1.Max purchases a new auto in 2017 at a cost of $56,000. He uses the car 80% for
ID: 2540844 • Letter: 1
Question
1.Max purchases a new auto in 2017 at a cost of $56,000. He uses the car 80% for business. Assuming a half-year convention, bonus depreciation but no immediate expensing, what is the depreciation deduction on the auto?
a.$28,000
b.$8,960
c.$33,600
d.$0
e.$8,928
2.
Section 197 intangibles:
a.Include goodwill, going-concern value, and information bases.
b.Are not amortized over the actual estimated useful life of the intangible asset.
c.Were defined in the Revenue Reconciliation Act of 1993.
d.Are amortized over a 15-year period.
e.All of these choices are true.
3.
If a loss from sale or exchange of property between related parties is disallowed and the property is subsequently sold to an unrelated party,
a.The disallowed loss may be used to offset gain on the subsequent sale.
b.The unrelated party may claim the loss previously disallowed.
c.The disallowed loss is lost forever.
d.The disallowed loss may be used if there is a further loss on the subsequent sale.
e.An amended return may be filed to claim the loss previously disallowed.
4.
During 2017, Travis purchases $13,000 of used manufacturing equipment (7-year property) for use in his business, his only asset purchase that year. Travis has taxable income from his business of $510,000. What is the maximum amount that Travis may deduct under the election to expense?
a.$13,000
b.$500,000
c.$25,000
d.$0
e.None of these choices are correct.
4.
What is the minimum number of years over which computers may be depreciated under MACRS?
a.5 years
b.7 years
c.10 years
d.3 years
e.15 years
5.
Which of the following is not true about capital assets?
a.Individual taxpayers may deduct net capital losses of up to $3,000 per year.
b.Real property used in a trade or business is not a capital asset.
c.Net long-term capital gains are granted preferential tax treatment.
d.Shares of stock held for investment are capital assets.
e.Capital losses may be carried back for 3 years to offset capital gains in those years.
6.
Sol purchased land as an investment on January 12, 2014 for $85,000. On January 31, 2017 Sol sold the land for $90,000 cash. What is the nature of the gain or loss?
a.Short-term capital gain
b.Short-term capital loss
c.Long-term capital gain
d.Long-term capital loss
e.None of these choices are correct.
6.
An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000. If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset?
a.$30,000
b.$20,000
c.$10,000
d.$5,000
e.None of these choices are correct
Explanation / Answer
Note: All given questions are separate & independent. So as per rule I am answering only first question.
(1).
Answer is option (b). $8960
Explanation;
Following information are given as per question;
Cost of Auto = $56000
Used for business purpose = 80%
As per rule, this is classified as 5 years property
Half-year convention rate for year 1 = 20%
So now let’s calculate depreciation deduction on Auto;
Cost of Auto used for business purpose;
($56000 * 0.80) = $44800
Thus depreciation deduction ($44800 * 0.20) = $8960
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