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TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.1)Like financial accounting, most acquired business property must be capitalized for tax purposes.
Answer:True False
2)Tax cost recovery methods include depreciation, amortization, and depletion.
Answer:True False
3)If a business mistakenly claims too little depreciation, the business must only reduce the asset's basis by the depreciation actually taken rather than the amount of the allowable depreciation.
Answer:True False
4)An asset's capitalized cost basis includes only the actual purchase price; whereas expenses to purchase, prepare the asset for use, and begin using the asset are immediately expensed.
Answer:True False
5)The basis for a personal use asset converted to business use is the lesser of the asset's cost basis or fair market value on the date of the transfer or conversion.
Answer:True False
6)Depreciation is currently computed under the Modified Accelerated Cost Recovery System
(MACRS).
Answer:True False
7)The 200 percent or double declining balance method is allowable for five- and seven-year property.
Answer:True False
8)Taxpayers may use historical data to determine the recovery period for tax depreciation.
Answer:True False
9)Taxpayers use the half-year convention for all assets.
Answer:True False
10)If a taxpayer places only one asset (a building) in service during the fourth quarter of the year, the mid-quarter convention must be used.
Answer:True False
11)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.
Answer:True False
12)If tangible personal property is depreciated using the half-year convention and is disposed of during the first quarter of a subsequent year, the taxpayer must use the mid-quarter convention for the year of disposition.
Answer:True False
1 Taxation of Business Entities 2018 Edition 9th Edition Spilker Test Bank Visit TestBankDeal.com to get complete for all chapters
13)If a machine (seven-year property) being depreciated using the half-year convention is disposed of during the seventh year, a taxpayer must multiply the appropriate depreciation percentage from the MACRS table percentage by 50 percent to calculate the depreciation expense properly.
Answer:True False
14)Real property is always depreciated using the straight-line method.
Answer:True False
15)The mid-month convention applies to real property in the year of acquisition and disposition.
Answer:True False
16)All taxpayers may use the §179 immediate expensing election on certain property.
Answer:True False
17)The §179 immediate expensing election phases out based upon a taxpayer's taxable income.
Answer:True False
18)The §179 immediate expensing election phases out based upon the amount of tangible personal property a taxpayer places in service during the year.
Answer:True False
19)Property expensed under the §179 immediate expensing election is not included in the 40 percent test to determine whether the mid-quarter convention must be used.
Answer:True False
20)In general, a taxpayer should select longer-lived property for the §179 immediate expensing election.
Answer:True False
21)Occasionally bonus depreciation is used as a stimulus tool by tax policy makers.
Answer:True False
22)Business assets that tend to be used for both business and personal purposes are referred to as listed property.
Answer:True False
23)If the business use percentage for listed property falls below 50 percent, the only adjustment is all future depreciation must be calculated under the straight-line method.
Answer:True False
24)Significant limits are placed on the depreciation of luxury automobiles.
Answer:True False
25)The alternative depreciation system requires both a slower method of recovery and longer recovery periods.
Answer:True False
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26)The method for tax amortization is always the straight-line method.
Answer:True False
27)All assets subject to amortization have the same recovery period.
Answer:True False
28)Goodwill and customer lists are examples of §197 amortizable assets.
Answer:True False
29)Taxpayers may always expense a portion of start-up costs and organizational expenditures.
Answer:True False
30)Businesses may immediately expense research and experimentation expenditures or they may elect to capitalize these costs and amortize them using the straight-line method over a period of not less than 60 months.
Answer:True False
31)The manner in which a business amortizes a patent or copyright is the same whether the business directly purchases the patent or copyright or whether it self-creates the intangible.
Answer:True False
32)Depletion is the method taxpayers use to recover their capital investment in natural resources.
Answer:True False
33)In general, major integrated oil and gas producers may take the greater of cost or percentage depletion.
Answer:True False
34)Cost depletion is available to all natural resource producers.
Answer:True False
35)Businesses deduct percentage depletion when they sell the natural resource and they deduct cost depletion in the year they produce or extract the natural resource.
Answer:True False
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
36)Tax cost recovery methods do NOT include:
A)Amortization.B)Capitalization.C)Depreciation.D)Depletion.E)All of the choices are tax cost recovery methods.
Answer:B
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37)Which of the following business assets is NOT depreciated?A)Patent B)Automobile C)Building D)Machinery E)All of the assets are depreciated.
Answer:A
38)An office desk is an example of:
A)Business property.B)Personal-use property.C)Personal property.D)Real property.E)Personal property and business property.
Answer:E
39)An example of an asset that is both personal-use and personal property is:
A)A storage building used by the CEO to store personal records.B)A company airplane used by the CEO for business travel.C)A computer used solely to monitor the CEO's investments and to complete her Form 1040.D)A computer used solely to email company employees regarding company activities.E)All of the assets are personal-use and personal property.
Answer:C
40)Which of the following is NOT usually included in an asset's tax basis?A)Shipping B)Sales tax C)Purchase price D)Installation costs E)All of the choices are included in an asset's tax basis.
Answer:E
41)Which of the following would be considered an improvement rather than a routine maintenance?A)Wiper blade replacementB)Oil change C)Engine overhaulD)Air filter change
Answer:C
42)Tax depreciation is currently calculated under what system?A)Modified accelerated cost recovery system B)Sum of the years digits C)Accelerated cost recovery system D)Straight line system E)None of the choices are correct.
Answer:A
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