Posted: October 20th, 2022

CHAPTER 8–DEPRECIATION, COST RECOVERY, AMORTIZATION, AND DEPLETION

1. The
concept of depreciation assumes that the asset has a determinable useful
life.
True False

2. The
basis of cost recovery property must be reduced by the cost recovery
allowed.
True False

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

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

5. Land
improvements are generally not eligible for cost recovery.
True False

6. The
cost recovery basis for property converted from personal use to business use
may be the fair market value of the property at the time of the
conversion.
True False

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

8. If
150% declining-balance is used, there is no straight-line switchover.
True False

9. All
personal property placed in service in 2012 and used in a trade or business
qualifies for additional first-year depreciation.
True False

10. 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 will be allowed 1.5 months
of cost recovery.
True False

11. Under
MACRS, if the mid-quarter convention is applicable, all property sold is
treated as being sold at the mid-point of the quarter in which it is placed in
service.
True False

12. All
eligible real estate under MACRS is permitted one-half month of cost recovery
in the month of disposition.
True False

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

14. Motel
buildings are classified as residential rental real estate.
True False

15. Taxpayers
may elect to use the straight-line method under MACRS for personalty.
True False

16. Under
the MACRS straight-line election for personalty, the mid-quarter convention is
applicable.
True False

17. The
cost recovery period for new farm equipment placed in service during 2012 is
seven years.
True False

18. In
a farming business, MACRS straight-line cost recovery is required for all fruit
bearing trees.
True False

19. In
a farming business, if the uniform capitalization rules are not used, cost is
recovered using the ADS straight-line method.
True False

20. When
lessor owned leasehold improvements are abandoned because of the termination of
the lease, a loss can be taken for the unrecovered basis.
True False

21. The
costs of qualified leasehold improvements qualify for additional first-year
depreciation.
True False

22. For
personal property placed in service in 2012, the § 179 maximum deduction is
limited to $139,000.
True False

23. The
§ 179 deduction can exceed $139,000 in 2012 if the taxpayer had a § 179 amount
which exceeded the taxable income limitation in the prior year.
True False

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

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

26. The
basis of an asset on which $139,000 has been expensed under § 179 will be
reduced by $139,000, even if $139,000 cannot be expensed in the current year
because of the taxable income limitation.
True False

27. Property
used for the production of income is not eligible for § 179
expensing.
True False

28. The
statutory dollar cost recovery limits under § 280F do not apply to all
automobiles.
True False

29. The
§ 179 limit for a sports utility vehicle with a GVW of 7,000 pounds used for
the production of income is $25,000.
True False

30. Once
the more-than-50% business usage test is passed for listed property, it does
matter if the business usage for the property drops to 50% or less during the
recovery period.
True False

31. If
a new car that is used predominantly in business is placed in service in 2012,
the statutory dollar cost recovery limit under § 280F will depend on whether
the taxpayer takes MACRS or straight-line depreciation.
True False

32. If
an automobile is placed in service in 2012, the limitation for cost recovery in
2014 will be based on the cost recovery limits for the year 2012.
True False

33. The
statutory dollar cost recovery limits under § 280F for passenger automobiles
still apply if mid-quarter cost recovery is used.
True False

34. If
a used $15,000 automobile used 100% for business in the first year (2012) fails
the 50% business usage test in the second year, no cost recovery will be
recaptured.
True False

35. The
inclusion amount for a leased automobile is adjusted by a business usage
percentage.
True False

36. All
listed property is subject to the substantiation requirements of § 274.
True False

37. If
a taxpayer uses regular MACRS for all property, an alternative minimum tax
adjustment is made with respect to the depreciation on all property, regardless
of the class life.
True False

38. MACRS
depreciation is used to compute earnings and profits.
True False

39. Under
the alternative depreciation system (ADS), the half-year convention must be
used for personalty.
True False

40. A
taxpayer may elect to use the alternative depreciation system (ADS) on property
used predominantly outside the United States.
True False

41. An
election to use straight-line under ADS is made on an asset-by-asset basis for
property other than eligible real estate.
True False

42. For
real property, the ADS convention is the mid-month convention.
True False

43. The
cost of a covenant not to complete for 20 years incurred in connection
with the acquisition of a business is amortized over 20 years.
True False

