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Exam 5: Business Deductions

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Question 71

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A taxpayer may elect to use the alternative depreciation system (ADS)to compute depreciation for earnings and profits.

A) True
B) False

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Question 72

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Two-thirds of treble damage payments under the antitrust law are not deductible.

A) True
B) False

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Question 73

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Research and experimental expenditures do not include the cost of consumer surveys.

Bhaskar purchased a new factory building and land on September 10,2015,for $3,700,000.($500,000 of the purchase price was allocated to the land. ) He elected the alternative depreciation system (ADS) .Determine the cost recovery deduction for 2016.

On June 1,2015,Gabriella purchased a computer and peripheral equipment (five-year property)for $25,000.She used the assets 40% for business,50% for the production of income,and 10% for personal use.These are the only assets Gabriella purchased during the current year.Determine her total cost recovery deduction for the current year.

During the past two years,through extensive advertising and improved customer relations,Orange Corporation estimated that it had developed customer goodwill worth $500,000.For the current year,determine the amount of goodwill Orange Corporation may amortize.

The cost recovery method for new farm equipment is 200% declining balance.

Which of the following is not a related party for constructive ownership purposes under § 267?

An expense need not be recurring in order to be "ordinary."

Why are there restrictions on the recognition of gains and losses resulting from transactions between related parties?

A purchased trademark is a § 197 intangible.

Cost depletion is determined by multiplying the depletion cost per unit by the number of units sold.

For purposes of the § 267 loss disallowance provision,a taxpayer's aunt is a related party.

Augie purchased one new asset during the year (five-year property) on November 10,2015,at a cost of $650,000.She would like to use the § 179 election and will also take additional first-year depreciation,if available.The income from the business before the cost recovery deduction and the § 179 deduction was $600,000.Determine the total cost recovery deduction with respect to the asset for 2015.

On January 2,2015,Fran acquires a business from Chuck.Among the assets purchased are the following intangibles: patent with a 7-year remaining life,a covenant not to compete for 10 years,and goodwill. ​ Of the purchase price,$140,000 was paid for the patent and $60,000 for the covenant.The amount of the excess of the purchase price over the identifiable assets was $100,000.What is the amount of the amortization deduction for 2015?

A taxpayer's note or promise to pay satisfies the "actually paid" requirement for the cash basis method of accounting.

In a related party transaction where realized loss is disallowed,when can the disallowed loss be used by the buyer on the subsequent sale of the property? In the case of a related party disallowed loss transaction,can the related party seller's disallowed loss be used by a taxpayer other than the related party buyer?

James purchased a new business asset (three-year personalty) on July 23,2015,at a cost of $40,000.James takes additional first-year depreciation but does not elect Section 179 expense on the asset.Determine the cost recovery deduction for 2015.

If more than 40% of the value of property,other than real property,is placed in service during the last quarter,all of the property placed in service in the second quarter will be allowed 7.5 months of cost recovery.

On May 15,2015,Brent purchased new farm equipment for $200,000.Brent used the equipment in connection with his farming business.Brent does not elect to expense assets under § 179.Brent does not take additional first-year depreciation (if available) .Determine the cost recovery deduction for 2015.