During the year, Far-Out Furniture, a manufacturer of dormitory furniture, purchased the following assets: 2/15/20X0 Machine $40,000 10/31/20X0 Equipment $50,000 12/9/20X0 Warehouse $110,000 In computing depreciation of these assets, which of the following conventions will be used by this calendar-year taxpayer? Half-year, mid-month Half-year, mid-quarter, mid-month Mid-quarter, mid-month Mid-quarter only

During the year, Far-Out Furniture, a manufacturer of dormitory furniture, purchased the following assets: 2/15/20X0 Machine $40,000 10/31/20X0 Equipment $50,000 12/9/20X0 Warehouse $110,000 In computing depreciation of these assets, which of the following conventions will be used by this calendar-year taxpayer? Half-year, mid-month Half-year, mid-quarter, mid-month Mid-quarter, mid-month Mid-quarter only

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter12: Alternative Minimum Tax

Section: Chapter Questions

Problem 21CE

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Which of the following statements with respect to the depreciation of property under MACRS is incorrect? Under the half-year convention, one-half year of depreciation is allowed in the year the property is placed in service. If a taxpayer elects to use the straight-line method of depreciation for property in the 5 -year class, all other 5 -year class property acquired during the year must also be depreciated using the straight-line method. In some cases, when a taxpayer places a significant amount of property in service during the last quarter of the year, real property must be depreciated using a mid-quarter convention. Real property acquired after 1986 must be depreciated using the straight-line method. The cost of property to which the MACRS rate is applied is not reduced for estimated salvage value.
In March 2019, Helen Carlon acquired used equipment for her business at a cost of 300,000. The equipment is five-year property for regular tax depreciation purposes. a. If Helen depreciates the equipment using the method that will produce the greatest deduction for 2019 for regular income tax purposes, what is the amount of the AMT adjustment? b. Draft a letter to Helen regarding the choice of depreciation methods. Helens address is 500 Monticello Avenue, Glendale, AZ 85306.
18. Ryland Company, a calendar year taxpayer, purchased commercial realty for $2 million and allocated $200,000 cost to the land and $1.8 million cost to the building. Ryland placed the real estate in service on May 21. a. Compute Ryland's MACRS depreciation with respect to the realty for the year of purchase. b. How would your answer change if Ryland placed the realty in service on September 2 instead of May 21? c. How would your answer to part (a) change if the building was a residential apartment complex instead of a commercial office?
An individual purchased a warehouse as an investment property two years ago. During the current year, he received rents of $8,000 and paid the following expenses: interest of $6,000, property taxes of $2,000, heat, light and power of $500, and maintenance of $300. The UCC of this Class 1 asset was $60,000 on January 1 of the current year. He cannot claim a rental loss in the current year. True or False
A permanent steel building used for the overhaul of dewatering systems (engines, pumps, and wellpoints) is placed in service on July 10 by a calendar-year taxpayer for $260,000. It is sold almost 5 years later on May 15. A) What is the MACRS-GDS property class? B) Determine the depreciation deduction during each of the years involved. C) Determine the unrecovered investment during each of the years involved.
A permanent steel building used for the overhaul of dewatering systems (engines, pumps, and wellpoints) is placed in service on July 10 by a calendar-year taxpayer for $220,000. It is sold almost 5 years later on May 15. a. What is the MACRS-GDS property class?b. Determine the depreciation deduction during each of the years involved.c. Determine the unrecovered investment during each of the years involved.
In Year 1, T, a calendar year taxpayer, decided to move her insurance business into another office building. She purchased a used building for $700,000 (excluding the land) on March 15. T also purchased new office furniture for the building. The furniture was acquired for $200,000 on May 1. Compute MACRS depreciation. Ignore first-year expensing and bonus depreciation. MACRS depreciation tables are located in the Appendix. Assuming that the furniture was purchased on October 20, please enter T's depreciation deduction for Building for the first year using the Formula method (rounded to the nearest cent)
Material handling equipment used in the manufacture of sugar is purchased and installed for $250,000. It is placed in service in the middle of the tax year and removed from service 5.5 years later. Determine the MACRSGDS depreciation deduction during each of the tax years involved assuming: a. What is the MACRS-GDS property class? b. The equipment is removed 1 day before the end of the tax year. c. The equipment is removed 1 day after the end of the tax year.
During April of the current year, Ronen purchased a warehouse that he used for business purposes. The basis was $1,615,000. Calculate the maximum depreciation deduction during the current year. (Use MACRS Table 5.) (Round final answer to the nearest whole number.) TABLE 5 Nonresidential Real Property Mid-Month Convention Straight Line—39 Years (for assets placed in service on or after May 13, 1993) Month Property Placed in Service Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Year 1 2.461% 2.247% 2.033% 1.819% 1.605% 1.391% 1.177% 0.963% 0.749% 0.535% 0.321% 0.107% Year 2–39 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 Year 40 0.107 0.321 0.535 0.749 0.963 1.177 1.391 1.605 1.819 2.033 2.247 2.461
On October 1, you purchased a residential home in which lo locale your professional office for $180,000. The appraisal is divided into $30,000 for the land and $150,000 for the building.(a) In your first year of ownership, how much can you deduct for depreciationfor tax purposes?(b) Suppose that you sold the property at $197,000 at the end of the fourth year of ownership. What is the book value of the property?
Padre, Inc., purchased a used piece of heavy equipment for $25,000. Delivery of the equipmentto Padre’s business site cost $750. Expenditures to recondition the equipment and prepare it foruse totaled $2,230. The maintenance for the first year Padre owned the equipment was $1,200.Determine the cost that is the basis for calculating annual depreciation on the equipment.
16. Erwin Company, a calendar year taxpayer, made only two purchases of depreciable personalty this year. The first purchase was five-year recovery property costing $312,800, and the second purchase was seven-year recovery property costing $574,000. Compute Erwin's first-year MACRS depreciation with respect to the personalty assuming that a. The first purchase occurred on February 2, and the second purchase occurred on June 18. b. The first purchase occurred on February 2, and the second purchase occurred on October 13.