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

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Question 51

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On August 20,2017,May placed in service a building for her business.On November 28,2017,May paid $80,000 for improvements to the building.What is May's cost recovery deduction for the building improvements in 2017?

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Question 52

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In 2016,Gail had a § 179 deduction carryover of $30,000.In 2017,she elected § 179 for an asset acquired at a cost of $115,000.Gail's § 179 business income limitation for 2017 is $140,000.Determine Gail's § 179 deduction for 2017.

A) $25,000
B) $115,000
C) $130,000
D) $140,000
E) None of the above

F) A) and B)
G) C) and D)

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Question 53

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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.

Antiques may be eligible for cost recovery if they are used in a trade or business.

Hans purchased a new passenger automobile on August 17,2017,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 2017.

The basis of an asset on which $20,000 has been expensed under § 179 will be reduced by $20,000,even if $20,000 cannot be expensed in the current year because of the taxable income limitation.

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.

On July 17,2017,Kevin places in service a used automobile that cost $25,000.The car is used 80% for business and 20% for personal use.In 2018,he used the automobile 40% for business and 60% for personal use.Determine the cost recovery recapture for 2018.

All personal property placed in service in 2017 and used in a trade or business qualifies for additional first-year depreciation.

Rustin bought used 7-year class property on May 15,2017,for $738,000.Rustin elects § 179 and straight-line cost recovery.Rustin's taxable income would not create a limitation for purposes of the § 179 deduction.Determine the maximum cost recovery deduction Rustin can claim for 2017.

Norm purchases a new sports utility vehicle (SUV) on October 12,2017,for $60,000.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 2017.Compute the maximum deduction with respect to the SUV for 2017.Norm does not take additional first-year depreciation.

Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.

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.

Sid bought a new $1,310,000 seven-year class asset on August 2,2017.On December 2,2017,he purchased $800,000 of used five-year class assets.If Sid elects § 179 and takes additional first-year depreciation,what is the maximum cost recovery deduction for these purchases for 2017?

The luxury auto cost recovery limits applies to all automobiles.

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

Land improvements are generally not eligible for cost recovery.

Nora purchased a new automobile on July 20,2016,for $29,000.The car was used 60% for business and 40% for personal use.In 2017,the car was used 30% for business and 70% for personal use.Nora elects not to take additional first-year depreciation.Determine the cost recovery recapture and the cost recovery deduction for 2017.

On April 5,2017,Orange Corporation purchased,and placed in service,seven-year class assets costing $540,000 and five-year class assets costing $140,000.Orange elects to expense the maximum amount under § 179.Orange does not take additional first-year depreciation.Assume taxable income is not a limitation.Determine Orange Corporation's cost recovery with respect to the assets for 2017.

For a new car that is used predominantly in business,the "luxury auto" limit depends on whether the taxpayer takes MACRS or straight-line depreciation.