Question 1

Phyllis purchased $8,000 of specialized audio equipment that she uses in her business regularly. Occasionally, she uses the equipment for personal use. During the first year, Phyllis used the equipment for business use 70 percent of the time; however, during the current (second) year the business use fell to 40 percent. Assume that the equipment is seven-year MACRS property and is under the half-year convention. Assume the ADS recovery period is 10 years. What is the depreciation allowance for the current year, rounded to the nearest whole number?

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Question 2

Amit purchased two assets during the current year. Amit placed in service computer equipment (5-year property) on April 16th with a basis of $5,000 and furniture (7-year property) on September 9th with a basis of $20,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).

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Question 3

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

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Question 4

Eddie purchased only one asset during the current year. Eddie placed in service furniture (7-year property) on May 1st with a basis of $26,500. Calculate the maximum depreciation expense, rounded to the nearest whole number (ignoring §179 and bonus depreciation).

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Question 5

Yasmin purchased two assets during the current year. Yasmin placed in service computer equipment (5-year property) on May 26th with a basis of $10,000 and machinery (7-year property) on December 9th with a basis of $10,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).

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Question 6

During April of the current year, Ronen purchased a warehouse that he used for business purposes. The basis was $1,600,000. Calculate the maximum depreciation expense during the current year.

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Question 7

Jaussi purchased a computer several years ago for $2,200 and used it for personal purposes. On November 10th of the current year, when the fair market value of the computer was $800, Jaussi converted it to business use. What is Jaussi's tax basis for the computer?

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Question 8

Teddy purchased only one asset during the current year. Teddy placed in service machinery (7-year property) on October 1st with a basis of $76,500. Calculate the maximum depreciation expense, rounded to the nearest whole number (ignoring §179 and bonus depreciation).

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Question 9

Timothy purchased a new computer for his consulting practice on October 15th of the current year. The basis of the computer was $4,000. During the Thanksgiving holiday, he decided the computer didn't meet his business needs and gave it to his college-aged son in another state. The computer was never used for business purposes again. Timothy had $50,000 of taxable income before depreciation. What is Timothy's total cost recovery expense with respect to the computer during the current year?

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Question 10

Alexandra purchased a $35,000 automobile during 2014. The business use was 70 percent. What is the allowable depreciation for the current year (ignore any possible bonus depreciation)?

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Question 11

During August of the prior year, Julio purchased an apartment building that he used as a rental property. The basis was $1,400,000. Calculate the maximum depreciation expense during the current year.

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Question 12

In 2014, Northern LLC placed in service on September 6th machinery and equipment (7-year property) with a basis of $2,200,000. Assume that Northern has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (ignore any potential bonus expensing), rounded to the nearest whole number. Assume the 2013 §179 limits are extended to 2014.

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Question 13

Reid acquired two assets this year: computer equipment (5-year property) acquired on August 6th with a basis of $500,000 and machinery (7-year property) on November 9th with a basis of $500,000. Assume that Reid has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (but not bonus expensing). Assume the 2013 §179 limits are extended to 2014.

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The answer of Reid acquired two assets this year: computer...

Question 14

Boxer LLC has acquired various types of assets recently. Below is a list of assets acquired during 2013 and 2014: $$\begin{array} { | l | r | l | l | } 
\hline \text { Asset } & { \text { Cost Basis } } & \text { Convention } & \text { Date Placed in } \
& & & \text { Service } \
\hline \text { Machinery } & 25,000 & \text { Half year } & \text { January 24, 2013 } \
\hline \text { Warehouse } & 800,000 & \text { Mid month } & \text { August 1, 2013 } \
\hline \text { Furniture } & 100,000 & & \text { October 5, 2014 } \
\hline \text { Computer equipment } & 65,000 & & \text { October 10, 2014 } \
\hline \text { Office equipment } & 34,000 & & \text { September 28, 2014 } \
\hline \text { Automobile } & 35,000 & & \text { July 15, 2014 } \
\hline \text { Office building } & 800,000 & & \text { September 24, 2014 } \
\hline
\end{array}$$ Boxer did not elect §179 expense or potential bonus depreciation in 2013, but would like to elect §179 expense for 2014 (assume that taxable income is sufficient). Calculate Boxer's maximum depreciation expense for 2014, rounded to the nearest whole number (ignore bonus depreciation for 2014). If necessary, use the 2013 luxury automobile limitation amount for 2014 and assume that the 2013 §179 limits are extended to 2014.

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Question 15

Olney LLC placed in service on July 19, 2014 machinery and equipment (7-year property) with a basis of $850,000. Assume that Olney has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing, rounded to the nearest whole number (but ignoring bonus expensing). Assume the 2013 §179 limits are extended to 2014.

Accepted Answer

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Question 16

Flax, LLC purchased only one asset during 2014. Flax placed in service a computer (5-year property) on January 16 with a basis of $14,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).

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Question 17

Bonnie Jo used two assets during the current year. The first was computer equipment with an original basis of $15,000, currently in the second year of depreciation, and under the half-year convention. This asset was disposed of on October 1st of the current year. The second was furniture with an original basis of $24,000 placed in service during the first quarter, currently in the fourth year of depreciation, and under the mid-quarter convention. What is Bonnie Jo's depreciation expense for the current year, rounded to the nearest whole number?

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Question 18

Columbia LLC placed in service on October 9, 2014 machinery and equipment (7-year property) with a basis of $2,150,000. Assume that Columbia has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (but ignoring bonus expensing) for the year, rounded to the nearest whole number. Assume the 2013 §179 limits are extended to 2014.

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Question 19

Kristine sold two assets on March 20th of the current year. The first was machinery with an original basis of $51,000, currently in the fourth year of depreciation, and under the half-year convention. The second was furniture with an original basis of $16,000 placed in service during the fourth quarter, currently in the third year of depreciation, and under the mid-quarter convention. What is Kristine's depreciation expense for the current year, rounded to the nearest whole number?

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Question 20

An office building was purchased on December 9th several years ago for $2,500,000. The purchase price was allocated as follows: building $1,900,000, landscaping $100,000, and land $500,000. During the current year, the 10th year, the building was sold on March 10th. Calculate the maximum depreciation expense for the real property during the current year, rounded to the nearest whole number.

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Quiz 9: Property Acquisition and Cost Recovery