44. Goodwill
associated with the acquisition of a business cannot be amortized.
True False

45. A
purchased trademark is a § 197 intangible.
True False

46. If
startup expenses total $53,000 in 2012, $51,000 is amortized over 180
months.
True False

47. The
amortization period in 2012 for $4,000 of startup expenses if no election is
made is 180 months.
True False

48. Cost
depletion is determined by multiplying the depletion cost per unit by the
number of units sold.
True False

49. Percentage
depletion enables the taxpayer to recover more than the cost of an asset.
True False

50. Intangible
drilling costs may be expensed rather than capitalized and written off through
depletion.
True False

51. Grape
Corporation purchased a machine in December of the current year. This was the
only asset purchased during the current year. The machine was placed in service
in January of the following year. No assets were purchased in the following
year. Grape Corporation’s cost recovery would begin:
A. In the current year using a mid-quarter convention.
B. In the current year using a half-year convention.
C. In the following year using a mid-quarter convention.
D. In the following year using a half-year convention.
E. None of the above.

52. Which
of the following assets would be subject to cost recovery?
A. A painting by Picasso hanging on a doctor’s office wall.
B. An antique vase in a doctor’s waiting room.
C. Stock in the doctor’s LLC.
D. a., b., and c.
E. None of the above.

53. On
June 1 of the current year, Tab converted a machine from personal use to rental
property. At the time of the conversion, the machine was worth $90,000. Five
years ago Tab purchased the machine for $120,000. The machine is still encumbered
by a $50,000 mortgage. What is the basis of the machine for cost
recovery?
A. $70,000.
B. $90,000.
C. $120,000.
D. $140,000.
E. None of the above.

54. Tara
purchased a machine for $40,000 to be used in her business. The cost recovery
allowed and allowable for the three years the machine was used are as follows:

Cost Recovery Allowed

Cost Recovery Allowable

Year 1

$16,000

$ 8,000

Year 2

9,600

12,800

Year 3

5,760

7,680

If Tara sells the machine after three years for $15,000, how much gain should
she recognize?
A. $3,480.
B. $6,360.
C. $9,240.
D. $11,480.
E. None of the above.

55. Hazel
purchased a new business asset (five-year asset) on September 30, 2012, at a
cost of $100,000. On October 4, 2012, Hazel placed the asset in
service. This was the only asset Hazel placed in service in 2012.
The only election with respect to the asset was not to take § 179.
On August 20, 2013, Hazel sold the asset. Determine the cost recovery for
2013 for the asset.
A. $9,600.
B. $11,875.
C. $23,750.
D. $38,000.
E. None of the above.

56. Tan
Company acquires a new machine (ten-year property) on January 15, 2012, at a
cost of $200,000. Tan also acquires another new machine (seven-year property)
on November 5, 2012, at a cost of $40,000. No election is made to use the
straight-line method. The company does not make the § 179 election. Tan
takes additional first-year depreciation. Determine the total deductions in
calculating taxable income related to the machines for 2012.
A. $24,000.
B. $25,716.
C. $102,000.
D. $132,858.
E. None of the above.

57. James
purchased a new business asset (three-year personalty) on July 23, 2012, at a
cost of $40,000. James takes additional first-year depreciation Determine
the cost recovery deduction for 2012.
A. $8,333.
B. $26,666.
C. $33,333.
D. $41,665.
E. None of the above.

58. Alice
purchased office furniture on September 20, 2012, for $100,000. On October 10,
she purchased business computers for $80,000. Alice did not elect to expense
any of the assets under § 179, nor did she elect straight-line cost
recovery. She did not take additional first-year depreciation.
Determine the cost recovery deduction for the business assets for 2012.
A. $6,426.
B. $14,710.
C. $25,722.
D. $30,290.
E. None of the above.

59. Barry
purchased a used business asset (seven-year property) on September 30, 2012, at
a cost of $200,000. This is the only asset he purchased during the year. Barry
did not elect to expense any of the asset under § 179, nor did he elect
straight-line cost recovery. Barry sold the asset on July 17, 2013. Determine
the cost recovery deduction for 2013.
A. $19,133.
B. $24,490.
C. $34,438.
D. $55,100.
E. None of the above.

60. Bonnie
purchased a new business asset (five-year property) on March 10, 2012, at a
cost of $30,000. She also purchased a new business asset (seven-year property)
on November 20, 2012, at a cost of $13,000. Bonnie did not elect to expense
either of the assets under § 179, nor did she elect straight-line cost
recovery. Bonnies takes additional first-year depreciation.
Determine the cost recovery deduction for 2012 for these assets.
A. $5,858.
B. $7,464.
C. $9,586.
D. $19,429.
E. None of the above.

