Tax Depreciation and Deduction Study Guide

Cost recovery Over how many different tax years is a 7-year asset depreciated?8 The depreciable recovery period for a hotel is39 years. Depreciable real estate is depreciated for tax using a straight-line methodTRUE Answer: 1,030,000 oBecause XYZ has placed in service Section 179 eligible property in excess of $2,590,000, their 179 deduction begins to be phased-out dollar-for-dollar. The result is that a maximum election of $1,040,000 is reduced to $1,030,000. Because the building is not eligible for Section 179, it is not included in the computation of any phase-out. Same question as above but,Answer: 750,000 oXYZ's deduction is limited to taxable income computed without regard to the Section 179 deduction, so $750,000 Answer: Half-year oHalf-year is the correct convention. The total of tangible personal property placed in service in the last quarter is $35,000, which is 35% of the total tangible personal property placed in service. Because 35% is not above 40%, the midquarter convention doesn't apply. Acme, Inc. places a passenger automobile (weighting 2,900 lbs) into service in 2018. The cost of the automobile is $30,000. The automobile is eligible for bonus depreciation. The applicable convention is half-year. What is the maximum amount of depreciation that can be claimed on the automobile in 2018?18,000 oBecause of the auto luxury limit, the maximum depreciation deduction for a bonus eligible passenger vehicle is $18,000 In 2018, Wonka, Inc. places $3,100,000 of tangible personal property (i.e., eligible Section 179 property) into service. Wonka's taxable business income before the Section 179 deduction is $100,000. How much Section 179 expense can Wonkaelect?400,000 oMaximum election = 1,000,000 - (3,100,000 - 2,500,000) = 400,000