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Exam 8: Depreciation, Cost Recovery, Amortization, and Depletion

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Question 61

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Percentage depletion enables the taxpayer to recover more than the cost of an asset.

A) True
B) False

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Question 62

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Discuss the effect on the cost recovery method of a taxpayer election if the uniform capitalization rules apply to a farming business.

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The cost recovery me...

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Question 63

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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.

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.

Bonnie purchased a new business asset (five-year property) on March 10, 2012, at a cost of $30,000.She also purchased a new business asset (seven-year property) on November 20, 2012, at a cost of $13,000.Bonnie did not elect to expense either of the assets under § 179, nor did she elect straight-line cost recovery. Bonnies takes additional first-year depreciation. Determine the cost recovery deduction for 2012 for these assets.

Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.

All listed property is subject to the substantiation requirements of § 274.

In 2011, Gail had a § 179 deduction carryover of $25,000.In 2012, she elected § 179 for an asset acquired at a cost of $115,000.Gail's § 179 business income limitation for 2012 is $142,000.Determine Gail's § 179 deduction for 2012.

The cost recovery period for new farm equipment placed in service during 2012 is seven years.

Which of the following assets would be subject to cost recovery?

Taxpayers may elect to use the straight-line method under MACRS for personalty.

The basis of cost recovery property must be reduced by the cost recovery allowed.

For personal property placed in service in 2012, the § 179 maximum deduction is limited to $139,000.

Janet purchased a new car on June 5, 2012, at a cost of $18,000.She used the car 80% for business and 20% for personal use in 2012.She used the automobile 40% for business and 60% for personal use in 2013. Janet takes additional first-year depreciation. Determine Janet's cost recovery recapture for 2013.

White Company acquires a new machine (seven-year property) on January 10, 2012, at a cost of $600,000.White makes the election to expense the maximum amount under § 179.No election is made to use the straight-line method. White does take additional first-year depreciation.Determine the total deductions in calculating taxable income related to the machine for 2012 assuming White has taxable income of $800,000.

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.