final exam status:
80%
Question 1
Correct
A taxpayer purchased his home in 1974 and converted it to a residential rental property in 2013. Which of the following statements is correct?
The taxpayer should use a pre-ACRS method to depreciate the property because the house was purchased before 1981 when ACRS first applied.
The taxpayer should use MACRS to depreciate the property as 39-year nonresidential real property.
The taxpayer may not depreciate the building because a residence that is converted to business use by the original owner is ineligible for depreciation.
(You Answered) (Correct Answer) The taxpayer should depreciate the property as MACRS 27.5-year residential rental property.
Question 2
Correct
Which of the following statements is not correct?
Depreciation may not be claimed on an asset acquired and disposed of in the same tax year.
A land improvement is depreciated under MACRS as 15-year property unless the land improvement is specifically included in the Rev. Proc. 87-56 Asset Guideline Class that applies to the taxpayer’s business.
(You Answered) (Correct Answer) Property used outside of the United States may be depreciated using any MACRS method other than the MACRS alternative depreciation system (ADS).
A 100 percent bonus depreciation rate applies to qualifying property acquired after September 8, 2010, and placed in service before January 1, 2012.
Question 3
Correct
A calendar-year taxpayer makes a MACRS 150 percent declining-balance election with respect to seven-year MACRS property placed in service in 2013. The election:
Requires the use of the 150 percent declining-balance method and a recovery period that is generally longer than seven years for each item of seven-year property placed in service in 2013.
(You Answered) (Correct Answer) Requires the use of the 150 percent declining-balance method and the regular GDS recovery period for each item of seven-year property placed in service in 2013
Also applies to seven-year property placed in service in 2014 unless the taxpayer makes a formal election out in 2014.
May be revoked for good cause without IRS approval.
Question 4
Correct
Under MACRS the 200 percent declining balance method is only used to depreciate:
Residential and nonresidential real property
7-year, 10-year, 15-year and 20-year property
3-year and 5-year property
(You Answered) (Correct Answer) 3-year, 5-year, 7-year, and 10-year property
Question 5
Correct
Under MACRS 3-, 5-, 7-, and 10-year farm property is depreciated using:
The straight-line method
(You Answered) (Correct Answer) The 150 percent declining balance method
The 200 percent declining balance method
The MACRS alternative depreciation system (ADS) method
Question 6
Correct
Which depreciation period and method apply to MACRS qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property placed in service before January 1, 2014?
15-year depreciation period and 200 percent declining-balance method
15-year depreciation period and 150 percent declining-balance method
(You Answered) (Correct Answer) 15-year depreciation period and straight-line method
39-year depreciation period and straight-line method
Question 7
Correct
A calendar-year taxpayer places the following property in service in 2013: \r\rMACRS 7-year property costing $10,000 on December 1\r\rMACRS 5-year property costing $10,000 on June 1\r\rIf the taxpayer claims a $5,000 bonus allowance on the machinery placed in service on December 1, and elects not to claim bonus depreciation on the 5-year property, which convention should be used to depreciate the 5-year and 7-year property assuming no amount was expensed under Code Sec. 179?
Mid-month convention
(You Answered) (Correct Answer) Mid-quarter convention
Half-year convention
None of the above
Question 8
Correct
An item of property subject to the mid-quarter convention, which is placed in service in April by a calendar-year taxpayer, is deemed placed in service on:
July 1
The midpoint of April
(You Answered) (Correct Answer) The midpoint of May
The midpoint of June
Question 9
Correct
The cost of MACRS 15-year property has a 15-year recovery period but is depreciated over:
14 tax years
15 tax years
(You Answered) (Correct Answer) 16 tax years
17 tax years
Question 10
Correct
Which of the following statements is correct?
(You Answered) (Correct Answer) Qualified leasehold improvements placed in service in 2013 qualify for bonus depreciation and a 15-year MACRS recovery period.
A qualified restaurant building placed in service in 2013, qualifies for bonus depreciation and a 15-year MACRS recovery period.
A qualified retail improvement property placed in service in 2013 qualifies for bonus depreciation and a 15-year MACRS recovery period.
Up to $500,000 of the cost of qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property may expensed under Code Sec. 179 if placed in service in a tax year that begins in 2010, 2011, 2012, or 2013.
Question 11
Correct
The recovery period of an MACRS asset for purposes of the MACRS alternative depreciation system (ADS) is:
Usually shorter than the regular MACRS general depreciation system (GDS) recovery period
Usually identical to the regular MACRS general depreciation system (GDS) recovery period
Based on the actual useful life of the asset in the hands of the taxpayer
(You Answered) (Correct Answer) Usually longer than the regular MACRS general depreciation system (GDS) recovery period
Question 12
Incorrect
In 2013, the owner of a restaurant remodels and spends $50,000 on structural improvements such as new walls, floors, and a stairway. The building was placed in service by the owner in 1982. The owner should depreciate the improvements as:
New 15-year ACRS real property
New 15-year MACRS leasehold improvement property
(Correct Answer) New 15-year MACRS restaurant improvement property
(You Answered) New 39-year MACRS nonresidential real property
Question 13
Incorrect
A cost segregation study may result in a tax benefit in the case of:
A building constructed by a taxpayer and placed in service by the taxpayer during the current tax year
An existing building purchased from another person and placed in service by the taxpayer during the current tax year
(You Answered) An existing building which was acquired by the taxpayer from another person five years ago
(Correct Answer) All of the above
Question 14
Incorrect
Which of the following statements regarding bonus depreciation is correct?
Retail improvement property qualifies for bonus depreciation.
(Correct Answer) An alternative minimum tax depreciation adjustment is not required with respect to depreciation claimed during any year of a property’s recovery period if bonus depreciation was claimed on the property.
Bonus depreciation is not considered a depreciation deduction that is subject to recapture upon the sale or disposition of an asset at a gain.
(You Answered) A 100 percent bonus depreciation rate applies to qualifying property placed in service in 2012 and 2013.
Question 15
Correct
A taxpayer claims the bonus depreciation allowance on qualifying property acquired and placed in service in 2013. If the property cost $1,000 and $500 is expensed under Code Sec. 179, what is the amount of the bonus depreciation deduction?
$0
(You Answered) (Correct Answer) $250
$500
$1,000