M5 Cost Recovery

Question 1

Depreciation Rules - MACRS - Salvage value is

Answer 1

IGNORED

Question 2

Depreciation Rules - MACRS - Salvage value is

Answer 2

IGNORED

Question 3

Depreciation Rules - MACRS Personal Property. What convention is applied to personal property?

Answer 3

Half-year

Question 4

Depreciation Rules - MACRS Personal Property. If more than 40% of depreciable personal property is place in service in the last quarter of the year, what convention must be used?

Answer 4

Mid-quarter

Question 5

Depreciation - REAL property. Residential years and method

Answer 5

Straight-line 27.5

Question 6

Depreciation - REAL property. Nonresidential and method

Answer 6

Straight Line 39 years

Question 7

Depreciation - REAL Property. Convention?

Answer 7

MID-MONTH (i.e. if property placed in service April 1, you multiply amount by 8.5 months instead of 9 months - April-Dec)

Question 8

Section 179 limit

Answer 8

510,000, then reduced dollar for dollar if in excess of 2,030,000

Question 9

Section 179 limit for SUV

Answer 9

$25,000

Question 10

Bonus percent

Answer 10

50% (2015-2017)
40% 2018
30% 2019

Question 11

Order of depreciation

Question 12

Depletion. 2 Types and Calculations

Answer 12

Cost Depletion (GAAP)
DEPLETION RATE = Basis of property / remaining number of recoverable units
COST DEPLETION = Depletion rate * number of units SOLD
Percentage Depletion (NON-GAAP = TAX ONLY)
Multiply certain percentage * Gross Income
*ranges from 5-22% but limited to 50%
PREFERENCE ITEM FOR AMT

Question 13

Amortization. Intangibles for tax purposes

Answer 13

15 year straight line

Question 14

Amortization - Start up amounts

Answer 14

$5,000 expensed, rest amortized over 180 months

*$5,000 reduced for total cost exceeding $50,000 for each item

Question 15

After-Tax Cash Flows calculation

Answer 15

After-tax cash flow = Earnings after tax + Amortization + Depletion + Depreciation

Question 16

Depreciation Rules - MACRS Personal Property. What convention is applied to personal property?

Answer 16

Half-year

Question 17

Depreciation Rules - MACRS Personal Property. If more than 40% of depreciable personal property is place in service in the last quarter of the year, what convention must be used?

Answer 17

Mid-quarter

Question 18

Depreciation - REAL property. Residential years and method

Answer 18

Straight-line 27.5

Question 19

Depreciation - REAL property. Nonresidential and method

Answer 19

Straight Line 39 years

Question 20

Depreciation - REAL Property. Convention?

Answer 20

MID-MONTH (i.e. if property placed in service April 1, you multiply amount by 8.5 months instead of 9 months - April-Dec)

Question 21

Section 179 limit

Answer 21

510,000, then reduced dollar for dollar if in excess of 2,030,000

Question 22

Section 179 limit for SUV

Answer 22

$25,000

Question 23

Bonus percent

Answer 23

50% (2015-2017)
40% 2018
30% 2019

Question 24

Order of depreciation

Question 25

Depletion. 2 Types and Calculations

Answer 25

Cost Depletion (GAAP)
DEPLETION RATE = Basis of property / remaining number of recoverable units
COST DEPLETION = Depletion rate (GIVEN) * number of units SOLD but then limited to half of taxable income
Percentage Depletion (NON-GAAP = TAX ONLY)
Multiply certain percentage * Gross Income
*ranges from 5-22% but limited to 50%
PREFERENCE ITEM FOR AMT

Question 26

Amortization. Intangibles for tax purposes

Answer 26

15 year straight line

Question 27

Amortization - Start up amounts

Answer 27

$5,000 expensed, rest amortized over 180 months

*$5,000 reduced for total cost exceeding $50,000 for each item

Question 28

After-Tax Cash Flows calculation

Answer 28

After-tax cash flow = Earnings after tax + Amortization + Depletion + Depreciation

Question 29

Depletion. Under the % completion method for depletion, what is the amount of deduction limited to?

Answer 29

50% of taxable income

*PASS KEY - if not sure how to calculate, guess by taking 50% of the taxable income given as the deduction