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2009-Ch8Solutions - CHAPTER 8 DEPRECIATION COST RECOVERY...

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CHAPTER 8 DEPRECIATION, COST RECOVERY, AMORTIZATION, AND DEPLETION SOLUTIONS TO ASSIGNED PROBLEMS 2. The basis of the property must be reduced by the amount of cost recovery that should have been deducted (i.e., the cost recovery “allowable”). pp. 8-3 and 8-4 26. The amortization period for a § 197 intangible is 15 years regardless of the actual useful life. p. 8- 22 27. The following issues are relevant for Orange Motors: Does the noncompete agreement come under § 197 for intangibles? Was the noncompete agreement in connection with the acquisition of a trade or business? Can the cost of the noncompete agreement be amortized over a period other than the normal statutory period if the noncompete agreement is legally enforceable for a shorter period of time? What is the normal statutory period for amortizing intangibles? p. 8-22 28. The elective treatment for start-up expenditures allows the taxpayer to deduct the lesser of: (1) the amount of start-up expenditures with respect to the trade or business or (2) $5,000, reduced, but not below zero, by the amount by which the start-up expenditures exceed $50,000. Any start-up expenditures not deducted may be amortized ratably over a 180-month period beginning in the month in which the trade or business begins. pp. 8-21 and 8-23 29. The following issues are relevant for George. Are all of the expenditures qualifying expenditures?
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