Question : 1.
Jacqueline Corporation acquired new office furniture on 13th July, 2013, for $80,000. Jacqueline did not elect instant expensing under Section 179. Jacqueline also elects not to take the additional first-year depreciation. Evaluate Jacqueline's cost recovery for 2013.
a. $80,000
b. $11,432
c. $8,000
d. $0
Question : 2.
On August 5, 2013, Pavlina purchased a new office building for $2 million. On 3rd October, 2013, she started to rent out office space in the building. Evaluate Pavlina's cost recovery for 2013?
a. $0
b. $10,700
c. $51,282
d. $2,000,000
Question : 3.
Consider the same facts as in the previous problem. Suppose further that Pavlina sells the office building on July 12, 2017. Evaluate Pavlina's cost recovery for 2017?
a. $51,282
b. $27,777
c. $10,700
d. $0
Question : 4.
In March 2013, Dave, a calendar-year taxpayer, brought new 7-year property for $1,000,000. The property was instantly placed into service (and is being used exclusively in Dave's extremely profitable business). No other personal property may be purchased by Dave in 2013. Dave wants to take the largest possible tax deduction in 2013 relating to the equipment. Evaluate the largest tax deduction possible in 2013 for the equipment:
a. $1,000,000
b. $ 785,725
c. $500,000
d. $139,000
Question : 5.
In 2007, John (a single taxpayer) loaned $10,000 to his friend Gregory. In 2013, Gregory declared bankruptcy, with the result that the debt became completely worthless. How should John treat the loss relating to this debt (consider that the debt is a nonbusiness debt that is a bona fide debt that arose from a debtor-creditor relationship)?
a. John may not take any deduction relating to the debt
b. As a short-term capital loss
c. As a long-term capital loss
d. As an itemized deduction
Question : 6.
Suppose the facts stated in the prior question. Consider further that John has no other capital gains or losses in 2013 (or any prior years). Determine the maximum amount (related to the bad debt) that John can deduct in 2013?
a. $10,000
b. $7,000
c. $3,000
d. $0
Question : 7.
Suppose the facts stated in the prior two questions. Consider further that for 2013 John will offset his wages (with any deduction related to the debt) to the maximum extent permitted by law. Evaluate the amount of John's capital loss carryover to 2014?
a. $10,000
b. $7,000
c. $3,000
d. $0