3). John purchases a vacant office building on April 1^st, 2023. The building was fully rented on June 1, 2023. Under MACRS (The modified accelerated cost recovery system which is a depreciation system used for tax purposes in the U.S. MACRS depreciation allows the capitalized cost of an asset to be recovered over a specified period via annual deductions) Joel must use the half-year convention to compute his depreciation in 2022.

a). True b). False

4). The Code Section 179 deduction is generally limited to an annual $1 million limitation (which is indexed for inflation). The limit may only be exceeded if the amount was attributable to the carryover of a Code Section 179 Deduction (Office furniture, computers and off-the-shelf software are among the business equipment covered by Section 179. It doesn't generally cover real estate) from the prior year which exceeded the business income limitation in the prior year.

a). True b). False

5). Tracy purchased a new machine for use in her manufacturing business on December 27^th, 2022, for $75,000. The Machine was not delivered until February 1^st, 2023, and was not used exclusively in the business. She is on a calendar year (starts when placed in service) and purchased no other assets in either 2022 or 2023. Which of the following is true regarding when Tracy may begin claiming depreciation?

a). Tracy may claim depreciation in 2022 using the half year convention.

b). Tracy may claim depreciation in 2022 using the mid-quarter convention.

c). Tracy may claim depreciation in 2023 using the half year convention.

d). Tracy may claim depreciation in 2023 using the mid-quarter convention.

e). Tracy may elect to claim depreciation in either 2022 or 2023 using the same depreciation applicable for the year elected.

6). Viva Inc., purchases new equipment (5 Year MACRS property) at a cost of 90,000 on March 1^st, 2022. It is on a calendar year basis and also purchases a machine (7 Year MACRS property) on December 27^th, 2022 at cost of $100,000 wants to maximize its deduction and has business income of $1,000,0000 (before 179 deduction). How much can Viva claim in maximum total deductions for 2022? Ignoring inflat.

a). $500,000 b). $790,000

c). $1,000,000 d). $1,020,000

e). None of the above

7). Elizabeth purchases equipment in 2023 for $3 million for use in her business. She has $1.5 million in taxable income from her business during the year and makes a proper section 179 election. How much may Elizabeth deduct in 2023 under section 179 if she makes a proper election. Ignoring inflation. Adj.

a). $100,000 b). $500,000

c). 1,000,000 d). $1,500,000

e). $3,000,000

8). Assume Elizabeth instead purchases equipment for $3 million in 2023 for use in her business but has only $100,000 in taxable income from her business during the year. She makes a proper section 179 election. How much may Elizabeth deduct in 2023 under section 179.

a). $100,000 b). $500,000

c). 1,000,000 d). $1,500,000

e). $3,000,000

9). Which of the following is true regarding depreciation and expensing for Qualified Improvement Property (QIP)?

a). Uses a 15-year recovery period, a straight-line method, and half year convention.

b). Uses a 15-year recovery period, a straight-line method and mid quarter convention.

c). Uses a 15-year recovery period, straight line method and either half year or mid quarter convention (as applicable)

d). Uses a 15-year recovery period, a straight-line method and mid-month convention.

e). Qualifies for the section 179 election.

10). Tom purchased an office building on October 10^th, 2023 for $9,600,000 which was fully rented to commercial tenants. $1,600,000 of the purchase price is allocated to land. How much may he claim as depreciation in 2023 and 2024. Use the tables provided in the text to compute your answer.

a). $21,400 in 2023 and $102,560 in 2024.

b). $42,800 in 2023 and $205,120 in 2024.

c). $51,360 in 2023 and $246,144 in 2024.

d). $60,640 in 2023 and $290,880 in 2024.

e). None of the above

11). David buys an office building with surrounding land. He paves over the surrounding land for use as a parking lot for the buildings commercial tenants and their customers. Which of the following is true with respect to the cost paid for paving.

a). The cost may be recovered over a 39 year recovery period.

b). The cost may be recovered over a 31.5 year recovery period.

c). The cost may be recovered over a 27.5 year recovery period.

d). The cost may be recovered over a 15 year recovery period.

e). The cost is capitalized as part of the land and may not be recovered until the property is sold.

12). Sandra purchased a residential building on March 2^nd, 2023 for $5,000,000 which was fully rented to individuals. $1,000,000 of the purchase price is allocated to tables provided in the text to compute your answer.

a). 81,320 in 2023 and 102,560 in 2024.

b). 98,440 in 2023 and 102,560 in 2024.

c). 115,160 in 2023 and 145,440 in 2024.

d). 100,520 in 2023 and 127,000 in 2024.

e). None of the above.

13). Dawn invests $820,000 during 2023 for a 25% interest in a partnership. She materially participates in the partnership during the year. The partnership incurs a loss with $400,000 being Lindas allocable shares. She has no other investments. Which statement is incorrect?

a). Since Linda has only $320,000 of capital at risk, she cannot deduct anymore than this amount against her other income in 2023.

b). Linda has a nondeductible loss of $80,000 in 2023 which can only be carried over and used in future years.

c). If Linda has taxable income of $160,000 from the partnership in 2024 and there are NO other transactions that affect her at-risk amount, she can use the $80,000 loss carried over from 2023.

d). Lindas $400,000 loss is not deductible in either 2022 or 2023 under the passive activity loss provisions.

e). ALL STATEMENTS ARE CORRECT.

14). Melivin invested $200,000 in 2023 for a 50% interest in a partnership conducting a non-real estate passive activity. The partnership reported losses of $180,000 in 2023 and $300,000 in 2024. Melvins share of the losses was $90,000 in 2023 and $150,000 in 2024. Hoe much of the losses from the partnership can Melvin deduct assuming he owns no other investments and does not participate in the partnerships operations.

a). 0 in 2023; 200,000 in 2024.

b). 90,000 in 2023; 0 in 2024.

c). 200,000 in 2023; 0 in 2024.

d). 90,000 in 2023; 110,000 in 2024

e). None of the above.