02 Jan Property which is

Question 1

The key date for calculating cost recovery is the date the asset is placed in service.

1) True

2) False

Question 2

Doug purchased a new factory building on January 15, 1990, for $400,000. On March 1, 2016, the building was sold. Determine the cost recovery deduction for the year of the sale; Doug did not use the MACRS straight-line method.

1) $0

2) $1,587

3) $2,645

4) $12,696

5) None of the above

Question 3

Residential rental real estate includes property where 80% or more of the net rental revenues are from nontransient dwelling units.

1) True

2) False

Question 4

Intangible drilling costs must be capitalized and recovered through depletion.

1) True

2) False

Question 5

Taxable income for purposes of § 179 limited expensing is computed by including the MACRS deduction.

1) True

2) False

Question 6

Antiques may be eligible for cost recovery if they are used in a trade or business.

1) True

2) False

Question 7

On June 1, 2016, Red Corporation purchased an existing business. With respect to the acquired assets of the business, Red allocated $300,000 of the purchase price to a patent. The patent will expire in 20 years. Determine the total amount that Red may amortize for 2016 for the patent.

1) $0

2) $1,667

3) $11,667

4) $35,000

5) None of the above

Question 8

The only asset Bill purchased during 2016 was a new seven-year class asset. The asset, which was listed property, was acquired on June 17 at a cost of $50,000. The asset was used 40% for business, 30% for the production of income, and the rest of the time for personal use. Bill always elects to expense the maximum amount under § 179 whenever it is applicable. The net income from the business before the § 179 deduction is $100,000. Determine Bill’s maximum deduction with respect to the property for 2016.

1) $1,428

2) $2,499

3) $26,749

4) $33,375

5) None of the above

Question 9

Mary purchased a new five-year class asset on March 7, 2016. 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 (if available). Determine the total deductions with respect to the asset for 2016.

1) $72,000

2) $271,600

3) $524,000

4) $600,000

5) None of the above

Question 10

The maximum cost recovery method for all personal property under MACRS is 150% declining balance.

1) True

2) False

Question 11

If more than 40% of the value of property, other than real property, is placed in service during the last quarter, all of the property placed in service in the second quarter will be allowed 7.5 months of cost recovery.

1) True

2) False

Question 12

Any § 179 expense amount that is carried forward is subject to the business income limitation in the carryforward year.

1) True

2) False

Question 13

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

1) True

2) False

Question 14

Property which is classified as personality may be depreciated.

1) True

2) False

Question 15

Motel buildings have a cost recovery period of 27.5 years.

1) True

2) False