Actg 470 Final Exam With
Complete Solution
Which two tests must be met to claim a periodic recovery deduction on a
capital expenditure? - ANSWER expenditure must have business purpose
(incurred in trade, business, or investment activity) and have a definite useful
life.
what types of capital expenditures are not deductible over time? - ANSWER
personal-use assets (no business purpose), and those with indefinite lives
(land, securities) are not deductible until disposition.
recovery on personal use assets is limited to the amount realized from the
disposition - personal use losses are not deductible
which types of property may be expensed under Section 179, and what is the
current maximum limit on the deduction? - ANSWER tangible personal
property used in a trade or business. maximum annual expense election for
2021 is $1,050,000
limitations placed on maximum Section 179 expense - ANSWER - purchases
of qualifying investment property exceed $2,620,000, reduced by each dollar
exceeding it
-limited to the taxpayer's total trade or business income before considering
the expense deduction.
-cost of section 179 property exceeding taxpayer's income can be carried
forward to subsequent years *if taxpayer chooses not to expense, then
, amount of deduction is subtracted from basis of property*
tangible personal property subject to which convention - ANSWER generally
mid-year convention; property is considered to be purchased and disposed of
in the middle of the year, a half-year of depreciation is allowed in the year of
purchase and the year of disposition
OR mid-quarter convention: more than 40% of the personal property
purchases occur in the 4th quarter of the year, assets are grouped by the
quarter of purchase and depreciated from the middle of the quarter to the
end of the year
real property is subject to which convention - ANSWER mid-month
convention
real property - ANSWER land and anything attached to it
tangible personal property - ANSWER personal property that can be seen,
touched, and possessed. (furniture, equipment, supplies, etc)
Intangible Personal Property - ANSWER evidences of ownership of personal
property such as patents, copyrights, licenses, royalties, etc.
-recovered through a straight-line amortization of the cost of the asset over
its useful life *does not depreciate*
what is the Alternative Depreciation System (ADS)? - ANSWER used to
calculate the allowable depreciation for alternative minimum tax purposes.
The ADS generally uses straight-line depreciation over longer tax lives than
that for MACRS
bargain purchase* - ANSWER -purchase price less than the fair value of net
assets acquired
Complete Solution
Which two tests must be met to claim a periodic recovery deduction on a
capital expenditure? - ANSWER expenditure must have business purpose
(incurred in trade, business, or investment activity) and have a definite useful
life.
what types of capital expenditures are not deductible over time? - ANSWER
personal-use assets (no business purpose), and those with indefinite lives
(land, securities) are not deductible until disposition.
recovery on personal use assets is limited to the amount realized from the
disposition - personal use losses are not deductible
which types of property may be expensed under Section 179, and what is the
current maximum limit on the deduction? - ANSWER tangible personal
property used in a trade or business. maximum annual expense election for
2021 is $1,050,000
limitations placed on maximum Section 179 expense - ANSWER - purchases
of qualifying investment property exceed $2,620,000, reduced by each dollar
exceeding it
-limited to the taxpayer's total trade or business income before considering
the expense deduction.
-cost of section 179 property exceeding taxpayer's income can be carried
forward to subsequent years *if taxpayer chooses not to expense, then
, amount of deduction is subtracted from basis of property*
tangible personal property subject to which convention - ANSWER generally
mid-year convention; property is considered to be purchased and disposed of
in the middle of the year, a half-year of depreciation is allowed in the year of
purchase and the year of disposition
OR mid-quarter convention: more than 40% of the personal property
purchases occur in the 4th quarter of the year, assets are grouped by the
quarter of purchase and depreciated from the middle of the quarter to the
end of the year
real property is subject to which convention - ANSWER mid-month
convention
real property - ANSWER land and anything attached to it
tangible personal property - ANSWER personal property that can be seen,
touched, and possessed. (furniture, equipment, supplies, etc)
Intangible Personal Property - ANSWER evidences of ownership of personal
property such as patents, copyrights, licenses, royalties, etc.
-recovered through a straight-line amortization of the cost of the asset over
its useful life *does not depreciate*
what is the Alternative Depreciation System (ADS)? - ANSWER used to
calculate the allowable depreciation for alternative minimum tax purposes.
The ADS generally uses straight-line depreciation over longer tax lives than
that for MACRS
bargain purchase* - ANSWER -purchase price less than the fair value of net
assets acquired
