Question 1. Sid bought a new $80,000 seven-year class asset o

1. Sid bought a new $80,000 seven-year class asset on August 2, 2014. On December 2, 2014, he purchased $24,000 of used five-year class assets. Sid does not take additional first­year depreciation if available. If Sid elects § 179, what is the maximum write-off for these purchases for 2014?

2. Polly purchased a new hotel on July 20, 2014, for $6,000,000. On January 20, 2021, the building was sold. Determine the cost recovery deduction for the year of the sale.

3. Rustin bought used 7-year class property on May 15, 2014, for $72,000. Rustin elects § 179 and straight­line cost recovery. Rustin’s taxable income would not create a limitation for purposes of the § 179 deduction. Determine the maximum write-off Rustin can take in 2014.

4. Audra acquires the following new five-year class property in 2014:

Audra’s taxable income from her business would not create a limitation for purposes of the § 179 deduction. Audra does not take additional first-year depreciation (if available). Determine her total cost recovery deduction (including the § 179 deduction) for the year.

5. On April 5, 2014, Orange Corporation purchased, and placed in service, seven-year class assets costing $54,000 and five-year class assets costing $14,000. Orange elects to expense the maximum amount under § 179. Orange does not take additional first-year depreciation (if available). Assume taxable income is not a limitation. Determine Orange Corporation’s cost recovery with respect to the assets for 2014.

6. Martin is a sole proprietor of a business. On March 4, 2014, Martin purchased and placed in service new seven- year class assets costing $56,000. Martin’s business has income for the year, before any deductions associated with the purchased assets, of $16,000. Martin also has $3,000 of interest income for the year which is not related to the business. Martin wants his adjusted gross income for the year to be as low as possible. With this objective in mind, determine how Martin should recover the cost of the acquired assets.

7. On February 21, 2014, Joe purchased new farm equipment for $60,000. Joe has made an election to not have the uniform capitalization rules apply to his farming business. He does not take additional first-year depreciation (if available). If Joe elects § 179, what is the maximum write­off for this purchase for 2014?

8. On April 15, 2014, Sam placed in service a storage facility (a single-purpose agricultural structure) costing $80,000. Sam also purchased and planted fruit trees costing $40,000. Sam does not elect to expense any of the acquisitions under § 179 and he elects not to take additional first­year depreciation (if available). Determine Sam’s cost recovery from these two items for 2014.

9. On August 20, 2013, May signed a 10-year lease on a building for her business. On November 28, 2014, May paid $80,000 for leasehold improvements to the building. She does not take additional first-year depreciation (if available) and does not elect § 179 expensing. What is May’s cost recovery deduction for the improvement in 2014?

10. On July 15, 2014, Mavis paid $275,000 for leasehold improvements on a commercial building she was leasing. Determine the maximum total cost recovery from the improvements in 2014.

11. Joe purchased a new five-year class asset on June 1, 2014. The asset is listed property (not an automobile). It was used 55% for business and 45% for the production of income. The asset cost $100,000. Joe made the § 179 election. Joe’s taxable income would not create a limitation for purposes of the § 179 deduction. Joe does not take additional first­year depreciation (if available). Determine Joe’s total cost recovery (including the § 179 deduction) for the year.

12. Nora purchased a new automobile on July 20, 2013, for $29,000. The car was used 60% for business and 40% for personal use. In 2014, the car was used 30% for business and 70% for personal use. Nora elects not to take additional first-year depreciation. Determine the cost recovery recapture and the cost recovery deduction for 2014.

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