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Exam 2: Property Acquisition and Cost Recovery

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Question 61

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How is the recovery period of an asset determined?

A) Estimated useful life
B) Treasury regulation
C) Revenue Procedure 87-56
D) Revenue Ruling 87-56
E) None of these

F) D) and E)
G) C) and D)

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Question 62

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Roth, LLC purchased only one asset during the current year. Roth placed in service computer equipment (5-year property) on November 1^st with a basis of $42,500. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).

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$2,125
Explanation: The asset's recovery...

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Question 63

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Janey purchased machinery on April 8^th of the current year. The relevant costs for the year are as follows: machinery for $10,000, $800 shipping, $50 for delivery insurance, $500 for installation, $750 for sales tax, $150 for the annual tune up, and $200 of property taxes (an annual tax on business property). What is Janey's tax basis for the machinery?

Which of the following assets is eligible for bonus depreciation?

Which is not an allowable method under MACRS?

Assume that Yuri acquires a competitor's assets on May 1^st. The purchase price was $500,000. Of the amount, $325,000 is allocated to tangible assets and $175,000 is allocated to goodwill (a §197 intangible asset). What is Yuri's amortization expense for the current year, rounded to the nearest whole number?

Suvi, Inc. purchased two assets during the current year (a full 12-month tax year) . Suvi placed in service computer equipment (5-year property) on August 10 with a basis of $20,000 and machinery (7-year property) on November 18 with a basis of $10,000. Calculate the maximum depreciation expense, rounded to a whole number (ignoring §179 and bonus depreciation) :