25 May Question 1. On May 30, 2014, Jane signed a 20-year lease on a fact
Question
1. On May 30, 2014, Jane signed a 20-year lease on a factory building to use for her business. The lease begins on June 1, 2014. In August 2014, Jane paid $300,000 for leasehold improvements to the building. Determine Jane’s total deduction with respect to the leasehold improvements for 2014.
a. $2,889.
b. $4,173.
c. $4,815.
d. $25,000.
e. None of the above.
2. On February 20, 2014, Susan paid $200,000 for a leasehold improvement to an office building that she is going to lease to John. The leasehold improvement is not a qualified leasehold improvement. The lease will begin on June 1, 2014, and terminate on May 31, 2024. At the termination of the lease, the improvement will be worthless. Determine Susan’s deductible loss as a result of the termination of the lease.
a. $0.
b. $123,503.
c. $127,990.
d. $128,631.
e. None of the above.
3. White Company acquires a new machine (seven-year property) on January 10, 2013, at a cost of $600,000. White makes the election to expense the maximum amount under § 179. No election is made to use the straightline method. White does take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machine for 2013 assuming White has taxable income of $800,000.
a. $71,593.
b. $128,610.
c. $385,296.
d. $390,868.
e. None of the above.
4. Augie purchased one new asset during the year (five-year property) on November 10, 2014, at a cost of $650,000. She would like to use the § 179 election if available. The income from the business before the cost recovery deduction and the § 179 deduction was $600,000. Determine the total cost recovery deduction with respect to the asset for 2014.
a. $32,500.
b. $56,250.
c. $130,000.
d. $150,000.
e. None of the above.
5. In 2013, Gail had a § 179 deduction carryover of $30,000. In 2014, she elected § 179 for an asset acquired at a cost of $115,000. Gail’s § 179 business income limitation for 2014 is $140,000. Determine Gail’s § 179 deduction for 2014.
a. $25,000.
b. $35,000.
c. $40,000.
d. $55,000.
e. None of the above.
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