TestsbanksIncomesTax
CHAPTER 8: DEPRECIATION, COST RECOVERY, AMORTIZATION, AND DEPLETION
s s s s s s s
1. Propertyswhichsissclassifiedsasspersonaltysmaysbesdepreciated.
a. True
b. False
ANSWER: True
2. Thesbasissofscostsrecoveryspropertysmustsbesreducedsbysatsleaststhescostsrecoverysallowable.
a. True
b. False
ANSWER: True
RATIONALE:s Thesbasissofscostsrecoveryspropertysmustsbesreducedsbysthescostsrecoverysallowedsbutsnotslessst
hansthescostsrecoverysallowable.
3. Antiquessmaysbeseligiblesforscostsrecoverysifstheysaresusedsinsastradesorsbusiness.
a. True
b. False
ANSWER: False
4. Theskeysdatesforscalculatingscostsrecoverysissthesdatesthesassetsissplacedsinsservice.
a. True
b. False
ANSWER: True
RATIONALE:s Theskeysdatesforscalculatingscostsrecoverysissthesdatesthesassetsissplacedsinsservice,snotsthespurc
hasesdate.
5. Landsimprovementssaresgenerallysnotseligiblesforscostsrecovery.
a. True
b. False
ANSWER: False
RATIONALE:s Landsimprovementssares15-yearsclasssproperty.
, 6. Thescostsrecoverysbasissforspropertysconvertedsfromspersonalsusestosbusinesssusesmaysbesthesfairsmarketsva
luesofsthespropertysatsthestimesofsthesconversion.
a. True
b. False
ANSWER: True
RATIONALE:s Thisswouldsoccursforstheslosssbasissifsthesfairsmarketsvaluesisslesssthansthesadjustedsbasissofsthesp
roperty.
7. ThesmaximumscostsrecoverysmethodsforsallspersonalspropertysundersMACRSsiss150%sdecliningsbalance.
a. True
b. False
ANSWER: False
RATIONALE:s MACRSsusessboths200%sands150%sdecliningsbalancesdependingsonsthesclasssofsthesproperty.
8. Thescostsrecoverysperiodsfors3-yearsclassspropertysiss4syears.
a. True
b. False
ANSWER: True
9. Allspersonalspropertysplacedsinsservicesins2013sandsusedsinsastradesorsbusinesssqualifiessforsadditionalsfir
st-yearsdepreciation.
a. True
b. False
ANSWER: False
RATIONALE:s Onlysnewspropertysplacedsinsservicesins2013squalifiessforsadditionalsfirst-yearsdepreciation.
10. Ifsmoresthans40%sofsthesvaluesofsproperty,sothersthansrealsproperty,sissplacedsinsservicesduringstheslastsqu
arter,sallsofsthespropertysplacedsinsservicesinsthessecondsquarterswillsbesalloweds7.5smonthssofscostsrecov
ery.
a. True
b. False
ANSWER: True
,11. UndersMACRS,sifsthesmid-
quartersconventionsissapplicable,sallspropertyssoldsisstreatedsassbeingssoldsatsthesmid-
pointsofsthesquartersinswhichsitsissplacedsinsservice.
a. True
b. False
ANSWER: False
RATIONALE:s Allspropertyssoldsisstreatedsassbeingssoldsatsthesmid-pointsofsthesquartersinswhichsitsisssold.
12. ThesfactorsforsdeterminingsthescostsrecoverysforseligiblesrealsestatesundersMACRS,sinsthesyearsofsdi
sposition,sisstakensfromsthesmonthsofsthesdisposition.
a. True
b. False
ANSWER: False
RATIONALE:s Thesfactorsisstakensfromsthesmonthsthesrealsestatesissplacedsinsservice.
13. Residentialsrentalsrealsestatesincludesspropertyswheres80%sorsmoresofsthesnetsrentalsrevenuessaresfromsno
ntransientsdwellingsunits.
a. True
b. False
ANSWER: False
RATIONALE:s Thestestsiss80%sorsmoresofsgrosssrentalsrevenues.
