SOUTH WESTERN FEDERAL TAXATION
COMPREHENSIVE EXAM 2026 QUESTIONS
WITH SOLUTIONS GRADED A+
◉ Additional first-year depreciation. Answer: See fifty percent
additional first-year depreciation and one hundred percent additional
first-year depreciation.
◉ Alternative depreciation system (ADS). Answer: A cost recovery
system that produces a smaller deduction than would be calculated under
ACRS or MACRS. The alternative system must be used in certain
instances and can be elected in other instances. § 168(g).
◉ Amortization. Answer: The tax deduction for the cost or other basis of
an intangible asset over the asset's estimated useful life. Examples of
amortizable intangibles include patents, copyrights, and leasehold
interests. Most purchased intangible assests (e.g., goodwill) can be
amortized for income tax purposes over a 15-year period.
◉ Cost depletion. Answer: Depletion that is calculated based on the
adjusted basis of the asset. The adjusted basis is divided by the expected
recoverable units to determine the depletion per unit. The depletion per
, unit is multiplied by the units sold during the tax year to calculate cost
depletion.
◉ Cost recovery. Answer: The portion of the cost of an asset written off
under ACRS (or MACRS), which replaced the depreciation system as a
method for writing off the cost of an asset for most assets placed in
service after 1980 (after 1986 for MACRS). § 168.
◉ Depletion. Answer: The process by which the cost or other basis of a
natural resource (e.g., an oil or gas interest) is recovered upon extraction
and sale of the resource. The two ways to determine the depletion
allowance are the cost and percentage (or statutory) methods. Under cost
depletion, each unit of production sold is assigned a portion of the cost
or other basis of the interest. This is determined by dividing the cost or
other basis by the total units expected to be recovered. Under percentage
(or statutory) depletion, the tax law provides a special percentage factor
for different types of minerals and other natural resources. This
percentage is multiplied by the gross income from the interest to arrive
at the depletion allowance. §§ 613 and 613A.
◉ Depreciation. Answer: The deduction for the cost or other basis of a
tangible asset over the asset's estimated useful life.
◉ Half-year convention. Answer: A cost recovery convention that
assumes that all property is placed in service at mid-year and thus
provides for a half-year's cost recovery for that year.
COMPREHENSIVE EXAM 2026 QUESTIONS
WITH SOLUTIONS GRADED A+
◉ Additional first-year depreciation. Answer: See fifty percent
additional first-year depreciation and one hundred percent additional
first-year depreciation.
◉ Alternative depreciation system (ADS). Answer: A cost recovery
system that produces a smaller deduction than would be calculated under
ACRS or MACRS. The alternative system must be used in certain
instances and can be elected in other instances. § 168(g).
◉ Amortization. Answer: The tax deduction for the cost or other basis of
an intangible asset over the asset's estimated useful life. Examples of
amortizable intangibles include patents, copyrights, and leasehold
interests. Most purchased intangible assests (e.g., goodwill) can be
amortized for income tax purposes over a 15-year period.
◉ Cost depletion. Answer: Depletion that is calculated based on the
adjusted basis of the asset. The adjusted basis is divided by the expected
recoverable units to determine the depletion per unit. The depletion per
, unit is multiplied by the units sold during the tax year to calculate cost
depletion.
◉ Cost recovery. Answer: The portion of the cost of an asset written off
under ACRS (or MACRS), which replaced the depreciation system as a
method for writing off the cost of an asset for most assets placed in
service after 1980 (after 1986 for MACRS). § 168.
◉ Depletion. Answer: The process by which the cost or other basis of a
natural resource (e.g., an oil or gas interest) is recovered upon extraction
and sale of the resource. The two ways to determine the depletion
allowance are the cost and percentage (or statutory) methods. Under cost
depletion, each unit of production sold is assigned a portion of the cost
or other basis of the interest. This is determined by dividing the cost or
other basis by the total units expected to be recovered. Under percentage
(or statutory) depletion, the tax law provides a special percentage factor
for different types of minerals and other natural resources. This
percentage is multiplied by the gross income from the interest to arrive
at the depletion allowance. §§ 613 and 613A.
◉ Depreciation. Answer: The deduction for the cost or other basis of a
tangible asset over the asset's estimated useful life.
◉ Half-year convention. Answer: A cost recovery convention that
assumes that all property is placed in service at mid-year and thus
provides for a half-year's cost recovery for that year.
