1. On June 1, 2011, Sandalwood Corporation purchases a passenger automobile for 100 percent use in its business. The automobile is in the 5-year cost recovery class and has a basis for depreciation for $30,000. Assuming that the corporation elects the accelerated method of cost recovery for the asset and does not elect to expense any of its cost or take bonus depreciation, what is the total tax depreciation deduction for the 2011 calendar tax year (year 1)?
2. Jerry bought his home 15 years ago for $60,000. Three years ago Jerry married Debbie and she moved into the same house and has lived there since. If they sell Jerry’s house in December, 2011 for $340,000, what is their taxable gain on a joint tax return?
3. On January 1, 2011, Roxburgia Company places a commercial storage building into service. The costs allocated to construction of the building total $300,000 and land is accounted for separately. Which of the following is a true statement with respect to the depreciation of the building?
A. The period over which the building must be depreciated is shorter than the period over which a residential building must be depreciated
B. Since the building was placed in service on the first day of the year, the depreciation expense for each year the building is used, except for the year of disposition, will be the same amount
C. Since the land is accounted for separately, the amount of depreciation expense for the building cannot be determined from the information given
D. The depreciation expense for 2nd Year would be the same regardless of whether the building is placed in service on January 1, 2011 or February 1, 2011
4. What is the minimum number of years over which computers may be depreciated under Modified Accelerated Cost Recovery System (MACRS)?
5. Terry has a casualty gain of $1,000 and a casualty loss of $5,400, before the $100 floor and before the adjusted gross income limitation. The gain and loss were the result of two separate casualties occurring during 2011 and both properties were personal-use assets. If Terry itemizes deductions on her 2011 return and has adjusted gross income of $25,000, what is Terry’s gain or net itemized deduction as a result of these casualties?
A. $5,300 itemized deduction, $1,000 capital gain
B. $4,300 itemized deduction
C. $1,800 itemized deduction
D. $2,800 itemized deduction, $1,000 capital gain
6. From the records of Tom, a cash basis sole proprietor, the following information was available: Gross receipts $30,000
Dividend income (on personal investments) $200
Cost of sales $15,000
Other operating expenses $3,000
State business taxes paid $300
What amount should Tom report as net earnings from self-employment?
7. The adjusted basis of an asset may be determined by:
A. Selling price + gain realized
B. Selling price + gain realized
C. Original basis + capital improvements + selling price
D. Selling price + gain recognized