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test 3 study guide (tax 4001) (1)
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test 3 study guide (tax 4001)10.2 (conceptual) understand how MACRS work for automobiles - ANS-5 year recovery
period, if used, doesnt change recovery period
10.3 (conceptual) list of different types of assets; which would be eligible for bonus
depreciation - ANS-must be used/new (as long as not been previously used within past
5 years), have regular depreciation life for 20 years or less
10.2 (problem) asset put in place, 5 year property, basis given; calculate depreciation;
determine which table to use based on purchase date of asset - ANS-original basis x
rate % = depreciation (half year table)
10.2 (problem) selling property; about property, when it was bought, the basis, table
used when bought, when disposed; calculate depreciation for year of disposal -
ANS-original basis x depreciation % x % of full year depreciation in year of disposal
10.3 (problem) machinery placed in service, use section 179; specific numbers given;
calculate max 179 - ANS-machinery - threshold for 179 phase out = phase out max 179
exp
- max 179 exp after phase out = max 179 before phase out - phase out max 179 exp
- if $4050000 or more, max 179 is $0
10.3 (problem) automobile, limitations table given, see if any limitations & use any
MACRS; determine max depreciation for year places in service - ANS-first determine
regular MACRS depreciation then compare to max depreciation amount for 1st year of
recovery period based on table, deduct lesser of the two
10.3 (conceptual) automobile not 100% used for business; understand how that works -
ANS-used 90% = limited to $10980, used 50% or less = straight line depreciation
10.4 (problem) start up question; amount of SU exp given; determine how much can be
deducted immediately - ANS-total SU costs cannot exceed $50000
10.4 (problem) R&D question; amortization; paid amount given; capitalize and amortize
asset; know length of time needed to determine amount of amortization that can be
taken in year 1 - ANS-length of time = 5 yrs
cost / remaining life in months x months in year 1
, 10.5 (problem) depletion question; simple depletion using units of production; calculate
amount of depletion that can be taken - ANS-basis / estimated units x units sold
11.1 (conceptual) figure out what amount realized is in determining gain/loss; list given;
determine which would NOT be correct on sale or asset - ANS-gain/loss recognized =
amount realized - adjusted basis
- amount realized = cash received + FMV of other property + buyers assumption of
liabilities - sellers exp
- adjusted basis = basis - cost recovery deductions
11.1 (conceptual) know adjusted basis and how it compares to book basis -
ANS-adjusted basis is likely to be lower than book basis bc businesses generally use
more highly accelerated depreciation methods for tax purposes
11.1 (conceptual) how to calculate gain/loss (formula) - ANS-amount realized - adjusted
basis
- G or L is what is reported on tax return
11.2 (conceptual) held land for investment; determine type of gain - ANS-capital gain
11.2 (conceptual) trade or business sold machinery for loss; asset held for more than a
year; determine type of loss - ANS-section 1231 loss
11.2 (conceptual) sale of computer equipment in trade or business held for less than a
year; determine type of gain/loss - ANS-most likely ordinary loss
11.3 (conceptual) general questions about depreciation recapture; understand what
happens if we do/don't recapture: character of gain and how that changes -
ANS-recapture usually applies to gains not losses; changes character of gain into
ordinary gain/ordinary income
- without it, depreciation deductions save taxes at ordinary rates and gains at
preferential rates
11.6 (conceptual) installment sales; general questions about how to calculate gains;
understand rules about depreciation recapture and how that might affect it as well and
its calculation in order to determine amount of gains reported in given period; type of
gains that can be deferred in relationship to installment sale - ANS-installment sale -
sale where taxpayers receives payment in more than 1 period, gain calculation = gross
profit % x payment received in year 1
- GP % = GP / contract price
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