61. Doug
purchased a new factory building on January 15, 1988, for $400,000. On March 1,
2012, the building was sold. Determine the cost recovery deduction for the year
of the sale assuming he did not use the MACRS straight-line method.
A. $0.
B. $1,587.
C. $2,645.
D. $12,696.
E. None of the above.

62. Cora
purchased a hotel building on May 17, 2012, for $3,000,000. Determine the cost
recovery deduction for 2013.
A. $48,150.
B. $59,520.
C. $69,000.
D. $76,920.
E. None of the above.

63. Carlos
purchased an apartment building on November 16, 2012, for $3,000,000. Determine
the cost recovery for 2012.
A. $9,630.
B. $11,910.
C. $13,950.
D. $22,740.
E. None of the above.

64. Diane
purchased a factory building on November 15, 1993, for $5,000,000. She sells
the factory building on February 2, 2012. Determine the cost recovery deduction
for the year of the sale.
A. $16,025.
B. $19,844.
C. $26,458.
D. $158,750.
E. None of the above.

65. Howard’s
business is raising and harvesting peaches. On March 10, 2012, Howard purchased
10,000 new peach trees at a cost of $60,000. Howard does not elect to expense
assets under § 179. If eligible, Howard takes additional first-year
depreciation. Determine the cost recovery deduction for 2012.
A. $0.
B. $3,000.
C. $31,500.
D. $60,000.
E. None of the above.

66. On
May 15, 2012, Brent purchased new farm equipment for $120,000. Brent used the
equipment in connection with his farming business. Brent does not elect
to expense assets under § 179. Brent does not take additional
first-year depreciation. Determine the cost recovery deduction for 2012.
A. $12,852.
B. $18,000.
C. $24,000.
D. $30,000.
E. None of the above.

67. On
June 1, 2012, Sam purchased new farm machinery for $150,000. Sam used the
machinery in connection with his farming business. Sam does not elect to
expense assets under § 179. Sam has, however, made an election to not have
the uniform capitalization rules apply to the farming business. Sam does
not take additional first-year depreciation. Determine the cost recovery
deduction for 2012.
A. $5,000.
B. $7,500.
C. $10,000.
D. $12,500.
E. None of the above.

68. On
May 30, 2012, Jane signed a 20-year lease on a factory building to use for her
business. The lease begins on June 1, 2012. In August 2012, Jane
paid $300,000 for qualified leasehold improvements to the building. Jane
takes additional first-year depreciation. Determine Jane’s total
deduction with respect to the leasehold improvements for 2012.
A. $2,890.
B. $150,000.
C. $151,445.
D. $300,000.
E. None of the above.

69. On
February 20, 2012, Susan paid $200,000 for a qualified leasehold improvement to
an office building that she is going to lease to John. The lease will begin on
June 1, 2012, and terminate on May 31, 2022. At the termination of the lease,
the improvement will be worthless. Susan did not elect to treat the leasehold
improvement property as § 179 property. She does not take additional first-year
depreciation. Determine Susan’s deductible loss as a result of the
termination of the lease.
A. $0.
B. $123,503.
C. $127,990.
D. $128,631.
E. None of the above.

70. White
Company acquires a new machine (seven-year property) on January 10, 2012, at a
cost of $600,000. White makes the election to expense the maximum amount under §
179. No election is made to use the straight-line method. White does take
additional first-year depreciation. Determine the total deductions in
calculating taxable income related to the machine for 2012 assuming White has
taxable income of $800,000.
A. $71,593.
B. $128,610.
C. $204,877.
D. $385,296.
E. None of the above.

71. Augie
purchased one new asset during the year (five-year property) on November 10,
2012, at a cost of $450,000. She made the § 179 election. The income from
the business before the cost recovery deduction and the § 179 deduction was $310,000.
She takes additional first-year depreciation. Determine the total cost
recovery deduction with respect to the asset for 2012.
A. $22,500.
B. $154,550.
C. $302,275.
D. $310,000.
E. None of the above.

72. In
2011, Gail had a § 179 deduction carryover of $25,000. In 2012, she elected §
179 for an asset acquired at a cost of $115,000. Gail’s § 179 business income
limitation for 2012 is $142,000. Determine Gail’s § 179 deduction for
2012.
A. $25,000.
B. $115,000.
C. $130,000.
D. $140,000.
E. None of the above.

