Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 17, Problem 8DQ
A
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4. Which of the following situations would not be permitted to defer the recognition of any recapture that
might arise from the disposition of an asset?
A building that was used for income earning purposes was destroyed in a flood. Insurance proceeds
were received which generated recapture. A new building was built 18 months later.
B
A piece of equipment that belonged to a company was stolen in November 2019. Insurance
proceeds were received which generated recapture. The equipment was replaced in December of
2020.
A piece of equipment that belonged to a construction company was sold in June 2019. The
proceeds from the sale generated recapture. A new piece of equipment was purchased in January of
2020. The company's fiscal year-end is December 31st.
D. A building that was used for income earning purposes was sold in December 2019. The proceeds
from the sale generated recapture. A new building was purchased in April 2020. The company's fiscal
year-end is December 31st.
none of the above
Question 78 of 85. Choose the response that correctly describes a condition, or conditions, that must be met for property to be considered depreciable. The property must be an item that will eventually wear out, get used up, become obsolete, or otherwise lose its value. The taxpayer must place the property in service and dispose of it within the same year. The taxpayer must either rent or own the property and use it in their business or in an income-producing activity. The useful life of the property must not exceed one year.
Which of the following statements is incorrect?
Assume that the rental activity is classified as ‘production-of-income.’ If the taxpayer sells the rental property later at a loss, the loss will be treated as a capital loss (i.e., $3,000/$1,500 deduction limit in the current year).
An amount that would have been paid in an arm’s-length transaction is considered a reasonable amount as deduction.
Payment (except for medical or educational expense) of another person’s obligation does not result in a tax deduction for the payer.
Regarding the start-up costs, if the new business is in the same line of business as the existing one and if the new business is not launched, then none of the start-up costs are deductible.
Payments for a speeding ticket are nondeductible.
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Chapter 17 Solutions
Individual Income Taxes
Ch. 17 - Prob. 1DQCh. 17 - Prob. 2DQCh. 17 - Prob. 3DQCh. 17 - Prob. 4DQCh. 17 - Prob. 5DQCh. 17 - Prob. 6DQCh. 17 - Prob. 7DQCh. 17 - A depreciable business dump truck has been owned...Ch. 17 - Prob. 9DQCh. 17 - Prob. 10DQ
Ch. 17 - Prob. 11DQCh. 17 - Prob. 12DQCh. 17 - Prob. 13DQCh. 17 - Prob. 14DQCh. 17 - Prob. 15DQCh. 17 - Prob. 16DQCh. 17 - Prob. 17DQCh. 17 - Prob. 18DQCh. 17 - Prob. 19DQCh. 17 - Prob. 20DQCh. 17 - Prob. 21CECh. 17 - Prob. 22CECh. 17 - LO.3 Renata Corporation purchased equipment in...Ch. 17 - LO.3 Jacob purchased business equipment for 56,000...Ch. 17 - Sissie owns two items of business equipment. Both...Ch. 17 - Prob. 26CECh. 17 - Prob. 27CECh. 17 - LO.4 Enzo is a single taxpayer with the following...Ch. 17 - Prob. 29CECh. 17 - Prob. 30CECh. 17 - LO.1, 2 Jenny purchased timber on a 100-acre tract...Ch. 17 - Prob. 32PCh. 17 - LO.2 A sculpture that Korliss Kane held for...Ch. 17 - Prob. 34PCh. 17 - Prob. 35PCh. 17 - Prob. 36PCh. 17 - Prob. 37PCh. 17 - Prob. 38PCh. 17 - Prob. 39PCh. 17 - Prob. 40PCh. 17 - Prob. 41PCh. 17 - Prob. 43PCh. 17 - Joanne is in the 24% tax bracket and owns...Ch. 17 - Prob. 45PCh. 17 - Prob. 46PCh. 17 - Prob. 47PCh. 17 - Prob. 48PCh. 17 - Prob. 49PCh. 17 - Jasmine owned rental real estate that she sold to...Ch. 17 - Prob. 51PCh. 17 - Prob. 52PCh. 17 - Prob. 53PCh. 17 - Prob. 54PCh. 17 - Jay sold three items of business equipment for a...Ch. 17 - Prob. 1RPCh. 17 - Prob. 2RPCh. 17 - Prob. 3RPCh. 17 - Prob. 4RPCh. 17 - Prob. 1CPACh. 17 - Prob. 2CPACh. 17 - Jerry uses a building for business purposes. The...Ch. 17 - Prob. 4CPACh. 17 - Prob. 5CPACh. 17 - Prob. 6CPACh. 17 - Wally, Inc., sold the following three personal...Ch. 17 - Net Section 1231 losses are: a. Deducted as a...Ch. 17 - Prob. 9CPACh. 17 - Prob. 10CPA
