ch09 Student: ___________________________________________________________________________ 1. Like financial accounting, most business property must be capitalized for tax purposes. True False 2. Tax cost recovery methods include depreciation, amortization, and depletion. True False 3. If a business mistakenly claims too little depreciation, the business must only reduce the asset's basis by the depreciation actually taken rather than the amount of the allowable depreciation. True False 4. An asset's capitalized cost basis includes only the actual purchase price; whereas the other expenses associated with the asset are immediately expensed. True False 5. The basis for a personal use asset converted to business use is the lesser of the asset's cost basis or fair market value on the date of the transfer or conversion. True False 6. Depreciation is currently computed under the Modified Accelerated Cost Recovery System (MACRS). True False 7. The 200 percent or double declining balance method is allowable for five and seven year property. True False 8. Taxpayers may use historical data to determine the recovery period for tax depreciation. True False 9. Taxpayers use the half-year convention for all assets. True False 10. If a taxpayer places only one asset (a building) in service during the fourth quarter of the year, the mid-quarter convention must be used. True False 11. The MACRS depreciation tables automatically switch to the straight-line method when it exceeds the declining balance method. True False 12. If tangible personal property is depreciated using the half-year convention and is disposed of during the first quarter of a subsequent year, the taxpayer must use the mid-quarter convention for the year of disposition. True False 13. If a machine (seven-year property) being depreciated using the half-year convention is disposed of during the seventh year, a taxpayer must multiply the appropriate depreciation percentage from the MACRS table percentage by 50 percent to calculate the depreciation expense properly. True False 14. Real property is always depreciated using the straight-line method. True False 15. The mid-month convention applies to real property in the year of acquisition and disposition. True False
16. All taxpayers may use the section 179 immediate expensing election on certain property. True False 17. The section 179 immediate expensing election phases out based upon a taxpayer's taxable income. True False 18. The section 179 immediate expensing election phases out based upon the amount of tangible personal property a taxpayer places in service during the year. True False 19. Property expensed under the section 179 immediate expensing election is not included in the 40 percent test to determine whether the mid-quarter convention must be used.
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