TestdbankdIncomedTax
CHAPTER 8: DEPRECIATION, COST RECOVERY, AMORTIZATION, AND DEPLETION
d d d d d d d
1. Propertydwhichdisdclassifieddasdpersonaltydmaydbeddepreciated.
a. True
b. False
ANSWER: True
2. Thedbasisdofdcostdrecoverydpropertydmustdbedreduceddbydatdleastdthedcostdrecoverydallowable.
a. True
b. False
ANSWER: True
RATIONALE:d Thedbasisdofdcostdrecoverydpropertydmustdbedreduceddbydthedcostdrecoverydalloweddbutdnotdl
essdthandthedcostdrecoverydallowable.
3. Antiquesdmaydbedeligibledfordcostdrecoverydifdtheydareduseddindadtradedordbusiness.
a. True
b. False
ANSWER: False
4. Thedkeyddatedfordcalculatingdcostdrecoverydisdtheddatedthedassetdisdplaceddindservice.
a. True
b. False
ANSWER: True
RATIONALE:d Thedkeyddatedfordcalculatingdcostdrecoverydisdtheddatedthedassetdisdplaceddindservice,dnotdthedpurc
haseddate.
5. Landdimprovementsdaredgenerallydnotdeligibledfordcostdrecovery.
a. True
b. False
ANSWER: False
RATIONALE:d Landdimprovementsdared15-yeardclassdproperty.
, 6. Thedcostdrecoverydbasisdfordpropertydconverteddfromdpersonaldusedtodbusinessdusedmaydbedthedfairdmarketd
valuedofdthedpropertydatdthedtimedofdthedconversion.
a. True
b. False
ANSWER: True
RATIONALE:d Thisdwoulddoccurdfordthedlossdbasisdifdthedfairdmarketdvaluedisdlessdthandthedadjusteddbasisdofd
thedproperty.
7. ThedmaximumdcostdrecoverydmethoddfordalldpersonaldpropertydunderdMACRSdisd150%ddecliningdbalance.
a. True
b. False
ANSWER: False
RATIONALE:d MACRSdusesdbothd200%dandd150%ddecliningdbalanceddependingdondthedclassdofdthedproperty
.
8. Thedcostdrecoverydperioddford3-yeardclassdpropertydisd4dyears.
a. True
b. False
ANSWER: True
9. Alldpersonaldpropertydplaceddindservicedind2013dandduseddindadtradedordbusinessdqualifiesdfordadditionald
first-yearddepreciation.
a. True
b. False
ANSWER: False
RATIONALE:d Onlydnewdpropertydplaceddindservicedind2013dqualifiesdfordadditionaldfirst-yearddepreciation.
10. Ifdmoredthand40%dofdthedvaluedofdproperty,dotherdthandrealdproperty,disdplaceddindservicedduringdthedlastd
quarter,dalldofdthedpropertydplaceddindservicedindthedseconddquarterdwilldbedallowedd7.5dmonthsdofdcostd
recovery.
a. True
b. False
ANSWER: True
,11. UnderdMACRS,difdthedmid-
quarterdconventiondisdapplicable,dalldpropertydsolddisdtreateddasdbeingdsolddatdthedmid-
pointdofdthedquarterdindwhichditdisdplaceddindservice.
a. True
b. False
ANSWER: False
RATIONALE:d Alldpropertydsolddisdtreateddasdbeingdsolddatdthedmid-pointdofdthedquarterdindwhichditdisdsold.
12. ThedfactordforddeterminingdthedcostdrecoverydfordeligibledrealdestatedunderdMACRS,dindthedyeardofd
disposition,disdtakendfromdthedmonthdofdtheddisposition.
a. True
b. False
ANSWER: False
RATIONALE:d Thedfactordisdtakendfromdthedmonthdthedrealdestatedisdplaceddindservice.
13. Residentialdrentaldrealdestatedincludesdpropertydwhered80%dordmoredofdthednetdrentaldrevenuesdaredfromd
nontransientddwellingdunits.
a. True
b. False
ANSWER: False
RATIONALE:d Thedtestdisd80%dordmoredofdgrossdrentaldrevenues.
