Cost Recovery (Depreciation, Depletion, & Amortization) - CPA Regulation (REG)
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A taxpayer purchased a forklift for use in the taxpayer's business for $20,000 on January 1 of the current year. The taxpayer sold the forklift for $22,000 on June 1 of the current year. What is the taxpayer's Section 1231 gain as a result of the sale?
A taxpayer purchased a forklift for use in the taxpayer's business for $20,000 on January 1 of the current year. The taxpayer sold the forklift for $22,000 on June 1 of the current year. What is the taxpayer's Section 1231 gain as a result of the sale?
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To qualify for Section 1231 gains, the asset must be held for more than 12 months. Since the asset was purchased and sold in the same year, it is not eligible.
To qualify for Section 1231 gains, the asset must be held for more than 12 months. Since the asset was purchased and sold in the same year, it is not eligible.
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A taxpayer wants to deduct the cost of a seven-year asset placed in service this year. The cost qualifies for the Section 179 election to expense assets. Which of the following statements is most accurate regarding the immediate expensing of this asset versus the depreciation of this asset over seven years?
A taxpayer wants to deduct the cost of a seven-year asset placed in service this year. The cost qualifies for the Section 179 election to expense assets. Which of the following statements is most accurate regarding the immediate expensing of this asset versus the depreciation of this asset over seven years?
Tap to reveal answer
The Section 179 election allows a taxpayer to deduct the entire cost of an asset (up to certain dollar thresholds) in place of depreciating the asset over its useful life. Since it is an alternative to depreciation in terms of when the depreciation costs are recognized (not the amount recognized), there is no difference in the amount that would be deductible depreciation expense over the life of the asset.
The Section 179 election allows a taxpayer to deduct the entire cost of an asset (up to certain dollar thresholds) in place of depreciating the asset over its useful life. Since it is an alternative to depreciation in terms of when the depreciation costs are recognized (not the amount recognized), there is no difference in the amount that would be deductible depreciation expense over the life of the asset.
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Gold Corp. purchased all the assets of a sole proprietorship, including the following intangible assets:
- Goodwill: $50,000
- Covenant not to compete: 13,000
For tax purposes, what amount of these purchased intangible assets should Gold amortize over the specific statutory cost recovery periods?
Gold Corp. purchased all the assets of a sole proprietorship, including the following intangible assets:
- Goodwill: $50,000
- Covenant not to compete: 13,000
For tax purposes, what amount of these purchased intangible assets should Gold amortize over the specific statutory cost recovery periods?
Tap to reveal answer
All intangible assets (e.g., goodwill, licenses, franchises, trademarks) may be amortized on the straight-line basis over 15 years. This treatment differs from US GAAP, where indefinite-lived assets are not amortized, and definite-lived assets are amortized over their useful lives (which may vary between intangible assets).
All intangible assets (e.g., goodwill, licenses, franchises, trademarks) may be amortized on the straight-line basis over 15 years. This treatment differs from US GAAP, where indefinite-lived assets are not amortized, and definite-lived assets are amortized over their useful lives (which may vary between intangible assets).
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Under the MACRS method of depreciation for property placed in service after 1986:
Under the MACRS method of depreciation for property placed in service after 1986:
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Under the MACRS method for property places in service after 1986, salvage value is ignored for purposes of computing the deduction.
Under the MACRS method for property places in service after 1986, salvage value is ignored for purposes of computing the deduction.
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Of the following conditions, which must be satisfied for a taxpayer to expense in the year of purchase under IRC 179, the cost of new or used tangible depreciable personal property? A) The property must be purchased for use in the taxpayer’s active trade or business B) The property must be purchased from an unrelated party.
Of the following conditions, which must be satisfied for a taxpayer to expense in the year of purchase under IRC 179, the cost of new or used tangible depreciable personal property? A) The property must be purchased for use in the taxpayer’s active trade or business B) The property must be purchased from an unrelated party.