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- Which of the following statements with respect to the depreciation of property under MACRS is incorrect? Under the half-year convention, one-half year of depreciation is allowed in the year the property is placed in service. If a taxpayer elects to use the straight-line method of depreciation for property in the 5 -year class, all other 5 -year class property acquired during the year must also be depreciated using the straight-line method. In some cases, when a taxpayer places a significant amount of property in service during the last quarter of the year, real property must be depreciated using a mid-quarter convention. Real property acquired after 1986 must be depreciated using the straight-line method. The cost of property to which the MACRS rate is applied is not reduced for estimated salvage value.arrow_forward1. List five events that would likely qualify as a casualty: 2. Generally, casualty losses of personal use property are deductible only if the loss resulted from a Presidentially declared disaster. TrueFalse 3. Calculate the amount of the casualty loss deduction, if any, that would claimed given that a business warehouse was completely destroyed by fire: FMV of the warehouse before the fire $600,000 FMV of the warehouse after the fire $0 Basis of the warehouse $500,000 Insurance recovery $400,000 4. Assume the same facts as in (3) above except that the warehouse was not completely destroyed and the FMV of the warehouse after the fire was $450,000 and the insurance recovery was $100,000. Now what would be the amount of the casualty loss deduction?arrow_forwardWhich of the following will cause a difference in book depreciation and federal depreciation? Choosing to depreciate a class of property using straight-line on the federal return and straight-line on the books. Depreciating property with a useful life of less than one year. Electing to take a Section 179 deduction on eligible property. Placing property in service mid-year.arrow_forward
- A resident citizen acquired a property for use in his business. After a devastatingtyphoon, the machinery suffered partial damage. The following were made available:Cost P570,000Accumulated depreciation 300,000Restoration cost 300,000Estimated useful life 5 yearsThe taxpayer received insurance proceeds of P50,000 to cover the loss.Determine the amount of allowable deductionsarrow_forwardA taxpayer who sells his or her principal residence at a realized loss can elect to recognize the loss even if a qualified residence is not acquired during the statutory time period True Falsearrow_forwardWhich of the following statements is correct? When depreciable property is gifted to another individual taxpayer, the depreciation recapture potential is extinguished. When depreciable property is inherited by a taxpayer, the depreciation recapture potential is extinguished. When corporate depreciable property is distributed as a dividend, the depreciation recapture potential is generally not recognized. When depreciable property is contributed to charity, the depreciation recapture potential has no effect on the amount of the charitable contribution deduction. All of the above are correct.arrow_forward
- A taxpayer who acquired property in a related party transaction where a loss is realized cannot use the disallowed loss to later create a loss on the sale of that property. True or falsearrow_forwardAC/DC-Corporation owns a building that it uses in its operations that has a basis of $70,000. During the year, a tornado occurs and partially destroys the building. The fair market value of the building before the tornado was $200,000 and the value of the building afterwards is $120,000. They are reimbursed by an insurance company for $25,000. How much can AC/DC-Corporation deduct as a casualty loss? Group of answer choices $25,000. $45,000. $70,000. $80,000.arrow_forward32. Under MACRS, which one of the following is not considered in determining depreciation for tax purposes? A) Half-year convention B) Cost of asset C) Salvage value D) Property classarrow_forward
- An apartment building was acquired in 2014 by an individual taxpayer. The depreciation taken on the building was $283,760, and the building was sold for a $85,128 gain. What is the amount of unrecaptured § 1250 gain? 198,632arrow_forwardA loss on the sale of a taxpayer's personal residence is deductible if the taxpayer owned and lived in the home for two of five years. True Falsearrow_forward16. Erwin Company, a calendar year taxpayer, made only two purchases of depreciable personalty this year. The first purchase was five-year recovery property costing $312,800, and the second purchase was seven-year recovery property costing $574,000. Compute Erwin's first-year MACRS depreciation with respect to the personalty assuming that a. The first purchase occurred on February 2, and the second purchase occurred on June 18. b. The first purchase occurred on February 2, and the second purchase occurred on October 13.arrow_forward
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