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test 3 study guide (tax 4001)
test 3 study guide (tax 4001)
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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
10.2 (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 (conceptual) automobile not 100% used for business; understand how that works -
ANS-used 90% = limited to $10980, used 50% or less = straight line depreciation
10.3 (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
10.3 (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 (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
10.4 (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
10.4 (problem) start up question; amount of SU exp given; determine how much can be
deducted immediately - ANS-total SU costs cannot exceed $50000
, 10.5 (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) how to calculate gain/loss (formula) - ANS-amount realized - adjusted
basis
- G or L is what is reported on tax return
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
11.2 (conceptual) held land for investment; determine type of gain - ANS-capital gain
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
11.2 (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 (problem) bought equipment used in business; selling equipment now; determine
amount and character of gain/loss - ANS-amount sold - amount purchased = section
1231 gain/loss
- if gain = characterized as LT capital gain, if loss = 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
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