Chapter 9 Tax Quiz

Assets utilized for more than ____________  generally must be capitalized and its cost is then recovered over the life of estimated life of that asset.

Basis of property acquired by gift is generally the basis of the donor?

• True

• False

Adjusted basis (net book value) or Tax basis are terms for the amount of the asset’s cost that has yet to be recovered

• True

• False

When multiple assets are purchased together at a “bargain price”, must allocate total cost according to the relative ____________ of each property.

The name of the cost recovery system depends on the type of business property capitalized: 1.Depreciation: ____________ property (e.g., equipment) and real property (e.g., buildings (not land))

2. Amortization: ____________ assets (e.g., start-up costs, goodwill, etc.)

Assets such as building, land and personal-use assets are depreciable.

• True

• False

If personal-use property is converted to business property, the initial basis of the property is the ____________ of:     1) Cost basis of the asset or     2) FMV of the asset at date of conversion to business use.          

3. .Depletion: ____________ resources (e.g., timber, coal, oil, gas, etc.)

Personal property refers to the physical nature of the property. It means that the property is immovable?

• True

• False

You do not consider salvage value when calculating MACRS depreciation rates?

• True

• False

Half-year convention is required for amortization.

• True

• False

At the beginning of the year, Dan bought and placed in service the following assets during the year:                  Asset                                                         Date Acquired                                                 Cost Basis Computer Equipment  (5 yr)                       3/23                                                                 $5,000 Dog grooming furniture (7 yr)                     5/12                                                                   7,000 Pickup truck (5 yr)                                      9/17                                                                 10,000 Commercial building                                 10/11                                                               270,000 Land (one acre)                                        10/11                                                                 80,000 What is Dan's year 1 depreciation expense for each asset?  Round to the nearest dollar.

Minor or routine maintenance of capitalized assets are ____________ when incurred.

Which convention applies when more than 40% personal property cost is placed in service during the last quarter?

• Mid-month

• Half-year

• Mid-quarter

• Full year

What is the maximum annual depreciation expense available for 2011 (year 1) on a 2012 Honda Civic costing $15,860 and a 2012 Porsche 911 costing $97,400 (ignoring bonus depreciation)?

Basis of property acquired by inheritance is generally the FMV at decedent’s ____________.

• Previous year's basis

• Salvage value

• Death

• None of the above

Which convention applies to PERSONAL property.

• Mid-month

• Half-year

• Mid-quarter

• Full year

At the beginning of the year, Dan bought and placed in service the following assets during the year:                  Asset                                                         Date Acquired                                                 Cost Basis Computer Equipment  (5 yr)                       3/23                                                                 $5,000 Dog grooming furniture (7 yr)                     5/12                                                                   7,000 Pickup truck (5 yr)                                      9/17                                                                 10,000 Commercial building                                 10/11                                                               270,000 Land (one acre)                                        10/11                                                                 80,000 What is Dan's year 2 depreciation expense for each asset?  Round to the nearest dollar.

Basis of property is ____________ by cost recovered every year

• Increased

• Reduced

• Remains constant

• None of the above

$11,060 is the maximum amount a business can depreciate an automobile if they elect to use the bonus depreciation in Year 1.

• True

• False

Which declining balance applies to 27.5 & 39-year classes of property?

• 200%

• 150%

• Double declining

• Straight line

Which property qualifies as real property?

• Land

• Equipment

• Building

• Land Improvements

• Office Equipment

• Building improvements

Which declining balance applies to 15-year and 20-year classes of property.?

• 200%

• 150%

• Double declining

• Straight line

Bonus Depreciation is eligible for new and used personal property with life expenctancies of 20 years or less.

• True

• False

The decision to use an accelerated method or SL applies to ____________ property

• Personal

• Real

• Personal-use

• All

The adjusted basis for assets acquired through nontaxable exchange is generally the ____________ basis as the property transferred

• Same

• Greater

• Seller's

• Cost

You cannot change from SL to accelerated for future year's acquisitions once you choose a method?

• True

• False

Which convention applies to real property?

• Mid-month

• Half-year

• Mid-quarter

• Full year

Which declining balance applies to 3-year, 5-year, 7-year and 10-year classes of property?

• 200%

• 150%

• Double declining

• Straight line

At the beginning of the year, Daelynn placed in service the following assets during the year: Asset                                                                    Date Acquired                                           Cost Basis Computer Equipment (5 yr)                                  3/23                                                          $5,000 Furniture (7 yr)                                                      5/12                                                           7,000 Pickup truck (5 yr)                                               11/15                                                         10,000 Commercial building                                             9/11                                                       270,000 What is Daelynn's year 2 cost recovery for each asset?

• $5,519

• $10,423

• $13,666

• $5,442

Assume that Teton elected bonus depreciation for the new tangible personal property he purchased in the current service year for $535,000.  What is Teton's bonus depreciation?

• $535,000

• $267,500

• $517,500

• $552,500

Additional costs that significantly extend an asset’s useful life, the expenditure generates a new asset (for cost recovery purposes) separate from the original asset are not expensed.

• True

• False

Assume that Teton elected bonus depreciation for the new tangible personal property he purchased in the current service year for $535,000.  What is Teton's bonus depreciation if he elects170 expensing?

• $535,000

• $35,000

• $35,500

• $552,500

At the beginning of the year, Daelynn placed in service the following assets during the year: Asset                                                                    Date Acquired                                           Cost Basis Computer Equipment (5 yr)                                  3/23                                                          $5,000 Furniture (7 yr)                                                      5/12                                                           7,000 Pickup truck (5 yr)                                               11/15                                                         10,000 Commercial building                                             9/11                                                       270,000 What is Daelynn's year 1 cost recovery for each asset?

• $5,519

• $10,423

• $13,666

• $5,442

Teton sells all of its office furniture (10,000) in year 2 (the year after it buys it).  What is Teton's depreciation for the office furniture for the office furniture in the year of disposition?

• $2,229

• $2,449

• $1,225

• $1,500

Which items are added to the cost on the date of acquiisition to calculate adjusted basis?

• Depreciation

• Cost of improvements (not routine repair or maintenence)

• Insurance proceeds

• Deductible loss on destruction casulaties

• Buying expenses including commissions, legal, title search, surveys and appraisal fees paid at date of original purchase

• Capital gain on destruction casualties

The magnitude of the bonus depreciation depends on the date of purchase.  Check which conditions qualify.

• 50% for purchases before September 9, 2010.

• 100% for purchases after Sept 8, 2010 but before January 1, 2012.

• 50% for purchases after Sept 8, 2010 but before January 1, 2012.

• 100% will return for qualifying property after December 31, 2011 and before January 1, 2013.

• 50% will return for qualifying property after December 31, 2011 and before January 1, 2013.

• 50% for purchases after September 9, 2010.