ACC250 Chapter 9

Question 1

The depreciation system enacted by Congress in 1981 that is based on the concept of set recovery periods and accelerated depreciation methods.

Answer 1

ACCELERATED COST RECOVERY SYSTEM (ACRS)

Question 2

The taxpayer’s acquisition basis plus capital improvements less depreciation or amortization.

Answer 2

ADJUSTED BASIS

Question 3

The method of recovering the cost of intangible assets over a specific time period.

Answer 3

AMORTIZATION

Question 4

Additional depreciation allowed in the acquisition year for new tangible personal property with a recovery period of 20 years or less.

Answer 4

BONUS DEPRECIATION

Question 5

The method of recovery the cost of a natural resource that allows a taxpayer to estimate or determine the number of units that remain in the resource at the beginning of the year and allocate a pro rata share of the remaining basis to each unit of the resource that is sold or extracted each year.

Answer 5

COST DEPLETION

Question 6

The method by which a company expenses the cost of acquiring capital assets. This can take the form of amortization, depreciation or depletion.

Answer 6

COST RECOVERY

Question 7

A contractual promise to refrain from conducting business or professional activities similar to those of another party.

Answer 7

COVENANT NOT TO COMPETE

Question 8

The cost recovery method to allocate the cost of natural resources as they are removed.

Answer 8

DEPLETION

Question 9

The cost recovery method to allocate the cost of tangible personal and real property over a specific time period.

Answer 9

DEPRECIATION

Question 10

A convention that allows owners of intangibles to deduct an entire month’s amortization in the month of purchase and the month of disposition.

Answer 10

FULL-MONTH CONVENTION

Question 11

A depreciation convention that allows owners of tangible personal property to take one-half year’s worth of depreciation in the year of purchase and in the year of disposition regardless of when the asset was actually placed into service or sold.

Answer 11

HALF-YEAR CONVENTION

Question 12

Assets that do not have physical characteristics. Examples include goodwill, covenants not to compete, organizational expenditures, and research and experimentation expenses.

Answer 12

INTANGIBLE ASSETS

Question 13

Business assets that are often used for personal purposes. Depreciation on this type of property is limited to the business use portion of the asset.

Answer 13

LISTED PROPERTY

Question 14

An automobile on which the amount of annual depreciation expense is limited because the cost of the automobile exceeds a certain threshold. The definition excludes vehicles with gross vehicle weight exceeding 6,000 lbs.

Answer 14

LUXURY AUTOMOBILE

Question 15

A convention that allows owners of real property to take one-half of a month’s depreciation during the month when property was placed in service and in the month it was disposed of.

Answer 15

MID-MONTH CONVENTION

Question 16

A depreciation convention for tangible personal property that allows for one-half of a quarter’s worth of depreciation in the quarter of purchase and in the quarter of disposition. This convention must be used when more than 40% of tangible personal property is put into service in QIV of the tax year.

Answer 16

MID-QUARTER CONVENTION

Question 17

The current tax depreciation system for tangible personal and real property. Depreciation under this system is calculated by finding the depreciation method, recovery period, and applicable convention.

Answer 17

MODIFIED ACCELERATED COST RECOVERY SYSTEM (MACRS)

Question 18

Expenditures to form and organize a business in the form of a corporation or partnership.

Answer 18

ORGANIZATIONAL EXPENDITURES

Question 19

A method of recovering the cost of a natural resource that allows a taxpayer to recover or expense an amount based on a statutorily determined percentage.

Answer 19

PERCENTAGE DEPLETION

Question 20

All tangible property other than real property.

Answer 20

PERSONAL PROPERTY

Question 21

Land and structures permanently attached to land.

Answer 21

REAL PROPERTY

Question 22

A length of time prescribed by statute in which business property is depreciated or amortized.

Answer 22

RECOVERY PERIOD

Question 23

Expenses for research including costs of research laboratories (salaries, materials, and other related expenses). Taxpayers can elect to amortize these costs over not less than 60 months from the time benefits are first derived from the research.

Answer 23

RESEARCH AND EXPERIMENTATION (R & E) COSTS

Question 24

An incentive for small businesses that allows them to immediately expense a certain amount of tangible personal property placed in service during the year.

Answer 24

SECTION 179 ELECTION

Question 25

Intangible assets that are purchased that must be amortized over 180 months regardless of their actual useful lives.

Answer 25

SECTION 197 PURCHASED INTANGIBLES

Question 26

Expenses that would be classified as business expenses except that the expenses are incurred before the business begins.

Answer 26

START-UP COSTS

Question 27

The amount of a taxpayer’s unrecovered cost of or investment in an asset.

Answer 27

TAX BASIS