14. Motelsbuildingsshavesascostsrecoverysperiodsofs27.5syears.
a. True
b. False
ANSWER: False
RATIONALE:s Motelsbuildingssaresclassifiedsassnonresidentialsrealsestateswithsasrecoverysperiodsofs39syears.
15. Taxpayerssmayselectstosusesthesstraight-linesmethodsundersMACRSsforspersonalty.
a. True
b. False
ANSWER: True
, 16. UndersthesMACRSsstraight-lineselectionsforspersonalty,sonlystheshalf-yearsconventionsissapplicable.
a. True
b. False
ANSWER: False
RATIONALE:s Thesmid-quartersconventionsissapplicablesundersthesMACRSsstraight-
lineselectionsforspersonalty.
17. Thescostsrecoverysmethodsforsnewsfarmsequipmentsplacedsinsservicesdurings2014siss200%sdecliningsb
alance.
a. True
b. False
ANSWER: False
RATIONALE:s Thescostsrecoverysmethodsiss150%sdecliningsbalance.
18. Insasfarmingsbusiness,sMACRSsstraight-linescostsrecoverysissrequiredsforsallsfruitsbearingstrees.
a. True
b. False
ANSWER: True
19. Insasfarmingsbusiness,sifsthesuniformscapitalizationsrulessaresnotsused,scostsissrecoveredsusingsthesADSsstr
aight-linesmethod.
a. True
b. False
ANSWER: True
20. Whenslessorsownedsleaseholdsimprovementssaresabandonedsbecausesofsthesterminationsofstheslease,saslo
ssscansbestakensforsthesunrecoveredsbasis.
a. True
b. False
ANSWER: True
21. Ins2013,sthescostssofsqualifiedsleaseholdsimprovementssqualifysforsadditionalsfirst-yearsdepreciation.
a. True
b. False
CHAPTER 8: DEPRECIATION, COST RECOVERY, AMORTIZATION, AND DEPLETION
s s s s s s s
1. Propertyswhichsissclassifiedsasspersonaltysmaysbesdepreciated.
a. True
b. False
ANSWER: True
2. Thesbasissofscostsrecoveryspropertysmustsbesreducedsbysatsleaststhescostsrecoverysallowable.
a. True
b. False
ANSWER: True
RATIONALE:s Thesbasissofscostsrecoveryspropertysmustsbesreducedsbysthescostsrecoverysallowedsbutsnotslessst
hansthescostsrecoverysallowable.
3. Antiquessmaysbeseligiblesforscostsrecoverysifstheysaresusedsinsastradesorsbusiness.
a. True
b. False
ANSWER: False
4. Theskeysdatesforscalculatingscostsrecoverysissthesdatesthesassetsissplacedsinsservice.
a. True
b. False
ANSWER: True
RATIONALE:s Theskeysdatesforscalculatingscostsrecoverysissthesdatesthesassetsissplacedsinsservice,snotsthespurc
hasesdate.
5. Landsimprovementssaresgenerallysnotseligiblesforscostsrecovery.
a. True
b. False
ANSWER: False
RATIONALE:s Landsimprovementssares15-yearsclasssproperty.
, 6. Thescostsrecoverysbasissforspropertysconvertedsfromspersonalsusestosbusinesssusesmaysbesthesfairsmarketsva
luesofsthespropertysatsthestimesofsthesconversion.
a. True
b. False
ANSWER: True
RATIONALE:s Thisswouldsoccursforstheslosssbasissifsthesfairsmarketsvaluesisslesssthansthesadjustedsbasissofsthesp
roperty.
7. ThesmaximumscostsrecoverysmethodsforsallspersonalspropertysundersMACRSsiss150%sdecliningsbalance.
a. True
b. False
ANSWER: False
RATIONALE:s MACRSsusessboths200%sands150%sdecliningsbalancesdependingsonsthesclasssofsthesproperty.
