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Exam 10: Property Acquisition and Cost Recovery

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Question 51

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During August of the prior year, Julio purchased an apartment building that he used as a rental property. The basis was $1,400,000. Calculate the maximum depreciation expense during the current year. (Use MACRS Table 3 in the text)

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$50,904
The asset's recovery p...

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Question 52

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Santa Fe purchased the rights to extract turquoise on a tract of land over a five-yearperiod. Santa Fe paid $300,000 for extraction rights. A geologist estimates that Santa Fe will recover 5,000 pounds of turquoise. During the current year, Santa Fe extracted 1,500 pounds of turquoise, which it sold for $200,000. What is Santa Fe's cost depletionexpense for the current year?

A) $110,000
B) $90,000
C) $300,000
D) $60,000
E) None of the choices are correct.

F) C) and E)
G) D) and E)

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Question 53

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How is the recovery period of an asset determined?

Which is not an allowable method under MACRS?

Which of the following business assets is not depreciated?

What is the basis of the intangibles at the end of the second year?

The MACRS recovery period for automobiles and computers is:

An asset's capitalized cost basis includes only the actual purchase price; whereasexpenses to purchase, prepare the asset for use, and begin using the asset are immediately expensed.

PC Mine purchased a platinum deposit for $3,500,000. It estimated it would extract 17,000 ounces of platinum from the deposit. PC mined the platinum and sold it reporting gross receipts of$500,000 and $8 million for years 1 and 2, respectively. During years 1 and 2, PC reported net income (loss) from the platinum deposit activity in the amount of ($100,000) and $3,800,000, respectively. In years 1 and 2, PC actually extracted 2,000 and 8,000 ounces of platinum. What is PC's depletion expense for years 1 and 2 if the applicable percentage depletion for platinum is 22 percent? (Round final answer to the nearest whole number)

All taxpayers may use the §179 immediate expensing election on certain property.

An office desk is an example of:

The MACRS depreciation tables automatically switch to the straight-line method when the straight-line method yields a higher annual depreciation amount than the declining balance method.

The alternative depreciation system requires both a slower method of recovery and longer recovery periods.

Tax cost recovery methods include depreciation, amortization, and depletion.