©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
Actg 470 Final Exam Questions With Correct
Answers 100% Verified.
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
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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
-amount is recorded as a gain by the purchaser
Split Basis Rule for property converted from personal to business use - Answer✔
rules for inherited property - Answer✔
Standard Mileage Rate - Answer✔26 cents per mile
depreciable basis - Answer✔asset's original basis for depreciation less any amounts deducted
under Section 179
MACRS Recovery Period - Answer✔each asset must be placed in a MACRS class according to its
class life
-most personal property is in a 3, 5, or 7 year class
-most land improvements and specialized property are in a 10, 15, or 20 year class
-real estate is in a 27.5, 31.5, or 39 year class
property disposition procedure - Answer✔Amount realized from disposition
LESS adjusted basis of property
EQUALS realized gain (loss)
LESS amount deferred [disallowed]
EUALS Recognized gain (loss)
Character of Gain/Loss - Answer✔When a taxpayer disposes of prop, gain or loss characterized
as either capital assets, ordinary, section 1231, or personal use
*Capital assets include prop (real/personal) held by the taxpayer, like:
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Actg 470 Final Exam Questions With Correct
Answers 100% Verified.
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
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
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
-amount is recorded as a gain by the purchaser
Split Basis Rule for property converted from personal to business use - Answer✔
rules for inherited property - Answer✔
Standard Mileage Rate - Answer✔26 cents per mile
depreciable basis - Answer✔asset's original basis for depreciation less any amounts deducted
under Section 179
MACRS Recovery Period - Answer✔each asset must be placed in a MACRS class according to its
class life
-most personal property is in a 3, 5, or 7 year class
-most land improvements and specialized property are in a 10, 15, or 20 year class
-real estate is in a 27.5, 31.5, or 39 year class
property disposition procedure - Answer✔Amount realized from disposition
LESS adjusted basis of property
EQUALS realized gain (loss)
LESS amount deferred [disallowed]
EUALS Recognized gain (loss)
Character of Gain/Loss - Answer✔When a taxpayer disposes of prop, gain or loss characterized
as either capital assets, ordinary, section 1231, or personal use
*Capital assets include prop (real/personal) held by the taxpayer, like:
2|Page
