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

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Question 41

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Carlos purchased an apartment building on November 16, 2017, for $3,000,000. Determine the cost recovery for 2017.

A) $9,630
B) $11,910
C) $13,950
D) $22,740
E) None of the above

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

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Question 42

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On March 3, 2017, Sally purchased and placed in service a building costing $12,000,000. The building has 10 floors. The bottom three floors are rented out to businesses. The top seven floors are residential apartments. The gross rents from the businesses are $60,000 and the gross rents from the apartments are $110,000. Determine Sally's cost recovery for the building in 2017.

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The gross rents from the apart...

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Question 43

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In 2017, Marci is considering starting a new business. Marci incurs the following costs associated with this venture.​ Marci started the new business on January 5, 2018. Determine the deduction for Marci's startup costs for 2017.

On May 2, 2017, 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 Karen's total cost recovery for 2017. Karen wants to use both §179 and additional first-year depreciation.

Barry purchased a used business asset (seven-year property) on September 30, 2017, 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, did not take additional first-year depreciation, and did not elect straight-line cost recovery. Barry sold the asset on July 17, 2018. Determine the cost recovery deduction for 2018.

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

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

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.

George purchases used seven-year class property at a cost of $200,000 on April 20, 2017. Determine George's cost recovery deduction for 2017 for alternative minimum tax purposes, assuming George does not elect § 179 and does not take additional first-year depreciation.

Taxable income for purposes of § 179 limited expensing is computed by including the MACRS deduction.

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

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

The amortization period for $58,000 of startup expenses is 180 months.

Tan Company acquires a new machine (ten-year property) on January 15, 2017, at a cost of $200,000. Tan also acquires another new machine (seven-year property) on November 5, 2017, at a cost of $40,000. No election is made to use the straight-line method. The company does not make the § 179 election and elects to not take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machines for 2017.

Under MACRS, if the mid-quarter convention is applicable, all property sold is treated as being sold at the mid-point of the quarter in which it is placed in service.

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.

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

On June 1 of the current year, Tab converted a machine from personal use to rental property. At the time of the conversion, the machine was worth $90,000. Five years ago Tab purchased the machine for $120,000. The machine is still encumbered by a $50,000 mortgage. What is the basis of the machine for cost recovery?

Orange Corporation begins business on April 2, 2017. The corporation reports startup expenditures of $64,000 all incurred last year. Determine the total amount that Orange can elect to deduct in 2017.

Property used for the production of income is not eligible for § 179 expensing.