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Exam 2: Property Acquisition and Cost Recovery

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Question 51

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Roth,LLC purchased only one asset during the current year.Roth placed in service computer equipment (5-year property)on November 1^st with a basis of $42,500.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).(Use MACRS Table 2)

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$2,125
The asset's recovery period is 5 ...

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Question 52

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Santa Fe purchased the rights to extract turquoise on a tract of land over a five-year period.Santa Fe paid $300,000 for extraction rights.A geologist estimated that Santa Fe will recover 5,000 pounds of turquoise.During the past several years,4,000 pounds were extracted.During the current year,Santa Fe extracted 1,500 pounds of turquoise,which it sold for $250,000.What is Santa Fe's cost depletion expense for the current year?

A) $60,000
B) $90,000
C) $190,000
D) $160,000
E) None of the choices are correct.

F) A) and E)
G) A) and D)

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Question 53

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

Eddie purchased only one asset during the current year.Eddie placed in service furniture (7-year property)on May 1^st with a basis of $26,500.Calculate the maximum depreciation expense,rounded to the nearest whole number (ignoring §179 and bonus depreciation).(Use MACRS Table 1)

Daschle LLC completed some research and development during June of the current year.The related costs were $60,000.If Daschle wants to capitalize and amortize the costs as quickly as possible,what is the total amortization expense Daschle may deduct during the current year?

Business assets that tend to be used for both business and personal purposes are referred to as listed property.

Lax,LLC purchased only one asset during the current year (a full 12-month tax year) .Lax placed in service computer equipment (5-year property) on August 26 with a basis of $20,000.Calculate the maximum depreciation expense for the current year (ignoring §179 and bonus depreciation) .(Use MACRS Table 1)

Flax,LLC purchased only one asset this year.Flax placed in service a computer (5-year property)on January 16 with a basis of $14,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).(Use MACRS Table 1)

The mid-month convention applies to real property in the year of acquisition and disposition.

Beth's business purchased only one asset during the current year (a full 12-month tax year) .Beth placed in service machinery (7-year property) on December 1 with a basis of $50,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation) .(Use MACRS Table 2)

Simmons LLC purchased an office building and land several years ago for $250,000.The purchase price was allocated as follows: $200,000 to the building and $50,000 to the land.The property was placed in service on October 2.If the property is disposed of on February 27 during the 10^th year,calculate Simmons' maximum depreciation in the 10^th year.(Use MACRS Table 5) EXHIBIT 2-6

Boxer LLC has acquired various types of assets recently used 100% in its trade or business.Below is a list of assets acquired during 2016 and 2017: Boxer did not elect §179 expense and elected out of bonus depreciation in 2016,but would like to elect §179 expense for 2017 (assume that taxable income is sufficient).Calculate Boxer's maximum depreciation expense for 2017,(ignore bonus depreciation for 2017).If necessary,use the 2016 luxury automobile limitation amount for 2017.(Use MACRS Table 1 and Use MACRS Table 5)Exhibit 2-8 (Round final answer to the nearest whole number)

Olney LLC only purchased one asset this year.Olney LLC placed in service on July 19,2017 machinery and equipment (7-year property)with a basis of $850,000.Assume that Olney has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including §179 expensing,(but ignoring bonus expensing).(Use MACRS Table 1)(Round final answer to the nearest whole number)

An office building was purchased on December 9^th several years ago for $2,500,000.The purchase price was allocated as follows: building $1,900,000,landscaping $100,000,and land $500,000.During the current year,the 10^th year,the building was sold on March 10^th.Calculate the maximum depreciation expense for the real property during the current year,rounded to the nearest whole number.(Use MACRS Table 5)

Wheeler LLC purchased two assets during the current year (a full 12-month tax year) .Wheeler placed in service computer equipment (5-year property) on November 16 with a basis of $15,000 and furniture (7-year property) on April 20 with a basis of $11,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation) .(Use MACRS Table 2) (Round final answer to the nearest whole number)

Arlington LLC purchased an automobile for $40,000 on July 5,2017.What is Arlington's depreciation expense for 2017 if its business use percentage is 75 percent (ignore any possible bonus depreciation) ? Exhibit 2-8

If tangible personal property is depreciated using the half-year convention and is disposed of during the first quarter of a subsequent year,the taxpayer must use the mid-quarter convention for the year of disposition.

All assets subject to amortization have the same recovery period.

An office desk is an example of:

If a taxpayer places only one asset (a building)in service during the fourth quarter of the year,the mid-quarter convention must be used.