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MACRS Deprication, MACRS Computation, Income Tax Returns

Dorothy purchased a car in the current year to be used three-fourths of the time in her business and one-fourth of the time for personal purposes. The car cost $8,000 and is 5-year recovery property. No Sec. 179 expense deduction is taken. The car's basis for MACRS depreciation is

A. $1,600
B. $2,000
C. $6,000
D. $8,000

Mr. Anderson, a sole proprietor, purchased $12,000 of office equipment and furniture in 2013 for use in his business. He elected to take the maximum Sec. 179 deduction. What is Mr. Anderson's basis for the MACRS computation?

A. $12,000
B. $7,000
C. $2,000
D. $0

During year 1, Mr. F acquired 100 shares of stock in ABC Corporation for $500. During year 3 he sold the stock for $1,000. His adjusted basis in the stock at the time of sale was $500 and he had no other capital gains or losses during the year. What is the amount and character of income to be reported on F's income tax return for year 3?

A. $500 long-term capital gain
B. $500 short-term capital gain
C. $500 ordinary income
D. $500 tax-exempt income

For 2011, Mr. Opal had the following capital gains and losses:

Short-term gains: $4,300
Short-term loss from a partnership: ($3,000)
Short-term gain from an S corporation: $22,500
Short-term carryover loss from 2008: ($5,700)
Long-term gains (15% basket): $7,500
Long-term losses (28% basket): ($11,000)

What is Mr. Opal's total capital gain or loss for 2011 (do not consider passive activity rules)?

A. $14,600
B. $17,600
C. $18,100
D. $20,300

Earl Cook, who worked as a machinist for Precision Corporation, lent Precision $1,000 in 2007. Cook did not own any of Precision's stock and the loan was not a condition of employment. In 2013, Precision declared bankruptcy and Cook's note receivable from Precision became worthless. What loss can Cook claim on his 2013 income tax return?

A. $0
B. $500 long-term capital loss
C. $1,000 short-term capital loss
D. $1,000 business bad debt.

Solution Preview

Dorothy purchased a car in the current year to be used three-fourths of the time in her business and one-fourth of the time for personal purposes. The car cost $8,000 and is 5-year recovery property. No Sec. 179 expense deduction is taken. The car's basis for MACRS depreciation is

A. $1,600
B. $2,000
C. $6,000
D. $8,000
Answer C <-- This is correct. It is .75 of 8,000.

Mr. Anderson, a sole proprietor, purchased $12,000 of office equipment and furniture in 2013 for use in his business. He elected to take the maximum Sec. 179 deduction. What is Mr. Anderson's basis for the MACRS ...

Solution Summary

This solution provides the correct answers with explanations to the taxation questions presented.

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