Which of the following is not an acceptable method of accounting under the tax law?

a.The accrual method

b.The cash method

c.The hybrid method

d.All of these choices are acceptable.

e.None of these choices are acceptable

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In the current year, Henry, a sole proprietor, sold for $65,000 a machine that was used in his business. The machine had been purchased a few years ago for $50,000, and when it was sold, it had accumulated depreciation of $20,000 and an adjusted basis of $30,000. For the current year, how should this gain be treated?

a.Section 1231 gain of $15,000 and ordinary income of $20,000

b.Ordinary income of $35,000

c.Section 1231 gain of $35,000

d.Section 1231 gain of $20,000 and ordinary income of $15,000

e.None of these choices are correc

Choose the incorrect statement.

a.The choice to file on a fiscal year-end basis must be made with an initial tax return.

b.Books and records may be kept on a different year-end basis than the year-end used for tax purposes.

c.Almost all individuals file tax returns using a calendar year accounting period.

d.An individual may request IRS approval to change to a fiscal year-end basis if certain conditions are met.

Steve Corp bought a $600,000 apartment building in June of 2015. Of the purchase price, $104,950 is allocated to the value of the land. What is the maximum amount of depreciation that the company can claim in 2016 (year 2) for the building?

a.$18,000

b.$25,000 under the election to expense business property

c.$9,752

d.$21,816

e.You cannot depreciate property costing over $500,000.

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Jenny constructed a building for use as a residential rental property. The cost of the building was $82,488, and it was placed in service on August 1, 1992. The building has a 27.5-year MACRS life. What is the amount of depreciation on the building for 2016 for tax purposes?

a.$6,000

b.$6,547

c.$2,250

d.$3,000

e.None of these choices are correct.