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Taxation Questions: Capatilization

Which of the following expenditures incurred in the operation of a business is not required to be capitalized?

I. Cost of replacing an old shingle roof with a new tile roof
II. Cost of changing from one heating system to another
III. Cost of replacing small tools

A. I only
B. II only
C. III only
D. I and II only
E. I, II, and III

Patsy lent money to Scarlett in 2009. Scarlett signed a loan agreement and made the agreed-upon monthly payments until May 2012 when she stopped making payments. Patsy called Scarlett and wrote her a letter requesting payment but received no response. Then Patsy read in the newspaper that Scarlett had filed for bankruptcy with no assets. Patsy can take a deduction for a bad debt

A. On her timely filed 2012 return
B. By amending her 2012 return within 3 years
C. By amending her 2009 return
D. On her timely filed 2012 return or by amending her 2009 return within 7 years

Charlie, who is self-employed, paid $7,500 to rent a 10-seat skybox at X stadium for three baseball games. The cost of regular non-luxury box seats at each game was $20 a seat. What is the amount Charlie can deduct as entertainment expense after any limitations?

A. $300
B. $600
C. $3,750
D. $7,500

Solution Preview

Which of the following expenditures incurred in the operation of a business is not required to be capitalized?

I. Cost of replacing an old shingle roof with a new tile roof
II. Cost of changing from one heating system to another
III. Cost of replacing small tools

A. I only
B. II only
C. III only
D. I and II only
E. I, II, and III

C - I & II are improvements <---- You're correct. We wouldn't capitalize small tool purchases. We could, and we'd likely use it as a ...

Solution Summary

This solution provides the correct answers with explanations to the capitalization multiple choice questions listed.

$2.19