Purchase Solution

Brenda's basis for depreciation. A Section 197 intangible.

Not what you're looking for?

Ask Custom Question

Brenda purchased a business for $120,000 and received a building FMV $80,000 land, FMV $10,000, and furniture and fixtures, FMV $130,000. She spent $10,000 on legal fees to make the purchase. What is the basis of these item for depreciation?

A. $82,500 building, $12,500 land, $35,000 furniture and fixtures
B. $88,750 building, $11,250 land, $30,000 furniture and fixtures
C. $80,000 building, $10,000 land, $30,000 furniture and fixtures
D. $86,667 building, $10,833 land, $32,500 furniture and fixtures

Which of the following is not a section 197 intangible?

A. A noncompete covenant
B. A government issued license
C. Workforce place
D. A partnership interest

Purchase this Solution
Solution Summary

The 236 word cited solution carefully explains the problems together with calculations.

Solution Preview

The total purchase price of $120,000 is increased by the $10,000 paid for legal fees. The fees are part of the total cost of all the property. The legal fees are not an expense of doing business and must be added to the value of the assets purchased. The method of doing so is to add the legal fees as a pro-rata amount of each type of asset acquired.

For example, ...

Purchase this Solution
Free BrainMass Quizzes
IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

View More Free Quizzes
Related BrainMass Solutions

  • Various Income Tax Questions

    Section 197 intangible assets such as goodwill are amortized for tax purposes over: IRC Section 197(a) states that "A taxpayer shall be entitled to an amortization deduction with respect to any amortizable section 197 intangible.

  • Goodwill : Section 197 Intangibles

    Goodwill = 950,000 As per Section 197, the goodwill can be amortised over 180 months (15 years) starting from the month of intangible asset acquired. Hence we will calculate goodwill for 10 months in the Year 2011.

  • Discuss the following cost recovery questions: Whether pro

    The amortization period of a Section 197 intangible if the actual useful life is less than 15 years.

  • Geraldo: US tax problem

    Additional depreciation 77,800-66,100= 11,700 will be deductible 2.Good will allowed to be amortized in 15 years as per section 197, therefore amount allowed is 500,000/ 15= 33,333 for 11 months it will be 33,333*11/12= 30556 3. a) Employee group term

  • Differences between depreciation, depletion and amortization

    Depreciation is the term for plant, property and equipment (so called hard assets) Depletion is the term for natural resources such as oil, timber, and coal Amortization is the term of intangible assets including patents, start up and organizational

  • Operating Activity for Cash Flows

    Operating activities section of cash flow statement starts with the net earning and non cash items like Depreciation, Intangible assets written off, provision for tax and dividend and increase or decrease in current assets or current liabilities are

  • How is Tax basis calculated; increases and decreases? GAAP?

    This can cause a difference in basis between book and tax. 3. Use of Section 179 can cause a major difference in basis. 4.

  • Tax Effects of sale of Hsui's process to preserve fresh frui

    Using the purchase of an asset scenario, the company can record the asset as an intangible subject to the 15-year write off provision under Section 197 of the Internal Revenue Code.

  • Intangible Assets: Appraisal on purchase, abuse, stuffing

    The anti-stuffing rule under Section 7701(a)(43) attempts to prevent the adjustment of the basis in a property for the sole purpose of reducing gain or increasing loss on transfer of assets.

View More Related Solutions