listed property,was acquired on June 17 at a cost of $50,000.The asset was used 40% for business,30% for the production of income,and the rest of the time for personal use.Bill always elects to expense the maximum amount under § 179 whenever it is applicable.The net income from the business before the § 179 deduction is $100,000.Determine Bill's maximum deduction with respect to the property for 2010.

Doug purchased a new factory building on January 15,1987,for $4,000,000.On March 1,2010,the building was sold.Determine the cost recovery deduction for the year of the sale assuming he did not use the MACRS straight-line method.

Discuss the tax consequences of listed property being used for the production of income compared to being used in a trade or business.

On February 20,2010,Susan paid $200,000 for a unique leasehold improvement to an office building that she is going to lease to John.The lease will begin on June 1,2010,and terminate on May 31,2025.At the termination of the lease,the improvement will be worthless.Determine Susan's deductible loss as a result of the termination of the lease.

Under the alternative depreciation system (ADS),only the half-year convention is applicable for personality.

Bhaskar purchased a new factory building on September 2,2010,for $4,000,000.He elected the alternative depreciation system (ADS) .Determine the cost recovery deduction for 2011.