R4 - Appendix Flashcards
The general rule is that all tangible property that is not inventory must be what?
Capitalized unless there is an exception
Generally an item that costs _____ or less or has an economic life of 12 months or less qualifies as materials and supplies.
$200
If the tangible property qualifies as materials and supplies, can it be deducted in the year of consumption if non-incidental, or in the year paid if incidental?
YES
What is defined as incidental materials and supplies?
Those for which no inventories or records of consumption are kept
True or false.
Amounts paid or incurred to produce or acquire tangible and intangible property must be capitalized.
True
Capitalized or expensed:
Indirect costs, such as otherwise deductible repair or removal costs, that directly benefit or are incurred by reason of an imrpovement
Capitalized
Capitalized or expensed:
Indirect costs that do not directly benefit and are not incurred by reason of an improvement
Expensed
What does UOP stand for?
Unit of property
What is defined as all components that are functionally interdependent?
A single unit of property
Capitalized or expensed:
Amounts paid or incurred for acquiring, creating, or enhancing intangible property
Capitalized
True or false.
Improvements to a single unit of property must be capitalized if they result in a betterment to the property, adapt the property to a new or different use, or result in a restoration of the property.
True
Is a gas distribution system considered a designated building system separate from the building structure?
YES
ABC Corporation has an applicable financial statement and at the beginning of Year 1 has a written accounting policy to expense amounts paid for tangible property costing up to $5,000. During Year 1, ABC pays $32,000 for 8 desks. How much may ABC deduct under the de minimis rule in Year 1?
$32,000 in Year 1
EXPLANATION: The cost of $4,000 per desk ($32,000/8) is below the $5,000 per item threshold.
Does routine maintenance include amounts paid or incurred for the repair of damage to the unit of property that has been taken as a basis adjustment as a result of a casualty loss?
NO
Qualifying small taxpayers can expense costs related to an eligible building if they do not exceed the lesser of 2 percent of unadjusted basis of the building or $_______.
$10,000
Will amounts deducted under the de minimis or routine maintenance rules count toward the $10,000 limit?
Yes
What is defined as a taxpayer with average annual gross receipts of $10 million or less during the three preceding tax years?
Qualifying small taxpayer
An eligible building is any building with an unadjusted basis that does not exceed $______.
$1 million
Inherited assets automatically receive ______ treatment.
long-term
What is the MACRS life?
Office furniture purchased on January 4 for $200k
7 years
What is the MACRS life?
A computer purchased on March 10 for $100,000
5 years
What is the MACRS life?
A building was purchased and used as residential rental property
27.5 years
What is the MACRS life?
A building was purchased and used as office space
39 years
Sold 200 shares of Y Corp. stock at $14 per share. Green received the 200 shares as a gift from his brother, three years ago, at the time that the shares had a FMV of $10 per share. Green’s brother purchased the stock for $16 per share. Gain or loss = ?
$0
EXPLANATION: If at the date of the gift, the gift’s FMV is less than the donor’s basis and if the donee later sells the gift for a price which is greater than the date-of-gift FMV, but which is lower than the donor’s basis, the taxpayer-donee recognizes neither a gain or a loss on the sale.
Sold 200 shares of Y Corp. stock at $22 per share. Green received the 200 shares as a gift from his brother, three years ago, at the time that the shares had a FMV of $26 per share. Green’s brother purchased the stock for $16 per share. Gain or loss = ?
$1200
EXPLANATION: If at the time of a gift the FMV of the gift is greater than the donor’s basis, then when the donee subsequently sells the gift, the donee uses the donor’s basis (rollover cost basis) to determine gain or loss.
Sold 450 shares of Z Corp. stock at $40 per share. Green received the 450 shares from his aunt’s estate as a bequest. The FMV of the stock at the date of his aunt’s death was $32 per share and did not change in the subsequent year. His aunt originally purchased the stock for $20 per share. Gain or loss = ?
$3,600
EXPLANATION: Unless the estate validly elects the alternative valuation date, property acquired by bequest or inheritance takes as its basis the FMV of the property as the date of the decedent’s death.
