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Exam 10: Property Acquisition and Cost Recovery

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Question 61

True/False

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The §179 immediate expensing election phases out based upon a taxpayer's taxable income.

A) True
B) False

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Question 62

Multiple Choice

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Which of the following is not usually included in an asset's tax basis?

A) Purchase price.
B) Sales tax.
C) Shipping.
D) Installation costs.
E) All of the choices are included in an asset's tax basis.

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

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Question 63

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Businesses may immediately expense research and experimentation expenditures or they may elect to capitalize these costs and amortize them using the straight-line method over a period of not less than 60 months.

Poplock LLC purchased a warehouse and land during the current year for $350,000. The purchase price was allocated as follows: $275,000 to the building and $75,000 to the land. The property was placed in service on August 12. Calculate Poplock's maximum depreciation for this first year. (Use MACRS Table 5) (Round final answer to the nearest whole number.)

Reid acquired two assets in 2018: computer equipment (5-year property) acquired on August 6ᵗʰ with a basis of $1,000,000 and machinery (7-year property) on November 9th with a basis of $1,000,000. Assume that Reid has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (but not bonus expensing). (Use MACRS Table 1)

Clay LLC placed in service machinery and equipment (7-year property) with a basis of $3,450,000 on June 6, 2018. 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.)  

Tax cost recovery methods include depreciation, amortization, and depletion.

Yasmin purchased two assets during the current year. Yasmin placed in service computer equipment (5-year property) on May 26ᵗʰ with a basis of $10,000 and machinery (7-year property) on December 9ᵗʰ with a basis of $10,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation). (Use MACRS Table 2)

Tax cost recovery methods do not include: