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

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Question 61

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In a farming business,if the uniform capitalization rules are not used,cost is recovered using the ADS straight-line method.

A) True
B) False

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Question 62

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The cost recovery basis for property converted from personal use to business use may be the fair market value of the property at the time of the conversion.

A) True
B) False

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Question 63

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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?

The cost recovery period for new farm equipment placed in service during 2012 is seven years.

Under the alternative depreciation system (ADS),the half-year convention must be used for personalty.

Orange Corporation begins business on April 2,2012.The corporation has startup expenditures of $54,000.If Orange Corporation elects § 195,determine the total amount that Orange may deduct in 2012.

On June 1,2012,Sam purchased new farm machinery for $150,000.Sam used the machinery in connection with his farming business.Sam does not elect to expense assets under § 179.Sam has,however,made an election to not have the uniform capitalization rules apply to the farming business.Sam does not take additional first-year depreciation.Determine the cost recovery deduction for 2012.

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.

Hans purchased a new passenger automobile on August 17,2012,for $30,000.During the year the car was used 40% for business and 60% for personal use.Determine his cost recovery deduction for the car for 2012.

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

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.

Percentage depletion enables the taxpayer to recover more than the cost of an asset.

On May 2,2012,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 2012.Karen wants to maximize her deductions.

The statutory dollar cost recovery limits under § 280F for passenger automobiles still apply if mid-quarter cost recovery is used.

In 2011,Gail had a § 179 deduction carryover of $25,000.In 2012,she elected § 179 for an asset acquired at a cost of $115,000.Gail's § 179 business income limitation for 2012 is $142,000.Determine Gail's § 179 deduction for 2012.

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