Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
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Chapter 7, Problem 18AP
a.
To determine
Calculate R’s MACRS
b.
To determine
Calculate R’s first year MACRS depreciation for commercial property.
c.
To determine
Calculate R’s MACRS depreciation for residential property.
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18. Ryland Company, a calendar year taxpayer, purchased commercial realty
for $2 million and allocated $200,000 cost to the land and $1.8 million
cost to the building. Ryland placed the real estate in service on May 21.
a. Compute Ryland's MACRS depreciation with respect to the realty for
the year of purchase.
b. How would your answer change if Ryland placed the realty in service
on September 2 instead of May 21?
c. How would your answer to part (a) change if the building was a
residential apartment complex instead of a commercial office?
On October 1, you purchased a residential home in which lo locale your professional office for $180,000. The appraisal is divided into $30,000 for the land and $150,000 for the building.(a) In your first year of ownership, how much can you deduct for depreciationfor tax purposes?(b) Suppose that you sold the property at $197,000 at the end of the fourth year of ownership. What is the book value of the property?
A permanent steel building used for the overhaul of dewatering systems (engines, pumps, and wellpoints) is placed in service on July 10 by a calendar-year taxpayer for $220,000. It is sold almost 5 years later on May 15.
a. What is the MACRS-GDS property class?b. Determine the depreciation deduction during each of the years involved.c. Determine the unrecovered investment during each of the years involved.
Chapter 7 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 7 - Prob. 1QPDCh. 7 - Assume that Congress enacted legislation requiring...Ch. 7 - Prob. 3QPDCh. 7 - To what extent do cost recovery deductions based...Ch. 7 - Can a firm have a negative tax basis in an asset?Ch. 7 - Prob. 6QPDCh. 7 - Corporation J manufactures electrical appliances....Ch. 7 - Identify the tax and nontax issues that firms must...Ch. 7 - Identify four possible differences in the...Ch. 7 - Prob. 10QPD
Ch. 7 - Prob. 11QPDCh. 7 - Prob. 12QPDCh. 7 - Prob. 13QPDCh. 7 - Prob. 14QPDCh. 7 - Prob. 15QPDCh. 7 - Prob. 16QPDCh. 7 - Prob. 17QPDCh. 7 - Prob. 18QPDCh. 7 - Prob. 1APCh. 7 - Assuming a 21 percent tax rate, compute the...Ch. 7 - Determine the tax basis of the business asset...Ch. 7 - ABC Company purchased business property several...Ch. 7 - Early this year, ZeZe Inc. paid a 52,000 legal fee...Ch. 7 - In year 1, Firm A paid 50,000 cash to purchase a...Ch. 7 - Prob. 7APCh. 7 - Hansen Company, a cash basis taxpayer, paid 50,000...Ch. 7 - In year 0, Jarmex paid 55,000 for an overhaul of a...Ch. 7 - Prob. 10APCh. 7 - Refer to the facts in problem 10. In its second...Ch. 7 - In its first year of operations, Lima Company...Ch. 7 - Prob. 13APCh. 7 - Herelt Inc., a calendar year taxpayer, purchased...Ch. 7 - Knute Company purchased only one asset during its...Ch. 7 - Prob. 16APCh. 7 - Suber Inc., a calendar year taxpayer, purchased...Ch. 7 - Prob. 18APCh. 7 - Prob. 19APCh. 7 - On May 12, 2018, Nelson Inc. purchased eight...Ch. 7 - In March 2018, Jones Company purchased a Mercedes...Ch. 7 - Margo, a calendar year taxpayer, paid 580,000 for...Ch. 7 - In 2019, Firm L purchased machinery costing 21,300...Ch. 7 - In 2018, Company W elected under Section 179 to...Ch. 7 - Prob. 25APCh. 7 - At the beginning of its 2019 tax year, Hiram owned...Ch. 7 - In April 2019, Lenape Corporation completed...Ch. 7 - Ajax Inc. was formed on April 25 and elected a...Ch. 7 - Prob. 29APCh. 7 - Mr. Z, a calendar year taxpayer, opened a new car...Ch. 7 - Prob. 31APCh. 7 - Prob. 32APCh. 7 - Prob. 33APCh. 7 - Prob. 34APCh. 7 - Prob. 35APCh. 7 - Prob. 36APCh. 7 - Prob. 37APCh. 7 - Prob. 1IRPCh. 7 - Prob. 2IRPCh. 7 - Prob. 3IRPCh. 7 - Prob. 4IRPCh. 7 - Prob. 5IRPCh. 7 - Prob. 6IRPCh. 7 - Prob. 7IRPCh. 7 - Prob. 8IRPCh. 7 - Prob. 9IRPCh. 7 - Prob. 10IRPCh. 7 - Prob. 1RPCh. 7 - Prob. 2RPCh. 7 - Prob. 3RPCh. 7 - Prob. 4RPCh. 7 - Prob. 1TPCCh. 7 - Prob. 2TPCCh. 7 - Prob. 3TPCCh. 7 - Prob. 4TPC