8. Thescostsrecoverysperiodsfors3-yearsclassspropertysiss4syears.
a. True
b. False
ANSWER: True
9. Allspersonalspropertysplacedsinsservicesins2013sandsusedsinsastradesorsbusinesssqualifiessforsadditionalsfir
st-yearsdepreciation.
a. True
b. False
ANSWER: False
RATIONALE:s Onlysnewspropertysplacedsinsservicesins2013squalifiessforsadditionalsfirst-yearsdepreciation.
10. Ifsmoresthans40%sofsthesvaluesofsproperty,sothersthansrealsproperty,sissplacedsinsservicesduringstheslastsqu
arter,sallsofsthespropertysplacedsinsservicesinsthessecondsquarterswillsbesalloweds7.5smonthssofscostsrecov
ery.
a. True
b. False
ANSWER: True
,11. UndersMACRS,sifsthesmid-
quartersconventionsissapplicable,sallspropertyssoldsisstreatedsassbeingssoldsatsthesmid-
pointsofsthesquartersinswhichsitsissplacedsinsservice.
a. True
b. False
ANSWER: False
RATIONALE:s Allspropertyssoldsisstreatedsassbeingssoldsatsthesmid-pointsofsthesquartersinswhichsitsisssold.
12. ThesfactorsforsdeterminingsthescostsrecoverysforseligiblesrealsestatesundersMACRS,sinsthesyearsofsdi
sposition,sisstakensfromsthesmonthsofsthesdisposition.
a. True
b. False
ANSWER: False
RATIONALE:s Thesfactorsisstakensfromsthesmonthsthesrealsestatesissplacedsinsservice.
13. Residentialsrentalsrealsestatesincludesspropertyswheres80%sorsmoresofsthesnetsrentalsrevenuessaresfromsno
ntransientsdwellingsunits.
a. True
b. False
ANSWER: False
RATIONALE:s Thestestsiss80%sorsmoresofsgrosssrentalsrevenues.
14. Motelsbuildingsshavesascostsrecoverysperiodsofs27.5syears.
a. True
b. False
ANSWER: False
RATIONALE:s Motelsbuildingssaresclassifiedsassnonresidentialsrealsestateswithsasrecoverysperiodsofs39syears.
15. Taxpayerssmayselectstosusesthesstraight-linesmethodsundersMACRSsforspersonalty.
a. True
b. False
ANSWER: True
, 16. UndersthesMACRSsstraight-lineselectionsforspersonalty,sonlystheshalf-yearsconventionsissapplicable.
a. True
b. False
ANSWER: False
RATIONALE:s Thesmid-quartersconventionsissapplicablesundersthesMACRSsstraight-
lineselectionsforspersonalty.
17. Thescostsrecoverysmethodsforsnewsfarmsequipmentsplacedsinsservicesdurings2014siss200%sdecliningsb
alance.
a. True
b. False
ANSWER: False
RATIONALE:s Thescostsrecoverysmethodsiss150%sdecliningsbalance.
18. Insasfarmingsbusiness,sMACRSsstraight-linescostsrecoverysissrequiredsforsallsfruitsbearingstrees.
a. True
b. False
ANSWER: True
19. Insasfarmingsbusiness,sifsthesuniformscapitalizationsrulessaresnotsused,scostsissrecoveredsusingsthesADSsstr
aight-linesmethod.
a. True
b. False
ANSWER: True
20. Whenslessorsownedsleaseholdsimprovementssaresabandonedsbecausesofsthesterminationsofstheslease,saslo
ssscansbestakensforsthesunrecoveredsbasis.
a. True
b. False
ANSWER: True
21. Ins2013,sthescostssofsqualifiedsleaseholdsimprovementssqualifysforsadditionalsfirst-yearsdepreciation.
a. True
b. False