14. Moteldbuildingsdhavedadcostdrecoverydperioddofd27.5dyears.
a. True
b. False
ANSWER: False
RATIONALE:d Moteldbuildingsdaredclassifieddasdnonresidentialdrealdestatedwithdadrecoverydperioddofd39dyea
rs.
15. Taxpayersdmaydelectdtodusedthedstraight-linedmethoddunderdMACRSdfordpersonalty.
a. True
b. False
ANSWER: True
, 16. UnderdthedMACRSdstraight-linedelectiondfordpersonalty,donlydthedhalf-yeardconventiondisdapplicable.
a. True
b. False
ANSWER: False
RATIONALE:d Thedmid-quarterdconventiondisdapplicabledunderdthedMACRSdstraight-
linedelectiondfordpersonalty.
17. Thedcostdrecoverydmethoddfordnewdfarmdequipmentdplaceddindservicedduringd2014disd200%ddecliningd
balance.
a. True
b. False
ANSWER: False
RATIONALE:d Thedcostdrecoverydmethoddisd150%ddecliningdbalance.
18. Indadfarmingdbusiness,dMACRSdstraight-linedcostdrecoverydisdrequireddfordalldfruitdbearingdtrees.
a. True
b. False
ANSWER: True
19. Indadfarmingdbusiness,difdtheduniformdcapitalizationdrulesdarednotdused,dcostdisdrecovereddusingdthedADSd
straight-linedmethod.
a. True
b. False
ANSWER: True
20. Whendlessordowneddleaseholddimprovementsdaredabandoneddbecausedofdthedterminationdofdthedlease,dad
lossdcandbedtakendfordthedunrecovereddbasis.
a. True
b. False
ANSWER: True
21. Ind2013,dthedcostsdofdqualifieddleaseholddimprovementsdqualifydfordadditionaldfirst-yearddepreciation.
a. True
b. False
CHAPTER 8: DEPRECIATION, COST RECOVERY, AMORTIZATION, AND DEPLETION
d d d d d d d
1. Propertydwhichdisdclassifieddasdpersonaltydmaydbeddepreciated.
a. True
b. False
ANSWER: True
2. Thedbasisdofdcostdrecoverydpropertydmustdbedreduceddbydatdleastdthedcostdrecoverydallowable.
a. True
b. False
ANSWER: True
RATIONALE:d Thedbasisdofdcostdrecoverydpropertydmustdbedreduceddbydthedcostdrecoverydalloweddbutdnotdl
essdthandthedcostdrecoverydallowable.
3. Antiquesdmaydbedeligibledfordcostdrecoverydifdtheydareduseddindadtradedordbusiness.
a. True
b. False
ANSWER: False
4. Thedkeyddatedfordcalculatingdcostdrecoverydisdtheddatedthedassetdisdplaceddindservice.
a. True
b. False
ANSWER: True
RATIONALE:d Thedkeyddatedfordcalculatingdcostdrecoverydisdtheddatedthedassetdisdplaceddindservice,dnotdthedpurc
haseddate.
5. Landdimprovementsdaredgenerallydnotdeligibledfordcostdrecovery.
a. True
b. False
ANSWER: False
RATIONALE:d Landdimprovementsdared15-yeardclassdproperty.
, 6. Thedcostdrecoverydbasisdfordpropertydconverteddfromdpersonaldusedtodbusinessdusedmaydbedthedfairdmarketd
valuedofdthedpropertydatdthedtimedofdthedconversion.
a. True
b. False
ANSWER: True
RATIONALE:d Thisdwoulddoccurdfordthedlossdbasisdifdthedfairdmarketdvaluedisdlessdthandthedadjusteddbasisdofd
thedproperty.