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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_forwardA permanent steel building used for the overhaul of dewatering systems (engines, pumps, and wellpoints) is placed in service on July 10 by a calendar-year taxpayer for $240,000. It is sold almost 5 years later on May 15. a. What is the MACRS-GDS property class? b. Determine the depreciation deduction during each of the years involved. c. Determine the unrecovered investment during each of the years involved.arrow_forwardOn November 10 of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,200,000; $300,000 was allocated to the basis of the land and the remaining $900,000 was allocated to the basis of the building. a) Assume the building was purchased and placed in service on March 3 instead of November 10. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3? b) Assume the building is residential property. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3?c) What would be the depreciation for 2022, 2023, and 2024 if the property were nonresidential property purchased and placed in service November 10, 2005 (assume the same original basis)?arrow_forward
- Is a deduction allowed under the MACRS rules for depreciable real estate (used in a business or held for investment) in the year the property is sold? If so, explain how it is calculated. O A. Yes, a deduction is allowed under the MACRS rules for depreciable real estate in the year the property is sold. It is assumed that the asset is held for the entire year. The amount of depreciation is computed by taking 100% of the annual depreciation. O B. No, there is no deduction allowed under the MACRS rules for depreciable real estate in the year the property is sold. O C. O D. Yes, a is deduction allowed under the MACRS rules for depreciable real estate in the year the property is sold. It is assumed that the asset is held for half the year. The amount of depreciation is computed by taking 6/12's of the annual depreciation. Yes, depreciation for real estate is computed using tables that follow the mid-month convention, so depreciation is allowed in the year of sale. The amount of…arrow_forwardOn May 15, 2020, Aldean Company, a calendar year taxpayer, purchased and placed into service a nonresidential building. The company paid $140,000 total and allocated $40,000 of the cost to the land and $100,000 of the cost to the building based on fair market values. Compute Aldean’s maximum first-year depreciation on the realty.arrow_forwardI didn't realized there were Tables for MACRS for the question that was rejected. Hopefully, the below will work now. Convers Corporation (calendar-year-end) acquired the following assets during the current tax year: (ignore §179 expense and bonus depreciation for this problem): (Use MACRS Table 1, Table2,and Table 5.) Date Placed Original Asset in Service Basis Machinery October 25 $ 94,000 Computer equipment February 3 $ 34,000 Used delivery truck* March 17 $ 47,000 Furniture April 22 $ 174,000 Total $ 349,000 *The delivery truck is not a luxury automobile. In addition to these assets, Convers installed new flooring (qualified improvement property) to its office building on May 12 at a cost of $540,000. What is the allowable MACRS depreciation on Convers's property in the current year assuming Convers does not elect out of bonus depreciation (but does not take §179 expense)? MACRS depreciation: Table 1 MACRS Half-Year Convention…arrow_forward
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