73. The
only asset Bill purchased during 2012 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 2012.
A. $1,428.
B. $2,499.
C. $26,749.
D. $33,375.
E. None of the above.

74. Mary
purchased a new five-year class asset on March 7, 2012. 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 $600,000. Mary made the § 179 election.
The income from the business before the § 179 deduction was $400,000. Mary does
take additional first-year depreciation. Determine the total deductions
with respect to the asset for 2012.
A. $72,000.
B. $250,000.
C. $272,000.
D. $360,000.
E. None of the above.

75. Hans
purchased a new passenger automobile on August 17, 2012, for $30,000. During
the year the car was used 40% for business and 60% for personal use. Determine
his cost recovery deduction for the car for 2012.
A. $500.
B. $1,000.
C. $1,224.
D. $1,500.
E. None of the above.

76. On
June 1, 2012, Irene places in service a new automobile that cost $21,000. The
car is used 70% for business and 30% for personal use. (Assume this percentage
is maintained for the life of the car.) She does not take additional
first-year depreciation. Determine the cost recovery deduction for 2013.
A. $3,060.
B. $3,290.
C. $3,430.
D. $6,720.
E. None of the above.

77. On
June 1, 2012, James places in service a new automobile that cost $40,000. The
car is used 60% for business and 40% for personal use. (Assume this percentage
is maintained for the life of the car.) James does take additional
first-year depreciation. Determine the cost recovery deduction for 2012.
A. $1,776.
B. $1,836.
C. $6,636.
D. $8,000.
E. None of the above.

78. On
May 2, 2012, Karen placed in service a new sports utility vehicle that cost
$60,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used
60% for business and 40% for personal use. Determine the cost recovery
for 2012. Karen wants to maximize her deductions.
A. $2,200.
B. $3,060.
C. $25,000.
D. $27,200.
E. None of the above.

79. On
July 17, 2012, Kevin places in service a used automobile that cost $25,000. The
car is used 80% for business and 20% for personal use. In 2013, he used the
automobile 40% for business and 60% for personal use. Determine the cost
recovery recapture for 2013.
A. $0.
B. $448.
C. $2,000.
D. $2,500.
E. None of the above.

80. Janet
purchased a new car on June 5, 2012, at a cost of $20,000. She used the car 80%
for business and 20% for personal use in 2012. She used the automobile 40% for
business and 60% for personal use in 2013. Janet takes additional
first-year depreciation. Determine Janet’s cost recovery recapture for
2013.
A. $0.
B. $928.
C. $1,008.
D. $7,408.
E. None of the above.

81. On
July 10, 2012, Ariff places in service a new sports utility vehicle that cost
$70,000 and weighed 6,300 pounds. The SUV is used 100% for business. Determine
Ariff’s maximum deduction for 2012, assuming Ariff’s § 179 business income is
$110,000. Ariff does not take additional first-year depreciation.
A. $2,960.
B. $25,000.
C. $34,000.
D. $70,000.
E. None of the above.

82. On
March 1, 2012, Lana leases and places in service a passenger automobile. The
lease will run for five years and the payments are $500 per month. During 2012,
she uses her car 40% for business and 60% for personal activities. Assuming the
dollar amount from the IRS table is $110, determine Lana’s deduction for the
lease payments.
A. $0.
B. $1,800.
C. $2,000.
D. $2,330.
E. None of the above.

83. On
June 1, 2012, Norm leases a taxi and places it in service. The lease payments
are $1,000 per month. Assuming the dollar amount from the IRS table is $241,
determine Norm’s inclusion amount.
A. $0.
B. $241.
C. $907.
D. $1,687.
E. None of the above.

84. Bhaskar
purchased a new factory building on September 2, 2012, for $2,000,000. He
elected the alternative depreciation system (ADS). Determine the cost recovery
deduction for 2013.
A. $15,000.
B. $18,000.
C. $22,000.
D. $50,000.
E. None of the above.

85. Pat
purchased a used five-year class asset on March 15, 2012, for $60,000. He did
not elect § 179 expensing. Determine the cost recovery deduction for 2012 for
earnings and profits purposes.
A. $2,000.
B. $3,000.
C. $6,000.
D. $12,000.
E. None of the above.

