Chapter 9 Tax Quiz
Property Acquisition & Cost Recovery
- 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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