Individual Taxation - Depreciation

Question 1

Under Sec. 179, A taxpayer may elect to expense up to _____ of the cost of new or used tangible depreciable personal property placed in service during the taxable year

Answer 1

$500,000

Question 2

For a taxpayer to be eligible to elect to expense up to $500,000 of the cost of new or used tangible depreciable personal property placed in service during the taxable year they must fulfill what two requirements?

Answer 2

1) The property must be acquired by purchase from an unrelated party
2) The property must be purchased for use in the taxpayer’s active trade or business

Question 3

Although a taxpayer may expense up to $500,000 of the cost of new or used tangible depreciable personal property place in service during the taxable year, they are limited by what two situations?

Answer 3

1) The maximum cost that can be expensed of $500,000 is reduced dollar-for-dollar by the cost of qualifying property that is placed in service during the year that exceeds $2M
2) The amount that can be expensed is further limited to the aggregate taxable income derived from the active conduct of any trade or business of the taxpayer

Question 4

Computers & Peripheral Equipment, Office Machinery, Autos, & Light trucks are in what category of MACRS

Answer 4

5-year, 200% Class

Question 5

Office furniture & fixtures are in what category of MACRS

Answer 5

7-year, 200% Class

Question 6

Residential Rental Property is in what category of MACRS

Answer 6

27 1/2-year, Straight-Line Class

Question 7

Property that is neither residential real property nor property with a class life of less than 27.5 years is in what category of MACRS?

Answer 7

39-year, Straight-Line Class

Question 8

Personal property is treated as placed in service or disposed of at what point in the year?

Answer 8

At the midpoint of the taxable year, resulting in a half-year of depreciation

Question 9

T/F

Personal Property recognizes no depreciation in the year the property is placed into service

Answer 9

FALSE

Personal Property recognizes a half-year in the year in which the property is placed into service or disposed of

Question 10

T/F

If personal property is disposed of in the same taxable year in which it was placed in service no depreciation is allowed

Answer 10

TRUE

Question 11

Under this convention, property is treated as placed in service (or disposed of) in the middle of the quarter in which placed in service (or disposed of)

Answer 11

Midquarter Convention

Question 12

When is the midquarter convention used?

Answer 12

If more than 40% of all personal property is placed in service during the last quarter of the taxpayer’s taxable year

Question 13

Real property is treated as placed in service (or disposed of) when?

Answer 13

In the middle of a month, resulting in a half-month/mid-month depreciation convention

Question 14

T/F

Under MACRS, used tangible depreciable property is excluded from the computation

Answer 14

FALSE

Question 15

T/F

Under MACRS, salvage value is ignored for purposes of computing the MACRS deduction

Answer 15

TRUE

Question 16

T/F

Under MACRS, no type of straight-line depreciation is allowable

Answer 16

FALSE

Question 17

T/F

Under MACRS, the recovery period for depreciable realty must be at least 27.5 years

Answer 17

FALSE