Answer the questions about fixed assets:
Explain the differences and similarities between personal property, real property, intangible property, and natural resources. Also, provide an example of each type of asset.
What is the difference in the recovery periods used by MACRS and those used under generally accepted accounting principles (GAAP)?
What are the two depreciation conventions that apply to tangible personal property under MACRS?Explain each.
What is Section 179? Explain the two limitations placed on the §179 deduction.
What is a §197 intangible?How do taxpayers recover the costs of these intangibles?
Jose purchased a delivery van for his business through an online auction. His winning bid for the van was $24,500. In addition, Jose incurred the following expenses before using the van: shipping costs of $650; paint to match the other fleet vehicles at a cost of $1,000; registration costs of $3,200 which included $3,000 of sales tax and a registration fee of $200; wash and detailing for $50; and an engine tune-up for $250. What is Joseâ€s cost basis for the delivery van?
GMW Corporation acquired and placed in service the following assets during the year:
At the beginning of the year, Winifred began a calendar-year dog boarding business called Gizzyâ€sâ€s Palace. Winifred bought and placed in service the following assets during the year:
Asset
Date Acquired
Cost Basis
3/23
$5,000
Dog grooming furniture
5/12
$7,000
Pickup truck
9/17
$10,000
Commercial building
10/11
$270,000
Land (one acre)
10/11
$80,000
Assuming Winifred does not elect §179 expensing and elects not to use bonus depreciation, answer the following questions:
What is Winifredâ€s year 1 depreciation deduction for each asset?
What is Winifredâ€s year 2 depreciation deduction for each asset?
Asset
Date Acquired
Cost Basis
Computer equipment
2/17
$10,000
Furniture
5/12
$17,000
Commercial building
11/1
$270,000
Assuming GMW does not elect §179 expensing and elects not to use bonus depreciation, answer the following questions:
What is GMWâ€s year 1 cost recovery for each asset?
What is GMWâ€s year 3 cost recovery for each asset if GMW sells all of these assets on 1/23 of year 3?
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