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To qualify for IRC 179, the property must be tangible personal property acquired by purchase from an unrelated party for use in the active conduct of a trade or business
To qualify for IRC 179, the property must be tangible personal property acquired by purchase from an unrelated party for use in the active conduct of a trade or business
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Per IRS tax or MACRS depreciation, is never used for calculation purposes.
Per IRS tax or MACRS depreciation, is never used for calculation purposes.
Tap to reveal answer
Under MACRS depreciation, salvage value is never used. Straight-line may be used, and any sort of basis would be relevant.
Under MACRS depreciation, salvage value is never used. Straight-line may be used, and any sort of basis would be relevant.
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A taxpayer purchased a forklift for use in the taxpayer's business for $20,000 on January 1 of the current year. The taxpayer sold the forklift for $22,000 on June 1 of the current year. What is the taxpayer's Section 1231 gain as a result of the sale?
A taxpayer purchased a forklift for use in the taxpayer's business for $20,000 on January 1 of the current year. The taxpayer sold the forklift for $22,000 on June 1 of the current year. What is the taxpayer's Section 1231 gain as a result of the sale?
Tap to reveal answer
To qualify for Section 1231 gains, the asset must be held for more than 12 months. Since the asset was purchased and sold in the same year, it is not eligible.
To qualify for Section 1231 gains, the asset must be held for more than 12 months. Since the asset was purchased and sold in the same year, it is not eligible.
← Didn't Know|Knew It →
A taxpayer wants to deduct the cost of a seven-year asset placed in service this year. The cost qualifies for the Section 179 election to expense assets. Which of the following statements is most accurate regarding the immediate expensing of this asset versus the depreciation of this asset over seven years?
A taxpayer wants to deduct the cost of a seven-year asset placed in service this year. The cost qualifies for the Section 179 election to expense assets. Which of the following statements is most accurate regarding the immediate expensing of this asset versus the depreciation of this asset over seven years?
Tap to reveal answer
The Section 179 election allows a taxpayer to deduct the entire cost of an asset (up to certain dollar thresholds) in place of depreciating the asset over its useful life. Since it is an alternative to depreciation in terms of when the depreciation costs are recognized (not the amount recognized), there is no difference in the amount that would be deductible depreciation expense over the life of the asset.
The Section 179 election allows a taxpayer to deduct the entire cost of an asset (up to certain dollar thresholds) in place of depreciating the asset over its useful life. Since it is an alternative to depreciation in terms of when the depreciation costs are recognized (not the amount recognized), there is no difference in the amount that would be deductible depreciation expense over the life of the asset.
← Didn't Know|Knew It →
Gold Corp. purchased all the assets of a sole proprietorship, including the following intangible assets:
- Goodwill: $50,000
- Covenant not to compete: 13,000
For tax purposes, what amount of these purchased intangible assets should Gold amortize over the specific statutory cost recovery periods?
Gold Corp. purchased all the assets of a sole proprietorship, including the following intangible assets:
- Goodwill: $50,000
- Covenant not to compete: 13,000
For tax purposes, what amount of these purchased intangible assets should Gold amortize over the specific statutory cost recovery periods?
Tap to reveal answer
All intangible assets (e.g., goodwill, licenses, franchises, trademarks) may be amortized on the straight-line basis over 15 years. This treatment differs from US GAAP, where indefinite-lived assets are not amortized, and definite-lived assets are amortized over their useful lives (which may vary between intangible assets).
All intangible assets (e.g., goodwill, licenses, franchises, trademarks) may be amortized on the straight-line basis over 15 years. This treatment differs from US GAAP, where indefinite-lived assets are not amortized, and definite-lived assets are amortized over their useful lives (which may vary between intangible assets).
← Didn't Know|Knew It →
Under the MACRS method of depreciation for property placed in service after 1986:
Under the MACRS method of depreciation for property placed in service after 1986:
Tap to reveal answer
Under the MACRS method for property places in service after 1986, salvage value is ignored for purposes of computing the deduction.
Under the MACRS method for property places in service after 1986, salvage value is ignored for purposes of computing the deduction.
