Exam

Name___________________________________
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
1
On its tax return, a corporation will use the same depreciation, amortization and depletion methods used in its financial
statements issued to shareholders.
1)
_______

Depreciable property includes business, investment, and personal-use assets.

2)
_______

In order for an asset to be depreciated in the year of purchase, it must be placed in service before year's end.

3)
_______

The basis of an asset must be reduced by the depreciation allowable.

4)
_______

Land, buildings, equipment, and stock are examples of tangible property.

5)
_______
6
If personal-use property is converted to trade or business use, the basis for depreciation is the lesser of adjusted basis or
FMV on the date of conversion.
6)
_______
7
Under the MACRS rules, salvage value is not considered in the computation of the cost-recovery or depreciation amount.
7)

_______
8
Under the MACRS system, depreciation rates for real property must always use the mid-month convention in the year of
acquisition.
8)
_______
9
Under MACRS, tangible personal property used in trade or business purchased and placed into service on March 1, 2014
should be depreciated for 10 months in 2014. Assume the business uses a calendar tax year.
9)
_______

MACRS recovery property includes tangible personal and real property that is used in a trade or business.

10)
______

Under the MACRS system, automobiles and computers are classified as seven-year property.

11)
______
1
In computing MACRS depreciation in the year of disposition of personal property used in a trade or business, the halfyear convention must be applied to the amounts in the tables if the half-year convention was used in the year the asset was
placed into service.
12)
______

Intangible assets are subject to MACRS depreciation.

13)
______
1
Section 179 allows taxpayers to immediately expense up to $25,000 (for 2014), subject to limitations, of the cost of real and
personal property placed into service in a trade or business.

14)
______

The Section 179 expensing election is available on an annual basis for property purchased during the year.

15)
______

Personal property used in a rental activity held for investment qualifies for the Section 179 expensing election.

16)
______

Sec. 179 tax benefits are recaptured if at any time an asset is converted to personal use.

17)
______

1
Any Section 179 deduction that is not allowed currently due to the taxable income limitation may be carried over and
deducted in future years.
18)
______
1
Under the MACRS system, if the aggregate basis of all personal property placed in service during the last three months of
the year exceeds 40% of the cost of all personal property placed in service during the tax year, the mid-quarter convention
is required.
19)
______

The mid-quarter convention applies to personal and real property.

20)
______
2

The MACRS system requires that residential real property and nonresidential rental property be depreciated using the
straight-line method.
21)
______
2
Capital improvements to real property must be depreciated over the remaining life of the property on which the
improvements were made.
22)
______
2
If the business use of listed property is 50% or less of the total usage, the alternative depreciation system must be used.
23)
______
2
If the business use of listed property decreases to 50% or less of the total usage, the property is subject to depreciation
recapture.
24)
______
2
If a new luxury automobile is used 100% for business and placed in service in 2014, the maximum MACRS depreciation
on the vehicle for 2014 is $3,160.
25)
______
2
A large SUV is place in service in 2014. MACRS depreciation on an SUV weighing over 6,000 pounds is limited to $3,160
for the first year placed in service.
26)
______

If a company acquires goodwill in connection with the acquisition of a business, the goodwill is amortizable over a 60month period.
27)

______

Amounts paid in connection with the acquisition of a business which represent a covenant not to compete are amortizable
over the covenant's remaining life.
28)
______

Unless an election is made to expense or defer and amortize research and experimental expenditures, these costs must be
capitalized.
29)
______

Most taxpayers elect to expense R&E expenditures because of the immediate tax benefit.
30)
______

1)
FALSE
2)
FALSE
3)
TRUE
4)
TRUE
5)
FALSE
6)
TRUE
7)
TRUE
8)
TRUE
9)
FALSE
10)
TRUE
11)
FALSE
12)
TRUE
13)

FALSE
14)
FALSE
15)
TRUE
16)
FALSE
17)
TRUE
18)
TRUE
19)
TRUE
20)
FALSE
21)
TRUE
22)
FALSE
23)
TRUE
24)
TRUE
25)
TRUE
26)
FALSE
27)
FALSE
28)
FALSE
29)
TRUE
30)
TRUE