7. ThedmaximumdcostdrecoverydmethoddfordalldpersonaldpropertydunderdMACRSdisd150%ddecliningdbalance.
a. True
b. False
ANSWER: False
RATIONALE:d MACRSdusesdbothd200%dandd150%ddecliningdbalanceddependingdondthedclassdofdthedproperty
.
8. Thedcostdrecoverydperioddford3-yeardclassdpropertydisd4dyears.
a. True
b. False
ANSWER: True
9. Alldpersonaldpropertydplaceddindservicedind2013dandduseddindadtradedordbusinessdqualifiesdfordadditionald
first-yearddepreciation.
a. True
b. False
ANSWER: False
RATIONALE:d Onlydnewdpropertydplaceddindservicedind2013dqualifiesdfordadditionaldfirst-yearddepreciation.
10. Ifdmoredthand40%dofdthedvaluedofdproperty,dotherdthandrealdproperty,disdplaceddindservicedduringdthedlastd
quarter,dalldofdthedpropertydplaceddindservicedindthedseconddquarterdwilldbedallowedd7.5dmonthsdofdcostd
recovery.
a. True
b. False
ANSWER: True
,11. UnderdMACRS,difdthedmid-
quarterdconventiondisdapplicable,dalldpropertydsolddisdtreateddasdbeingdsolddatdthedmid-
pointdofdthedquarterdindwhichditdisdplaceddindservice.
a. True
b. False
ANSWER: False
RATIONALE:d Alldpropertydsolddisdtreateddasdbeingdsolddatdthedmid-pointdofdthedquarterdindwhichditdisdsold.
12. ThedfactordforddeterminingdthedcostdrecoverydfordeligibledrealdestatedunderdMACRS,dindthedyeardofd
disposition,disdtakendfromdthedmonthdofdtheddisposition.
a. True
b. False
ANSWER: False
RATIONALE:d Thedfactordisdtakendfromdthedmonthdthedrealdestatedisdplaceddindservice.
13. Residentialdrentaldrealdestatedincludesdpropertydwhered80%dordmoredofdthednetdrentaldrevenuesdaredfromd
nontransientddwellingdunits.
a. True
b. False
ANSWER: False
RATIONALE:d Thedtestdisd80%dordmoredofdgrossdrentaldrevenues.
14. Moteldbuildingsdhavedadcostdrecoverydperioddofd27.5dyears.
a. True
b. False
ANSWER: False
RATIONALE:d Moteldbuildingsdaredclassifieddasdnonresidentialdrealdestatedwithdadrecoverydperioddofd39dyea
rs.
15. Taxpayersdmaydelectdtodusedthedstraight-linedmethoddunderdMACRSdfordpersonalty.
a. True
b. False
ANSWER: True
, 16. UnderdthedMACRSdstraight-linedelectiondfordpersonalty,donlydthedhalf-yeardconventiondisdapplicable.
a. True
b. False
ANSWER: False
RATIONALE:d Thedmid-quarterdconventiondisdapplicabledunderdthedMACRSdstraight-
linedelectiondfordpersonalty.
17. Thedcostdrecoverydmethoddfordnewdfarmdequipmentdplaceddindservicedduringd2014disd200%ddecliningd
balance.
a. True
b. False
ANSWER: False
RATIONALE:d Thedcostdrecoverydmethoddisd150%ddecliningdbalance.
18. Indadfarmingdbusiness,dMACRSdstraight-linedcostdrecoverydisdrequireddfordalldfruitdbearingdtrees.
a. True
b. False
ANSWER: True
19. Indadfarmingdbusiness,difdtheduniformdcapitalizationdrulesdarednotdused,dcostdisdrecovereddusingdthedADSd
straight-linedmethod.
a. True
b. False
ANSWER: True
20. Whendlessordowneddleaseholddimprovementsdaredabandoneddbecausedofdthedterminationdofdthedlease,dad
lossdcandbedtakendfordthedunrecovereddbasis.
a. True
b. False
ANSWER: True
21. Ind2013,dthedcostsdofdqualifieddleaseholddimprovementsdqualifydfordadditionaldfirst-yearddepreciation.
a. True
b. False
