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Exam 5: Business Deductions

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Question 71

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Discuss the reason for the inclusion amount with respect to leased automobiles.

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The purpose of the inclusion a...

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Question 72

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Mary purchased a new five-year class asset on March 7, 2017.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 $900,000.Mary made the § 179 election.The income from the business before the § 179 deduction was $600,000.Mary also takes additional first-year depreciation.Determine the total deductions with respect to the asset for 2017.

A) $180,000
B) $378,000
C) $528,000
D) $600,000
E) None of the above

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

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Question 73

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Under the MACRS straight-line election for personalty, only the half-year convention is applicable.

The cost recovery period for 3-year class property is 4 years.

Zeke made the following donations to qualified charitable organizations during the year: $\begin{array} { l r r r } & \text { Basis } & \underline { \text { Fair Market } } \\&& \underline { \text { Value } }\\\begin{array} { l } \text { Used clothing (all acquired more than a year ago) of } \\\text { taxpayer and his family }\end{array} & \$ 1,350 & \$ 375 \\\begin{array} { l } \text { Stock in ABC, Inc., held as an investment for fifteen } \\\text { months }\end{array} & 12,000 & 10,875 \\\begin{array} { l } \text { Stock in MNO, Inc., held as an investment for eleven } \\\text { months }\end{array} & 15,000 & 18,000 \\\text { Real estate held as an investment for two years } & 15,000 & 30,000\end{array}$ ? The used clothing was donated to the Salvation Army; the other items of property were donated to Eastern State University.Both are qualified charitable organizations.Disregarding percentage limitations, Zeke's charitable contribution deduction for the year is:

Discuss the tax implications of a seller allocating the selling price to goodwill or a covenant not to compete.

Andrew, who operates a laundry business, incurred the following expenses during the year ? Parking ticket of $250 for one of his delivery vans that parked illegally. ? Parking ticket of $75 when he parked illegally while attending a rock concert in Tulsa. ? DUI ticket of $500 while returning from the rock concert. ? Attorney's fee of $600 associated with the DUI ticket. What amount can Andrew deduct for these expenses?

Fines and penalties paid for violations of the law (e.g., illegal dumping of hazardous waste) are deductible only if they relate to a trade or business.

Bhaskar purchased a new factory building and land on September 10, 2017, for $3,700,000.($500,000 of the purchase price was allocated to the land.) He elected the alternative depreciation system (ADS) .Determine the cost recovery deduction for 2018.

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

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.

On January 2, 2017, Fran acquires a business from Chuck.Among the assets purchased are the following intangibles: patent with a 7-year remaining life, a covenant not to compete for 10 years, and goodwill. ​ Of the purchase price, $140,000 was paid for the patent and $60,000 for the covenant.The amount of the excess of the purchase price over the identifiable assets was $100,000.What is the amount of the amortization deduction for 2017?

A taxpayer may elect to use the alternative depreciation system (ADS) to compute depreciation for earnings and profits.

Purchased goodwill must be capitalized, but can be amortized over a 60-month period.

In the current year, Plum Corporation, a computer manufacturer, donated 100 laptop computers to a local university (a qualified educational organization) .The computers were constructed by Plum earlier this year, and the university will use the computers for research and research training.Plum's basis in the computers is $35,000, and their fair market value is $120,000.What is Plum's deduction for the contribution of the computers (ignoring the taxable income limitation) ?

Cream, Inc.'s taxable income for the current year before any deduction for an NOL carryforward of $30,000 is $70,000.Cream's qualified production activities income (QPAI) is $60,000.What is the amount of Cream's domestic production activities deduction (DPAD) for the current year?

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?

A purchased trademark is a § 197 intangible.

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.

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.