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TAX 4001 exam 2 cram (1).
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TAX 4001 exam 2 cram (1).
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TAX 4001 exam 2 cramWhat do taxpayers use to calculate tax depreciation? - ANS-modified accelerated cost
recovery system (MACRS)
4 things that must be knows to compute MACRS - ANS-asset's original costs
asset's recovery period
applicable depreciation method
applicable depreciation convention
depreciation recovery period for office furniture, fixtures, machinery, and equipment -
ANS-7 years
depreciation recovery period for cars, light duty trucks, computers, and peripheral
equipment - ANS-5 years
Who determines the recovery periods? - ANS-the IRS
depreciation method for personal property 3, 5, 7, 10 years - ANS-double declining
balance
depreciation method for personal property 15 and 20 year asset - ANS-150% double
declining balance
double declining balance - ANS-Doubles the depreciation under the straight-line method
MACRS depreciation formula - ANS-asset cost x cost recovery %
Mid-Quarter Convention - ANS-required when more than 40% of a taxpayer's personal
property placed in service during the year was placed in service during the fourth
quarter
Do I need the mid-quarter convention? - ANS-total tangible personalty placed in service
this year / total tangible personalty placed in service in the 4th quarter
if >40% then use mid-quarter personalty
, How does mid-quarter convention work? - ANS-assets treated as if placed in service in
the middle of the quarter the business actually placed them in service
What to do if disposed of before fully depreciated when using mid-quarter convention? -
ANS-full depreciation x %
1 q disposal = 1.5/12
2 q disposal = 4.5/12
3 q disposal = 7.5/12
4 q disposal = 10.5/12
allowed cost recovery - ANS-cost recovery actually taken
allowable cost recovery - ANS-cost recovery that could have been taken
If no cost recovery is taken then the property must be reduced by what? - ANS-the
allowable cost recovery
depreciation methods for personalty - ANS-double declining balance or 150% ddb
half year convention
mid-quarter convention
depreciation methods for realty - ANS-mid month convention
straight line
recovery period for residential property - ANS-27.5 years
recovery period for nonresidential prroperty - ANS-39 years
mid-month convention - ANS-realty depreciation in year of purchase is the depreciation
table amount
realty depreciation in year of disposition
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