← Didn't Know|Knew It →
Of the following conditions, which must be satisfied for a taxpayer to expense in the year of purchase under IRC 179, the cost of new or used tangible depreciable personal property? A) The property must be purchased for use in the taxpayer’s active trade or business B) The property must be purchased from an unrelated party.
Of the following conditions, which must be satisfied for a taxpayer to expense in the year of purchase under IRC 179, the cost of new or used tangible depreciable personal property? A) The property must be purchased for use in the taxpayer’s active trade or business B) The property must be purchased from an unrelated party.
Tap to reveal answer
To qualify for IRC 179, the property must be tangible personal property acquired by purchase from an unrelated party for use in the active conduct of a trade or business
To qualify for IRC 179, the property must be tangible personal property acquired by purchase from an unrelated party for use in the active conduct of a trade or business
← Didn't Know|Knew It →
Per IRS tax or MACRS depreciation, is never used for calculation purposes.
Per IRS tax or MACRS depreciation, is never used for calculation purposes.
Tap to reveal answer
Under MACRS depreciation, salvage value is never used. Straight-line may be used, and any sort of basis would be relevant.
Under MACRS depreciation, salvage value is never used. Straight-line may be used, and any sort of basis would be relevant.
← Didn't Know|Knew It →
A taxpayer purchased a forklift for use in the taxpayer's business for $20,000 on January 1 of the current year. The taxpayer sold the forklift for $22,000 on June 1 of the current year. What is the taxpayer's Section 1231 gain as a result of the sale?
A taxpayer purchased a forklift for use in the taxpayer's business for $20,000 on January 1 of the current year. The taxpayer sold the forklift for $22,000 on June 1 of the current year. What is the taxpayer's Section 1231 gain as a result of the sale?
Tap to reveal answer
To qualify for Section 1231 gains, the asset must be held for more than 12 months. Since the asset was purchased and sold in the same year, it is not eligible.
To qualify for Section 1231 gains, the asset must be held for more than 12 months. Since the asset was purchased and sold in the same year, it is not eligible.
← Didn't Know|Knew It →
A taxpayer wants to deduct the cost of a seven-year asset placed in service this year. The cost qualifies for the Section 179 election to expense assets. Which of the following statements is most accurate regarding the immediate expensing of this asset versus the depreciation of this asset over seven years?
A taxpayer wants to deduct the cost of a seven-year asset placed in service this year. The cost qualifies for the Section 179 election to expense assets. Which of the following statements is most accurate regarding the immediate expensing of this asset versus the depreciation of this asset over seven years?
Tap to reveal answer
The Section 179 election allows a taxpayer to deduct the entire cost of an asset (up to certain dollar thresholds) in place of depreciating the asset over its useful life. Since it is an alternative to depreciation in terms of when the depreciation costs are recognized (not the amount recognized), there is no difference in the amount that would be deductible depreciation expense over the life of the asset.
The Section 179 election allows a taxpayer to deduct the entire cost of an asset (up to certain dollar thresholds) in place of depreciating the asset over its useful life. Since it is an alternative to depreciation in terms of when the depreciation costs are recognized (not the amount recognized), there is no difference in the amount that would be deductible depreciation expense over the life of the asset.
← Didn't Know|Knew It →
Gold Corp. purchased all the assets of a sole proprietorship, including the following intangible assets:
- Goodwill: $50,000
- Covenant not to compete: 13,000
For tax purposes, what amount of these purchased intangible assets should Gold amortize over the specific statutory cost recovery periods?
Gold Corp. purchased all the assets of a sole proprietorship, including the following intangible assets:
- Goodwill: $50,000
- Covenant not to compete: 13,000
For tax purposes, what amount of these purchased intangible assets should Gold amortize over the specific statutory cost recovery periods?
Tap to reveal answer
All intangible assets (e.g., goodwill, licenses, franchises, trademarks) may be amortized on the straight-line basis over 15 years. This treatment differs from US GAAP, where indefinite-lived assets are not amortized, and definite-lived assets are amortized over their useful lives (which may vary between intangible assets).
