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

A) True
B) False

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

A) True
B) False

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

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The expenditures must meet two requireme...

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Intangible drilling costs are capitalized and recovered through depletion.

A) True
B) False

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Doug purchased a new factory building on January 15, 1991, for $400,000. On March 1, 2019, the building was sold. Determine the cost recovery deduction for the year of the sale; Doug did not use the MACRS straight-line method.


A) $0
B) $1,587
C) $2,645
D) $12,696

E) None of the above
F) C) and D)

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Hazel purchased a new business asset (five-year asset) on September 30, 2019, at a cost of $100,000. On October 4, 2019, she placed the asset in service. This was the only asset she placed in service in 2019. Hazel did not elect § 179 or additional first-year depreciation. On August 20, 2020, Hazel sold the asset. Determine the cost recovery for 2020 for the asset.


A) $14,250
B) $19,000
C) $23,750
D) $38,000

E) A) and B)
F) A) and C)

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Property that is classified as personalty may be depreciated.

A) True
B) False

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On June 1, 2019, 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 for such leases is $241, determine Norm's gross income inclusion amount.


A) $0
B) $241
C) $907
D) $1,687

E) C) and D)
F) B) and C)

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On May 2, 2019, 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 2019. Karen wants to use both §179 and additional first-year depreciation.


A) $7,200
B) $25,500
C) $27,200
D) $36,000

E) None of the above
F) B) and D)

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Audra acquires the following new five-year class property in 2019:  Asset  Acquisition Date  Cost  A  January 10 $106,000 B  July 570,000 C  November 15 1,950,000 Total $2,126,000\begin{array} { l l r } \text { Asset } & \text { Acquisition Date } & \text { Cost } \\\text { A } & \text { January 10 } & \$ 106,000 \\\text { B } & \text { July } 5 & 70,000 \\\text { C } & \text { November 15 } & \underline { 1,950,000 } \\\text { Total } & & \$ 2,126,000 \\\end{array} Audra elects § 179 treatment for Asset C. Her taxable income from her business would not create a limitation for purposes of the § 179 deduction. Audra does not claim any available additional first-year depreciation deduction. Determine her total cost recovery deduction (including the § 179 deduction) for the year.

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Audra's § 179 deduction is $1,020,000 (s...

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If a taxpayer has a business with a net operating loss carryover reducing current year income, the taxpayer may want to elect to use straight-line depreciation to slow down the cost recovery.

A) True
B) False

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Barry purchased a used business asset (seven-year property) on September 30, 2019, 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 claim additional first-year depreciation, and did not elect straight-line cost recovery. Barry sold the asset on July 17,2020. Determine the cost recovery deduction for 2020.


A) $19,133
B) $24,490
C) $34,438
D) $55,100

E) A) and D)
F) All of the above

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Under the MACRS straight-line election for personalty, only the half-year convention is applicable.

A) True
B) False

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The only asset Bill purchased during 2019 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 2019.


A) $1,428
B) $2,499
C) $26,749
D) $33,375

E) C) and D)
F) A) and B)

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In 2019, Marci is considering starting a new business. Marci incurs the following costs associated with this venture.  Advertising $5,000 Travel 10,000 Market surveys 8,000 Professional services 30,000 Interest expense 2,000 Taxes 1,000\begin{array}{lr}\text { Advertising } & \$ 5,000 \\\text { Travel } & 10,000 \\\text { Market surveys } & 8,000 \\\text { Professional services } & 30,000 \\\text { Interest expense } & 2,000 \\\text { Taxes } & 1,000\end{array} Marci started the new business on January 5, 2020. Determine the deduction for her startup costs for 2019.

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Marci is not allowed to deduct...

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Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.179. However, the § 179 limit for SUVs is $25,500 rather than $1,020,000 in 2019. The SUV also is eligible for additional first-year depreciation.

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If an automobile is not classified as a ...

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Bonnie purchased a new business asset (five-year property) on March 10, 2019, at a cost of $30,000. She also purchased a new business asset (seven-year property) on November 20, 2019, 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 2019 for these assets.


A) $7,858
B) $9,586
C) $21,915
D) $43,000

E) A) and D)
F) A) and C)

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Simpson Company, a calendar year taxpayer, acquires an apartment building on March 22, 2019 for $900,000. What is the maximum cost recovery deduction it may take for 2019?


A) $18,297.
B) $22,617.
C) $25,911.
D) $31,365.

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

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

A) True
B) False

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On January 15, 2019, Vern purchased the rights to a mineral interest for $3,500,000. At that time, it was estimated that the recoverable units would be 500,000. During the year, 40,000 units were mined and 25,000 units were sold for $800,000. Vern incurred expenses during 2019 of $500,000. The percentage depletion rate is 22%. Determine Vern's depletion deduction for 2019.


A) $150,000
B) $175,000
C) $176,000
D) $200,000
E) $250,000

F) None of the above
G) B) and D)

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