Question: 1. If a taxpayer purchases land worth $200,000 with an office building valued at $100,000 on it, how are the two depreciated for tax purposes?
A) Land:
B) Office building:
2. On August 1, 2016, David purchased manufacturing equipment for use in his business. The equipment cost $14,000 and has an estimated useful life and MACRS class life of 7 years. No election to expense or use bonus depreciation is made.
a. Calculate the amount of depreciation on the manufacturing equipment for 2016 using the accelerated MACRS method and no election to expense or use bonus depreciation is made.
b. Calculate the amount of depreciation on the manufacturing equipment for 2016 using the accelerated MACRS method and bonus depreciation used but no election to expense.
c. Calculate the amount of depreciation on the manufacturing equipment for 2016 using the straight-line MACRS optional method and no election to expense or use bonus depreciation is made.
d. Calculate the amount of depreciation on the manufacturing equipment for 2016 for financial accounting purposes using the straight-line method of depreciation.
3. Betty purchases a used $12,000 car in 2016, to use exclusively in her business.
a. What will the standard MACRS depreciation schedule be for the 6 years the auto is depreciated (no bonus expense)?
Year 1:
Year 2:
Year 3:
Year 4:
Year 5:
Year 6:
b. If Betty holds the car until it is fully depreciated, and uses straight-line depreciation, how many years will this take?