All intangible assets (e.g., goodwill, licenses, franchises, trademarks) may be amortized on the straight-line basis over 15 years. This treatment differs from US GAAP, where indefinite-lived assets are not amortized, and definite-lived assets are amortized over their useful lives (which may vary between intangible assets).
← Didn't Know|Knew It →
Under the MACRS method of depreciation for property placed in service after 1986:
Under the MACRS method of depreciation for property placed in service after 1986:
Tap to reveal answer
Under the MACRS method for property places in service after 1986, salvage value is ignored for purposes of computing the deduction.
Under the MACRS method for property places in service after 1986, salvage value is ignored for purposes of computing the deduction.
← Didn't Know|Knew It →
Of the following conditions, which must be satisfied for a taxpayer to expense in the year of purchase under IRC 179, the cost of new or used tangible depreciable personal property? A) The property must be purchased for use in the taxpayer’s active trade or business B) The property must be purchased from an unrelated party.
Of the following conditions, which must be satisfied for a taxpayer to expense in the year of purchase under IRC 179, the cost of new or used tangible depreciable personal property? A) The property must be purchased for use in the taxpayer’s active trade or business B) The property must be purchased from an unrelated party.
Tap to reveal answer
To qualify for IRC 179, the property must be tangible personal property acquired by purchase from an unrelated party for use in the active conduct of a trade or business
To qualify for IRC 179, the property must be tangible personal property acquired by purchase from an unrelated party for use in the active conduct of a trade or business
← Didn't Know|Knew It →
Per IRS tax or MACRS depreciation, is never used for calculation purposes.
Per IRS tax or MACRS depreciation, is never used for calculation purposes.
Tap to reveal answer
Under MACRS depreciation, salvage value is never used. Straight-line may be used, and any sort of basis would be relevant.
Under MACRS depreciation, salvage value is never used. Straight-line may be used, and any sort of basis would be relevant.
← Didn't Know|Knew It →
A taxpayer purchased a forklift for use in the taxpayer's business for $20,000 on January 1 of the current year. The taxpayer sold the forklift for $22,000 on June 1 of the current year. What is the taxpayer's Section 1231 gain as a result of the sale?
A taxpayer purchased a forklift for use in the taxpayer's business for $20,000 on January 1 of the current year. The taxpayer sold the forklift for $22,000 on June 1 of the current year. What is the taxpayer's Section 1231 gain as a result of the sale?
Tap to reveal answer
To qualify for Section 1231 gains, the asset must be held for more than 12 months. Since the asset was purchased and sold in the same year, it is not eligible.
To qualify for Section 1231 gains, the asset must be held for more than 12 months. Since the asset was purchased and sold in the same year, it is not eligible.
← Didn't Know|Knew It →
A taxpayer wants to deduct the cost of a seven-year asset placed in service this year. The cost qualifies for the Section 179 election to expense assets. Which of the following statements is most accurate regarding the immediate expensing of this asset versus the depreciation of this asset over seven years?
A taxpayer wants to deduct the cost of a seven-year asset placed in service this year. The cost qualifies for the Section 179 election to expense assets. Which of the following statements is most accurate regarding the immediate expensing of this asset versus the depreciation of this asset over seven years?
Tap to reveal answer
The Section 179 election allows a taxpayer to deduct the entire cost of an asset (up to certain dollar thresholds) in place of depreciating the asset over its useful life. Since it is an alternative to depreciation in terms of when the depreciation costs are recognized (not the amount recognized), there is no difference in the amount that would be deductible depreciation expense over the life of the asset.
The Section 179 election allows a taxpayer to deduct the entire cost of an asset (up to certain dollar thresholds) in place of depreciating the asset over its useful life. Since it is an alternative to depreciation in terms of when the depreciation costs are recognized (not the amount recognized), there is no difference in the amount that would be deductible depreciation expense over the life of the asset.
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