ch 10 Flashcards
cost basis
prevents double taxation of the same economic benefit
adjusted basis
represents remaining after-tax investment a taxpayer has in property. Cost basis-accumulated depreciation
de minimus safe harbor election
2500 or 5000 (if taxpayer files SEC fstmts) per item, may be expensed immediately
asset-related expenses
keep asset in good working order over original useful life
routine maintenance
expense in the current period: put the asset in new, better state or improve the asset/increase productive output
costs that significantly extend useful life
capitalize and treat as a new asset
cost recovery
depreciation, amortization, and depletion
cost recovery deductions are allowed if
- asset used in a trade or busn or held for production of income
- determinable useful life
- useful life exceeds 1 year
major types of assets for cost recovery
tangible, intangible, and natural resources
tangible assets
real and personal property- depreciate plus section 179 plus bonus depreciation
intangible assets
goodwill, covenants not to compete, etc. Amortize. Section 197- 180 months amortization
natural resources
oil, gold, etc, deplete. Cost depletion vs percentage depletion
multiple assets
purchased at same time- Basket purchase (building and land)
land
not depreciable
building
27.5 or 39 years