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Exam 2: Property Acquisition and Cost Recovery

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Question 31

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In general, major integrated oil and gas producers may take the greater of cost or percentage depletion.

A) True
B) False

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Question 32

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Paulman incurred $55,000 of research and experimental expenses and began amortizing them over 60 months during June of Year 1. During May of Year 3, Paulman received a patent based upon the research being amortized. $36,000 of legal expenses for the patent were incurred. The patent is expected to have a remaining useful life of 17 years. 1) What is the basis of the patent? (Round amortization for each year to the nearest whole number.)2) What is the amortization deduction with respect to the patent during the year it was issued? (Round final answer to the nearest whole number.)

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1) $69,000.
The basis of the patent is $...

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Question 33

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During April of the current year, Ronen purchased a warehouse that he used for business purposes. The basis was $1,613,000. Calculate the maximum depreciation deduction during the current year. (Use MACRS Table 5.) (Round final answer to the nearest whole number.)

Beth's business purchased only one asset during the current year (a full 12-month tax year) . On December 1 Beth placed in service machinery (seven-year property) with a basis of $50,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation) . (Use MACRS Table 2.)

Sairra LLC purchased only one asset during the current year (a full 12-month tax year) . On April 16 Sairra placed in service furniture (seven-year property) with a basis of $30,000. Calculate the maximum depreciation expense for the current year (ignoring §179 and bonus depreciation) . (Use MACRS Table 1.) (Round final answer to the nearest whole number.)

Clay LLC placed in service machinery and equipment (seven-year property) with a basis of $3,450,000 on June 6, 2020. Assume that Clay has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (ignoring any possible bonus depreciation) . (Use MACRS Table 1.) (Round final answer to the nearest whole number.)

Alexandra purchased a $55,800 automobile during 2020. The business use was 70 percent. What is the allowable depreciation for the current year? (Ignore any possible bonus depreciation.) (Use Exhibit 10-10.)

Potomac LLC purchased an automobile for $30,000 on August 5, 2020. What is Potomac's depreciation deduction for 2020? (Ignore any possible bonus depreciation.) (Use MACRS Table 1 and Exhibit 10-10.)

Arlington LLC purchased an automobile for $55,000 on July 5, 2020. What is Arlington's depreciation deduction for 2020 if its business-use percentage is 75 percent? (Ignore any possible bonus depreciation.) (Use Exhibit 10-10.)

Eddie purchased only one asset during the current year. On May 1^st Eddie placed in service furniture (seven-year property) with a basis of $26,500. Calculate the maximum depreciation deduction, rounded to the nearest whole number (ignoring §179 and bonus depreciation). (Use MACRS Table 1.)

Bonnie Jo used two assets during the current year. The first was computer equipment with an original basis of $15,000, currently in the second year of depreciation anddepreciated under the half-year convention. This asset was disposed of on October 1^st of the current year. The second was furniture with an original basis of $24,000, placed in service during the first quarter, currently in the fourth year of depreciation, anddepreciated under the mid-quarter convention. What is Bonnie Jo's depreciation deduction for the current year? (Round final answer to the nearest whole number.) (Use MACRS Table 1 and Table 2.)

Olney LLC only purchased one asset this year. Olney LLC placed in service on July 19, 2020, machinery and equipment (seven-year property) with a basis of $1,330,000. Assume that Olney has sufficient income to avoid any limitations. Calculate the maximum depreciation deduction, including §179 expensing (but ignoring bonus depreciation). (Use MACRS Table 1.)

Which depreciation convention is the general rule for tangible personal property?

The basis for a personal-use asset converted to business use is the lesser of the asset's cost basis or fair market value on the date of the transfer or conversion.

Northern LLC only purchased one asset this year. In 2020, Northern LLC placed in service on September 6^th machinery and equipment (seven-year property) with a basis of $3,150,000. Assume that Northern has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (ignore any potential bonus expensing). (Use MACRS Table 1.)

Crouch LLC placed in service on May 19, 2020, machinery and equipment (seven-year property) with a basis of $3,200,000. Assume that Crouch has sufficient income to avoid any limitations. Calculate the maximum depreciation deduction including §179 expensing (but ignoring bonus depreciation) . (Use MACRS Table 1.)

Bonnie Jo purchased a used camera (five-year property) for use in her sole proprietorship. The basis of the camera was $2,600. Bonnie Jo used the camera in her business 60 percent of the time and used it for personal purposes the rest of the time during the first year. Calculate Bonnie Jo's depreciation deduction during the first year, assuming the sole proprietorship had a loss during the year. (Bonnie did not place the property in service in the last quarter.) (Use MACRS Table 1.)

During April of the current year, Ronen purchased a warehouse that he used for business purposes. The basis was $1,600,000. Calculate the maximum depreciation deduction during the current year. (Use MACRS Table 5.)

Jorge purchased a copyright for use in his business in the current year. The purchase occurred on July 15 ^th and the purchase price was $66,000. If the copyright has a remaining life of 75 months, what is the total amortization amount Jorge may deduct during the current year? (Assume this is not an asset acquisition to which §197 applies.)

Tasha LLC purchased furniture (seven-year property) on April 20 for $20,000 and used the half-year convention to depreciate it. Tasha did not take §179 or bonus depreciation in the year it acquired the furniture. During the current year, which is the fourth year Tasha LLC owned the property, the property was disposed of on December 15. Calculate the maximum depreciation expense. (Use MACRS Table 1) (Round final answer to the nearest whole number.)