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Chapter I:10 Depreciation, Cost Recovery, Amortization and Depletion True-False I:10-1. The MACRS system applies to property acquired after December 31, 1986. T, p. I:10-2. I:10-2. Most of the property depreciated under the original ACRS system is now fully depreciated. T, p. I:10-2. I:10-3. Recovery property includes business, investment, and personal-use assets. F, p. I:10-2. Solution: Recovery property does not include personal-use assets. I:10-4. All land must be depreciated over a 39-year recovery period. F, p. I:10-3. Solution: No depreciation is permitted for land. I:10-5. In order for an asset to be depreciated in the year of purchase, it must be placed in service before years end. T, p. I:10-3. I:10-6. The basis of an asset must be reduced by the depreciation allowed or allowable. T, p. I:10-3. I:10-7. Land, buildings, equipment, and stock are examples of tangible property. F, p. I:10-3. Solution: Stock is intangible property. I:10-8. Personal property is any property, tangible or intangible, used by the taxpayer for his own personal use rather than in a trade or business. F, p. I:10-3. Solution: Personal property is tangible property other than real property. I:10-9. If personal-use property is converted to trade or business use, the basis for depreciation is the lesser of adjusted basis or FMV on the date of conversion. T, p. I:10-4. I:10-10. Under the MACRS rules, salvage value is not considered in the computation of the cost-recovery or depreciation amount. T, p. I:10-4. I:TB10-1 I:10-11. Under the MACRS system, depreciation rates for realty or real property must always use the mid-month convention in the year of acquisition. T, p. I:10-4. I:10-12. Under MACRS, tangible, personal property used in trade or business purchased and placed into service on March 1, 2007 should be depreciated for 10 months in 2007. F, p. I:10-4; Example I:10-3. ... View Full Document

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