Chapter 9 Tax Quiz

39 Questions | Total Attempts: 34

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Tax Quizzes & Trivia

Property Acquisition & Cost Recovery


Questions and Answers
  • 1. 
    Assets utilized for more than ____________  generally must be capitalized and its cost is then recovered over the life of estimated life of that asset.
  • 2. 
    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))
  • 3. 
    2. Amortization: ____________ assets (e.g., start-up costs, goodwill, etc.)
  • 4. 
    3. .Depletion: ____________ resources (e.g., timber, coal, oil, gas, etc.)
  • 5. 
    Basis of property is ____________ by cost recovered every year
    • A. 

      Increased

    • B. 

      Reduced

    • C. 

      Remains constant

    • D. 

      None of the above

  • 6. 
    Adjusted basis (net book value) or Tax basis are terms for the amount of the asset’s cost that has yet to be recovered
    • A. 

      True

    • B. 

      False

  • 7. 
    Which items are added to the cost on the date of acquiisition to calculate adjusted basis?
    • A. 

      Depreciation

    • B. 

      Cost of improvements (not routine repair or maintenence)

    • C. 

      Insurance proceeds

    • D. 

      Deductible loss on destruction casulaties

    • E. 

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

    • F. 

      Capital gain on destruction casualties

  • 8. 
    Minor or routine maintenance of capitalized assets are ____________ when incurred.
  • 9. 
    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.
    • A. 

      True

    • B. 

      False

  • 10. 
    When multiple assets are purchased together at a “bargain price”, must allocate total cost according to the relative ____________ of each property.
  • 11. 
    Assets such as building, land and personal-use assets are depreciable.
    • A. 

      True

    • B. 

      False

  • 12. 
    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.          
  • 13. 
    The adjusted basis for assets acquired through nontaxable exchange is generally the ____________ basis as the property transferred
    • A. 

      Same

    • B. 

      Greater

    • C. 

      Seller's

    • D. 

      Cost

  • 14. 
    Basis of property acquired by gift is generally the basis of the donor?
    • A. 

      True

    • B. 

      False

  • 15. 
    Basis of property acquired by inheritance is generally the FMV at decedent’s ____________.
    • A. 

      Previous year's basis

    • B. 

      Salvage value

    • C. 

      Death

    • D. 

      None of the above

  • 16. 
    Personal property refers to the physical nature of the property. It means that the property is immovable?
    • A. 

      True

    • B. 

      False

  • 17. 
    Personal-use property refers to property held for the taxpayer's own enjoyment?
    • A. 

      True

    • B. 

      False

  • 18. 
    Which property qualifies as real property?
    • A. 

      Land

    • B. 

      Equipment

    • C. 

      Building

    • D. 

      Land Improvements

    • E. 

      Office Equipment

    • F. 

      Building improvements

  • 19. 
    Which declining balance applies to 3-year, 5-year, 7-year and 10-year classes of property?
    • A. 

      200%

    • B. 

      150%

    • C. 

      Double declining

    • D. 

      Straight line

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

      200%

    • B. 

      150%

    • C. 

      Double declining

    • D. 

      Straight line

  • 21. 
    Which declining balance applies to 27.5 & 39-year classes of property?
    • A. 

      200%

    • B. 

      150%

    • C. 

      Double declining

    • D. 

      Straight line

  • 22. 
    You do not consider salvage value when calculating MACRS depreciation rates?
    • A. 

      True

    • B. 

      False

  • 23. 
    The decision to use an accelerated method or SL applies to ____________ property
    • A. 

      Personal

    • B. 

      Real

    • C. 

      Personal-use

    • D. 

      All

  • 24. 
    You cannot change from SL to accelerated for future year's acquisitions once you choose a method?
    • A. 

      True

    • B. 

      False

  • 25. 
    Which convention applies to PERSONAL property.
    • A. 

      Mid-month

    • B. 

      Half-year

    • C. 

      Mid-quarter

    • D. 

      Full year

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