24 May Question 26. The method for tax amortization is always the straight-line method.
Question
26. The method for tax amortization is always the straight-line method.
27. All assets subject to amortization have the same recovery period.
28. Goodwill and customer lists are examples of section 197 amortizable assets.
29. Taxpayers may always expense a portion of start-up costs and organizational expenditures.
30. Businesses may immediately expense research and experimentation expenditures or they may elect to
capitalize these costs and amortize them using the straight-line method over a period of not less than 60
months.
31. The manner in which a business amortizes a patent or copyright is the same whether the business directly
purchases the patent or copyright or whether it self-creates the intangible.
32. Depletion is the method taxpayers use to recover their capital investment in natural resources.
33. In general, major integrated oil and gas producers may take the greater of cost or percentage
depletion.
34. Cost depletion is available to all natural resource producers.
35. Businesses deduct percentage depletion when they sell the natural resource and they deduct cost depletion
in the year they produce or extract the natural resource.
36. Tax cost recovery methods do not include:
A. Amortization
B. Capitalization
C. Depletion
D. Depreciation
E. All of the above are tax cost recovery methods
37. Which of the following is not depreciated?
A. Automobile
B. Building
C. Patent
D. Machinery
E. All of the above are depreciated
38. Which of the following is not usually included in an asset’s tax basis?
A. Purchase price
B. Sales tax
C. Shipping
D. Installation costs
E. All of the above are included in an asset’s tax basis
39. Which of the following would be considered an improvement rather than a routine maintenance?
A. Oil change
B. Engine overhaul
C. Wiper blade replacement
D. Air filter change
40. Tax depreciation is currently calculated under what system?
A. Sum of the years digits
B. Accelerated cost recovery system
C. Modified accelerated cost recovery system
D. Straight line system
E. None of the above
41. Which is not an allowable method under MACRS?
A. 150 percent declining balance
B. 200 percent declining balance
C. Straight line
D. Sum of the years digits
E. All of the above are allowable methods under MACRS
42. Which of the allowable methods allows the most accelerated depreciation?
A. 150 percent declining balance
B. 200 percent declining balance
C. Straight line
D. Sum of the years digits
E. None of the above allow accelerated depreciation
43. How is the recovery period of an asset determined?
A. Estimated useful life
B. Treasury regulation
C. Revenue Procedure 87-56
D. Revenue Ruling 87-56
E. None of the above
44. Which of the following depreciation conventions are not used under MACRS?
A. Full-month
B. Half-year
C. Mid-month
D. Mid-quarter
E. All of the above are used under MACRS
45. Which depreciation convention is the general rule for tangible personal property?
A. Full-month
B. Half-year
C. Mid-month
D. Mid-quarter
E. None of the above are conventions for tangible personal property
46. The MACRS recovery period for automobiles and computers is:
A. 3 years
B. 5 years
C. 7 years
D. 10 years
E. None of the above
47. Lax, LLC purchased only one asset during the current year. It placed in service computer equipment (5-
year property) on August 26 with a basis of $20,000. Calculate the maximum depreciation expense for
the current year (ignoring section 179 and bonus expensing):
A. $2,000
B. $2,858
C. $3,000
D. $4,000
E. None of the above
48. Sairra, LLC purchased only one asset during the current year. It placed in service furniture (7-year
property) on April 16 with a basis of $25,000. Calculate the maximum depreciation expense for the
current year, rounding to a whole number (ignoring section 179 and bonus expensing):
A. $1,785
B. $3,573
C. $4,463
D. $5,000
E. None of the above
49. Beth’s business purchased only one asset during the current year. It placed in service machinery (7-year
property) on December 1 with a basis of $50,000. Calculate the maximum depreciation expense (ignoring
section 179 and bonus expensing):
A. $1,785
B. $2,500
C. $7,145
D. $10,000
E. None of the above
50. Deirdre’s business purchased two assets during the current year. It placed in service computer equipm
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