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

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Question 1

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On July 15,2012,Mavis paid $275,000 for exterior leasehold improvements on a commercial building she was leasing.Determine the total cost recovery from the improvements in 2012.Mavis elected not to take additional first-year depreciation.

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If startup expenses total $53,000 in 2012,$51,000 is amortized over 180 months.

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Question 3

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On May 2,2012,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 the cost recovery for 2012.Karen wants to maximize her deductions.

A taxpayer may elect to use the alternative depreciation system (ADS)on property used predominantly outside the United States.

Once the more-than-50% business usage test is passed for listed property,it does matter if the business usage for the property drops to 50% or less during the recovery period.

The statutory dollar cost recovery limits under § 280F do not apply to all automobiles.

All personal property placed in service in 2012 and used in a trade or business qualifies for additional first-year depreciation.

Mary purchased a new five-year class asset on March 7,2012.The asset was listed property (not an automobile) .It was used 60% for business and the rest of the time for personal use.The asset cost $600,000.Mary made the § 179 election.The income from the business before the § 179 deduction was $400,000.Mary does take additional first-year depreciation.Determine the total deductions with respect to the asset for 2012.

During the past two years,through extensive advertising and improved customer relations,Orange Corporation estimated that it had developed customer goodwill worth $500,000.For the current year,determine the amount of goodwill Orange Corporation may amortize.

On August 20,2012,May signed a 10-year lease on a building for her business.On November 28,2013,May paid $80,000 for a qualified leasehold improvement to the building.She takes additional first-year depreciation.What is May's cost recovery deduction for the improvement in 2013?

The § 179 limit for a sports utility vehicle with a GVW of 7,000 pounds used for the production of income is $25,000.

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

The statutory dollar cost recovery limits under § 280F for passenger automobiles still apply if mid-quarter cost recovery is used.

Discuss the difference between the half-year convention and the mid-quarter convention.

On February 21,2012,Joe purchased new farm equipment for $600,000.Joe has made an election to not have the uniform capitalization rules apply to his farming business.He does not take additional first-year depreciation.If Joe elects § 179,what is the maximum write-off for this purchase for 2013?

On July 10,2012,Ariff places in service a new sports utility vehicle that cost $70,000 and weighed 6,300 pounds.The SUV is used 100% for business.Determine Ariff's maximum deduction for 2012,assuming Ariff's § 179 business income is $110,000.Ariff does not take additional first-year depreciation.

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.

In a farming business,if the uniform capitalization rules are not used,cost is recovered using the ADS straight-line method.

Nora purchased a new automobile on July 20,2012,for $29,000.The car was used 60% for business and 40% for personal use.In 2013,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 2013.

Polly purchased a new hotel on July 20,2012,for $6,000,000.On January 20,2019,the building was sold.Determine the cost recovery deduction for the year of the sale.