86. George
purchases used seven-year class property at a cost of $200,000 on April 20,
2012. Determine George’s cost recovery deduction for 2012 for alternative
minimum tax purposes, assuming George does not elect § 179.
A. $2,500.
B. $10,000.
C. $14,280.
D. $28,580.
E. None of the above.

87. During
the past two years, through extensive advertising and improved customer
relations, Orange Corporation estimated that it had developed customer goodwill
worth $500,000. For the current year, determine the amount of goodwill Orange
Corporation may amortize.
A. $16,667.
B. $26,667.
C. $33,333.
D. $100,000.
E. None of the above.

88. On
June 1, 2012, 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 2012 for the patent.
A. $0.
B. $1,667.
C. $11,667.
D. $35,000.
E. None of the above.

89. Orange
Corporation begins business on April 2, 2012. The corporation has startup
expenditures of $54,000. If Orange Corporation elects § 195, determine the
total amount that Orange may deduct in 2012.
A. $1,000.
B. $2,650.
C. $3,650.
D. $5,000.
E. None of the above.

90. On
January 15, 2012, Vern purchased the rights to a mineral interest for
$3,500,000. At that time it was estimated that the recoverable units would be
500,000. During the year, 40,000 units were mined and 25,000 units were sold
for $800,000. Vern incurred expenses during 2012 of $500,000. The percentage
depletion rate is 22%. Determine Vern’s depletion deduction for 2012.
A. $150,000.
B. $175,000.
C. $176,000.
D. $200,000.
E. $250,000.

91. Tom
acquired a used five-year class asset on November 5, 2012 for $20,000.
This was the only asset Tom acquired in 2012. He placed the asset in
service on January 20, 2013. However, because the asset was purchased in
2012, Tom deducted regular MACRS cost recovery on the asset for the year 2012.
He did not elect to expense any of the asset under § 179. In 2013, Tom
purchased no assets and because he had no taxable income, he did not deduct any
cost recovery. In 2014, Tom sold the five-year asset on September
25th. Determine the basis of the five-year asset at the time of the
sale.

92. Jim
acquires a new seven-year class asset on September 20, 2012, for $80,000.
He placed the asset in service on October 5, 2012. He does not elect to expense
any of the asset under § 179 or elect straight-line, cost recovery.
He takes additional first-year depreciation. He sells the asset on August 25,
2013. This is the only asset he acquires in 2012. Determine Jim’s cost
recovery in 2012 and 2013.

93. Rod
paid $950,000 for a new warehouse on April 14, 2012. He sold the warehouse on
September 29, 2017. Determine the cost recovery deduction for 2012 and
2017.

94. On
March 3, 2012, Sally purchased and placed in service a building costing $12,000,000.
The building has 10 floors. The bottom three floors are rented out to
businesses. The top seven floors are residential apartments. The
gross rents from the businesses are $60,000 and the gross rents from the
apartments are $110,000. Determine Sally’s cost recovery for the building
in 2012.

95. Sid
bought a new $410,000 seven-year class asset on August 2, 2012. On December 2,
2012, he purchased $160,000 of used five-year class assets. Sid does take
additional first-year depreciation if available. If Sid elects § 179, what is
the maximum write-off for these purchases for 2012?

96. Polly
purchased a new hotel on July 20, 2012, for $6,000,000. On January 20, 2019,
the building was sold. Determine the cost recovery deduction for the year of
the sale.

97. Rustin
bought used 7-year class property on May 15, 2012, for $370,000. Rustin elects § 179
and straight-line cost recovery. Rustin’s taxable income would not create a
limitation for purposes of the § 179 deduction. Rustin does not take
additional first-year depreciation. Determine the write-off Rustin can take in
2012.

98. Audra
acquires the following new five-year class property in 2012:

Asset

Acquisition Date

Cost

A

January 10

$106,000

B

July 5

70,000

C

November 15

450,000

Total

$626,000

Audra elects § 179 for Asset C. Audra’s taxable income from her business would
not create a limitation for purposes of the § 179 deduction. Audra takes
additional first-year depreciation. Determine her total cost recovery deduction
(including the § 179 deduction) for the year.

99. On
April 5, 2012, Orange Corporation purchased, and placed in service, seven-year
class assets costing $500,000 and five-year class assets costing
$140,000. Orange elects to expense the maximum amount under § 179.
Orange does not take additional first-year depreciation. Assume taxable
income is not a limitation. Determine Orange Corporation’s cost recovery
with respect to the assets for 2012.

