【正文】 179 election. Tan did elect not to take additional firstyear depreciation. Determine the total deductions in calculating taxable ine related to the machines for 2020. a. $24,000. b. $25,716. c. $102,000. d. $132,858. e. None of the above. ANS: B The regular MACRS is calculated as follows: 10year property ($200,000 ? .10) $20,000 7year property ($40,000 ? .1429) 5,716 Total regular MACRS $25,716 PTS: 1 DIF: 1 REF: p. 85 to 88 | Table OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 5 min 7. James purchased a new business asset (threeyear property) on July 23, 2020, at a cost of $50,000. He did not elect to expense any of the asset under 167。 280F limit). The cost recovery in the first year using straightline would be $8,000 [($80,000 ? 10% = $8,000) (limited to $10,960。 179 amount before the business ine ceiling is applied. PTS: 1 DIF: 1 REF: p. 815 OBJ: 3 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min Depreciation, Cost Recovery, Amortization, and Depletion 89 used for the production of ine is not eligible for 167。 179 deduction can exceed $250,000 in 2020 if the taxpayer had a 167。 197 intangible Unchanged 38 39 Startup expenditures Unchanged 39 40 Depletion: cost versus percentage Unchanged 40 PROBLEMS 1 Cost recovery: MACRS personal property Unchanged 1 2 Cost recovery: MACRS real property Unchanged 2 3 Cost recovery: MACRS personal property and Modified 3 167。 179 expensing New 30 Listed property: 50% business use test Unchanged 30 31 Listed property: effect of statutory dollar amounts Unchanged 31 32 Listed property: statutory dollar amounts Unchanged 32 33 Listed property: statutory dollar amounts and Unchanged 33 midquarter convention 34 Listed property: cost recovery recapture Modified 34 35 Listed property: leasing and inclusion amount Unchanged 35 36 Listed property: substantiation Unchanged 36 37 Alternative depreciation system (ADS): AMT New adjustment 38 ADS: straightline Unchanged 38 39 ADS: convention for personalty Unchanged 39 40 ADS: election to use Unchanged 40 41 ADS: election to use Unchanged 41 42 ADS: convention for realty Unchanged 42 43 Covenant not to pete: 167。 179 and production of ine Unchanged 4 use 5 Listed property: luxury auto and SUV limit Unchanged 5 6 Listed property: leasing Unchanged 6 7 Startup expenditures Unchanged 7 Depreciation, Cost Recovery, Amortization, and Depletion 85 TRUE/FALSE 1. The concept of depreciation is based on the premise that an asset benefits more than one accounting period. ANS: T PTS: 1 DIF: 1 REF: p. 83 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 2. The basis of cost recovery property must be reduced by the cost recovery allowed and by not less than the cost recovery allowable. ANS: T PTS: 1 DIF: 1 REF: p. 84 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 3. Antiques are not eligible for cost recovery. ANS: T PTS: 1 DIF: 1 REF: p. 84 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 4. The key date for calculating cost recovery is the date the asset is purchased. ANS: F The key date for calculating cost recovery is the date the asset is placed in service. PTS: 1 DIF: 1 REF: p. 84 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 5. Land improvements are generally not eligible for cost recovery. ANS: F Land improvements are 15year class property. PTS: 1 DIF: 1 REF: Exhibit OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 6. The cost recovery basis for property converted from personal use to business use is the adjusted basis of the property at the time of the conversion. ANS: F The cost recovery basis for property converted from personal use to business use is the lower of the fair market value or the adjusted basis at the time of the conversion. PTS: 1 DIF: 1 REF: p. 85 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 86 2020 Comprehensive Volume/Test Bank cost recovery method for all personal property under MACRS is 200% declining balance. ANS: F MACRS uses both 200% and 150% declining balance depending on the class of the property. PTS: 1 DIF: 1 REF: p. 87 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 8. If 150% decliningbalance is used, there is no straightline switchover. ANS: F The straightline switchover takes place whether 200% or 150% decliningbalance is used. PTS: 1 DIF: 1 REF: p. 87 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 9. Under the MACRS halfyear convention, an asset sold on December 10 will be treated as though it were sold on July 1 for a calendar year taxpayer. ANS: T PTS: 1 DIF: 1 REF: p. 88 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 10. If more than 40% of the value of property, other than real property, is placed in service during the last quarter, all of the property will be allowed months of cost recovery. ANS: F Only the property placed in service during the last quarter will be allowed months of cost recovery. PTS: 1 DIF: 1 REF: p. 89 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 11. Under MACRS, if the midquarter convention is applicable, all property sold is treated as being sold at the midpoint of the quarter in which it is sold. ANS: T PTS: 1 DIF: 1 REF: p. 89 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 12. All eligible real estate under MACRS is permitted a full month of cost recovery in the month of disposition. ANS: F Onehalf month of cost recovery is permitted in the month of disposition for realty under MACRS. PTS: 1 DIF: 1 REF: p. 811 | Concept Summary OBJ: 2 NAT: