Question 2. 2. (TCO 10) In general, an expenditure must be capitalized for tax p

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Question 2.2. (TCO 10) In general, an expenditure must be capitalized for tax purposes if: (Points : 4)        it creates or enhances an asset with a useful life substantially beyond the current taxable year.
       it results in a significant long-term benefit to the firm.
       the taxpayer’s accountant says it should be.
       A and B Question 3.3. (TCO 10) On December 15, a calendar year taxpayer placed in service $100,000 of five-year recovery property. If this is the only property placed in service during the year, it will be subject to: (Points : 4)        the mid-quarter convention.
       the mid-month convention.
       the half-year convention.
       no convention. Question 4.4. (TCO 10) Bent Pretzel Inc. sold a building that it held for investment for several years. The FMV of the building is $80,000 and the adjusted basis of the property is $55,000.

What is Bent Pretzel's recognized gain? (Points : 4)        $55,000
       $25,000
       $80,000
       $0 Question 5.5. (TCO 10) In a qualifying like-kind exchange, Van Halen exchanges musical equipment with an adjusted basis of $200,000 (fair market value of $150,000) for other musical equipment.

What is his basis in the new equipment? (Points : 4)        $250,000
       $200,000
       $300,000
       $230,000 Question 2.2. (TCO 10) In general, an expenditure must be capitalized for tax purposes if: (Points : 4)        it creates or enhances an asset with a useful life substantially beyond the current taxable year.
       it results in a significant long-term benefit to the firm.
       the taxpayer’s accountant says it should be.
       A and B

Explanation / Answer

2.2 The correct answer is A and B An expenditure is capitalised if it provides the benefits for future. 4.4 The recognised gain will be 80000-55000 = $ 25000 The correct answer is $ 25000 5.5 The basis for equipment will be 200000 The correct answer is B. $ 200000

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