100. On
February 15, 2012, Martin signed a 20-year lease on a commercial
building. In March 2012, Martin purchased and placed in service new
seven-year class assets costing $400,000. In June 2012, Martin paid
$200,000 for qualified leasehold real property improvements. Martin
desires to take the maximum cost recovery deduction with respect to the assets
in 2012. He takes additional first-year depreciation. Assuming
taxable income is not a limitation, determine Martin’s maximum cost recovery
for 2012.

101. On
February 21, 2012, Joe purchased new farm equipment for $600,000. Joe has
made an election to not have the uniform capitalization rules apply to his
farming business. He does not take additional first-year depreciation. If
Joe elects § 179, what is the maximum write-off for this purchase for
2012?

102. On
April 15, 2012, Sam placed in service a storage facility (a single-purpose
agricultural structure) costing $80,000. Sam also purchased and planted
fruit trees costing $40,000. Sam does not elect to expense any of the
acquisitions under § 179. Sam elected not to take additional first-year
depreciation. Determine Sam’s cost recovery from these two items for
2012.

103. On
August 20, 2011, May signed a 10-year lease on a building for her business. On
November 28, 2012, May paid $80,000 for a qualified leasehold improvement to
the building. She takes additional first-year depreciation. What is May’s cost
recovery deduction for the improvement in 2012?

104. On
July 15, 2012, Mavis paid $275,000 for exterior leasehold improvements on a
commercial building she was leasing. Determine the total cost recovery
from the improvements in 2012. Mavis elected not to take additional
first-year depreciation.

105. Joe
purchased a new five-year class asset on June 1, 2012. The asset is listed
property (not an automobile). It was used 55% for business and 45% for the
production of income. The asset cost $1,000,000. Joe made the § 179 election.
Joe’s taxable income would not create a limitation for purposes of the § 179
deduction. Joe does not take additional first-year depreciation.
Determine Joe’s total cost recovery (including the § 179 deduction) for the year.

106. Nora
purchased a new automobile on July 20, 2012, for $29,000. The car was used 60%
for business and 40% for personal use. In 2013, the car was used 30% for
business and 70% for personal use. Nora elects not to take additional
first-year depreciation. Determine the cost recovery recapture and the
cost recovery deduction for 2013.

107. Norm
purchases a new sports utility vehicle (SUV) on October 12, 2012, for $50,000.
The SUV has a gross vehicle weight of 6,200 lbs. It is used 100% of the time
for business and it is the only business asset acquired by Norm during 2012.
Compute the maximum deduction with respect to the SUV for 2012. Norm does
take additional first-year depreciation.

108. On
June 1, 2012, Gabriella purchased a computer and peripheral equipment
(five-year property) for $25,000. She used the assets 40% for business, 50% for
the production of income, and 10% for personal use. These are the only assets
Gabriella purchased during the current year. Determine her total cost recovery
deduction for the current year.

109. In
2012, Marci is considering starting a new business. Marci had the
following costs associated with this venture:

Advertising

$ 5,000

Travel

10,000

Market surveys

8,000

Professional services

30,000

Interest expense

2,000

Taxes

1,000

Marci started the new business on October 1, 2012. Determine the
deduction for Marci’s startup costs for 2012.

110. Rick
purchased a uranium interest for $10,000,000 on January 3, 2012, when
recoverable reserves were estimated at 200,000 units. A total of 10,000 units
were extracted in 2012 and 7,000 units were sold in 2012. Gross income from the
property was $2,800,000 and taxable income without the allowance for depletion
was $1,000,000. Determine the depletion deduction for 2012.

111. Discuss
the difference between the half-year convention and the mid-quarter
convention.

112. Discuss
the criteria used to determine whether a building is residential or
nonresidential realty. Also explain the tax consequences resulting from this
determination if the property is placed in service in 2012.

113. Discuss
the effect on the cost recovery method of a taxpayer election if the
uniform capitalization rules apply to a farming business.

114. Discuss
the tax consequences of listed property being used for the production of income
compared to being used in a trade or business.

115. Discuss
the beneficial tax consequences of an SUV notbeing classified as a
passenger automobile.

116. Discuss
the reason for the inclusion amount with respect to leased automobiles.

117. Discuss
the requirements in order for startup expenditures to be amortized under §
195.

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