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Exam 5: Business Deductions

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Question 111

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Taxpayers may elect to use the straight-line method under MACRS for personalty.

A) True
B) False

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Question 112

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Beige, Inc., an airline manufacturer, is conducting negotiations for the sale of military aircraft. One negotiation is with a U.S. assistant secretary of defense. She can close the deal on the purchase of 50 attack helicopters if she is paid $750,000 under the table. Another negotiation is with the minister of defense of a third world country. To complete the sale of 20 jet fighters to his government, he demands that he be paid a $1 million grease payment. Beige makes the payments and closes the deals. How much of these payments are deductible by Beige, Inc.?

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The $750,000 payment to the U.S. assista...

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Question 113

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A used $35,000 automobile that is used 100% for business is placed in service in 2016. If the automobile fails the 50% business usage test in the second year, no cost recovery will be recaptured.

Rick purchased a uranium interest for $10,000,000 on January 3, 2016, when recoverable reserves were estimated at 200,000 units. A total of 10,000 units were extracted in 2016 and 7,000 units were sold in 2016. Gross income from the property was $2,800,000 and taxable income without the allowance for depletion was $1,000,000. Determine the depletion deduction for 2016.

A taxpayer's note or promise to pay satisfies the "actually paid" requirement for the cash basis method of accounting.

Research and experimental expenditures do not include the cost of consumer surveys.

On July 10, 2016, Ariff places in service a new sports utility vehicle that cost $70,000 and weighed 6,300 pounds. The SUV is used 100% for business. Determine Ariff's maximum deduction for 2016, assuming Ariff's § 179 business income is $110,000. Ariff does not take additional first-year depreciation (if available) .

If an election is made to defer deduction of research expenditures, the amortization period is based on the expected life of the research project if less than 60 months.