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Exam 8: Depreciation, Cost Recovery, Amortization, and Depletion

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Question 31

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The statutory dollar cost recovery limits under § 280F do not apply to all automobiles.

A) True
B) False

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Question 32

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The § 179 deduction can exceed $139,000 in 2012 if the taxpayer had a § 179 amount which exceeded the taxable income limitation in the prior year.

A) True
B) False

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Question 33

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Rustin bought used 7-year class property on May 15, 2012, for $370,000.Rustin elects § 179 and straight-line cost recovery.Rustin's taxable income would not create a limitation for purposes of the § 179 deduction. Rustin does not take additional first-year depreciation.Determine the write-off Rustin can take in 2012.

On July 10, 2012, Ariff places in service a new sports utility vehicle that cost $70,000 and weighed 6,300 pounds.The SUV is used 100% for business.Determine Ariff's maximum deduction for 2012, assuming Ariff's § 179 business income is $110,000. Ariff does not take additional first-year depreciation.

If 150% declining-balance is used, there is no straight-line switchover.

On June 1, 2012, Red Corporation purchased an existing business.With respect to the acquired assets of the business, Red allocated $300,000 of the purchase price to a patent.The patent will expire in 20 years.Determine the total amount that Red may amortize for 2012 for the patent.

Under the MACRS straight-line election for personalty, the mid-quarter convention is applicable.

On June 1, 2012, Norm leases a taxi and places it in service.The lease payments are $1,000 per month.Assuming the dollar amount from the IRS table is $241, determine Norm's inclusion amount.

Pat purchased a used five-year class asset on March 15, 2012, for $60,000.He did not elect § 179 expensing.Determine the cost recovery deduction for 2012 for earnings and profits purposes.

Barry purchased a used business asset (seven-year property) on September 30, 2012, at a cost of $200,000.This is the only asset he purchased during the year.Barry did not elect to expense any of the asset under § 179, nor did he elect straight-line cost recovery.Barry sold the asset on July 17, 2013.Determine the cost recovery deduction for 2013.

The maximum cost recovery method for all personal property under MACRS is 150% declining balance.

On June 1, 2012, James places in service a new automobile that cost $40,000.The car is used 60% for business and 40% for personal use.(Assume this percentage is maintained for the life of the car.) James does take additional first-year depreciation.Determine the cost recovery deduction for 2012.

In 2012, Marci is considering starting a new business. Marci had the following costs associated with this venture: Marci started the new business on October 1, 2012. Determine the deduction for Marci's startup costs for 2012.

On February 15, 2012, Martin signed a 20-year lease on a commercial building. In March 2012, Martin purchased and placed in service new seven-year class assets costing $400,000. In June 2012, Martin paid $200,000 for qualified leasehold real property improvements. Martin desires to take the maximum cost recovery deduction with respect to the assets in 2012. He takes additional first-year depreciation. Assuming taxable income is not a limitation, determine Martin's maximum cost recovery for 2012.

Diane purchased a factory building on November 15, 1993, for $5,000,000.She sells the factory building on February 2, 2012.Determine the cost recovery deduction for the year of the sale.

Sid bought a new $410,000 seven-year class asset on August 2, 2012.On December 2, 2012, he purchased $160,000 of used five-year class assets. Sid does take additional first-year depreciation if available.If Sid elects § 179, what is the maximum write-off for these purchases for 2012?

If startup expenses total $53,000 in 2012, $51,000 is amortized over 180 months.

If a new car that is used predominantly in business is placed in service in 2012, the statutory dollar cost recovery limit under § 280F will depend on whether the taxpayer takes MACRS or straight-line depreciation.

The key date for calculating cost recovery is the date the asset is placed in service.

On August 20, 2011, May signed a 10-year lease on a building for her business.On November 28, 2012, May paid $80,000 for a qualified leasehold improvement to the building.She takes additional first-year depreciation.What is May's cost recovery deduction for the improvement in 2012?