EA2 Study Unit 07 - Depreciation, Amortization, and Depletion

What is the depreciation period for Section 197 intangibles?

Which of the following is NOT considered a Section 197 intangible?

What is the requirement for a taxpayer to claim depletion deduction?

Which of the following is an example of a Section 1245 property?

What is the depreciation method used for residential rental property under the General Depreciation System (GDS)?

What is the recapture amount for a Section 1250 residential rental property?

Which of the following transactions qualify for treatment under Section 1231?

What is the treatment of recognized gain for a Section 1245 property?

What is the maximum amount of depreciation that can be taken on a $17,500 automobile used 60% for business in 2023?

Which of the following is NOT considered a startup expenditure?

What is the maximum amount of Sec. 179 expense allowed for Sec. 179 property in 2023?

What is the method of depreciation used for Sec. 1245 property?

What is the maximum percentage depletion allowed on coal?

How is gain on the disposition of Sec. 1245 property treated?

Which of the following is NOT subject to MACRS depreciation?

Which of the following is NOT a limitation on the Sec. 179 deduction?

Which of the following properties are subject to the limitations on depreciation for listed property?

Which of the following statements is true about the depreciation of Sec. 1250 property?

On December 31, 2023, John sold an apartment building for $243,500. He had purchased the building several years ago for $192,500. The depreciation deducted as of December 31, 2022, was $49,000. In 2023, the depreciation deducted was $7,000. Under an accelerated method, total depreciation would include $27,000 of excess depreciation. What amount may John treat as a Sec. 1231 gain?

Chris, a tennis pro, has built a tennis facility to suit her business needs. During Year 1, Chris purchased five ball machines for $3,500. Depreciation was correctly allowable on the ball machines as follows: Year 1 $500; Year 2 $1,250. Chris sold all of the ball machines in January of Year 3 for $2,500. What is the amount and character of the disposition of the ball machines?

Karey bought a small shopping mall 10 years ago for a total price of $2 million. Karey chose to use straight-line depreciation and deducted $423,000 before the mall was sold for $2.5 million on December 31 of the current year. The gain on the sale should be reported as

Canary owns a zinc mine for which he paid $900,000. He has claimed $410,000 in depletion in prior years. There were 750,000 tons of zinc when Canary acquired the mine. The beginning-of-the-year estimate indicated 350,000 tons of zinc remained. In the current year, he sold 90,000 tons of zinc. His gross income from the zinc was $1.5 million, and his taxable income before depletion was $380,000. The depletion rate for zinc is 22%. What is Canary's percentage depletion deduction for the current year?

Allen purchased a trademark on January 1 of last year for $150,000. On January 1 of this year, Allen sold the trademark for $200,000. How much of Allen's gain on the sale of the trademark is Sec. 1245 gain?

An election to amortize is deemed to have been made for qualifying costs of organization for a partnership. Which of the following is NOT considered a qualifying cost?

Donny owns and leases a coal mine to Brian. The lease agreement states that Brian will pay Donny $4 per ton royalty on coal mined. What is Brian's percentage depletion deduction for the current year from the information given below? Gross income from coal $250,000 Income from trucking coal $20,000 Royalty paid Donny $30,000 Taxable income on coal (excluding depletion) $40,000 Coal depletion rate 10%

In 2020, Ben purchased a truck for $15,000. In 2020, he claimed a $3,000 Sec. 179 deduction and began depreciating the truck. He sold the truck in 2023 for $13,000. Prior to the sale, Ben claimed MACRS deductions of $8,000. Had Ben claimed straight-line depreciation, he would have claimed $6,000 prior to the sale. What amount of gain on the sale is treated as ordinary income in 2023?

Matthew acquired a Sec. 1250 residential rental building for $200,000. He sold the building in 2023 for $300,000. Matthew depreciated his building using the straight-line method, deducting $120,000 in depreciation. What amount of Matthew's gain is treated as ordinary income?

Which of the following statements about ADS (alternative depreciation system) is false?

All of the following are considered Sec. 197 intangibles EXCEPT

For a taxpayer to claim a deduction for depletion, (s)he must possess an “economic interest” in the natural resource. For an economic interest to be considered present, the taxpayer is only required to

In 2023, your construction company bought and placed in service dump trucks that cost $1,058,000 and equipment that cost $111,000. Section 179 expensing was elected and applied $111,000 to the equipment and $1,049,000 to the dump trucks, for a total of $1,160,000. What is the depreciable basis in each item for 2023?

With regard to the modified accelerated cost recovery system (MACRS), which of the following statements is false?

On August 1, 2023, Bruce opened a framing and art supply store. Prior to opening the business, he incurred the following costs: Legal fees related to setup $25,000 Office equipment 15,000 Interest expense for funds borrowed prior to opening 5,000 Market analysis 7,500 Travel expense to secure supplier 30,000 Total $82,500. What is Bruce's amortization expense for start-up expenditures on his 2023 income tax return?

Canary owns a zinc mine and has claimed $120,000 in depletion in prior years. At the beginning of the current year, 600,000 tons of zinc remained in the mine. Canary mined 150,000 tons and sold 110,000 tons during the current year. What is Canary's adjusted basis in the zinc mine?

Donny owns and leases a coal mine to Brian. The lease agreement states that Brian will pay Donny $4 per ton royalty on coal mined. What is Brian's percentage depletion deduction for the current year from the information given below?

Which of the following statements concerning the alternative depreciation system (ADS) is true?

Which of the following transactions or events (after reduction for ordinary gain attributable to depreciation recapture) will not result in gain or loss from Sec. 1231 property? Assume all property has been held for more than 1 year and the transaction or event occurs in the current year.

A gain on the disposition of Sec. 1245 property is treated as ordinary income to the extent of

In 2021, Paige signed a 6-year lease for a building to use in her business. In 2023, she installed shelves and made other leasehold improvements to the building for a total of $8,000. She can