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Chp2-Mutiple Choice

Gessner LLC patented a process in 2023, incurring legal costs of $43,000 and having unamortized research expenditures of $15,000, allowing for a total amortization deduction of $4,350 for the current year. The document also discusses various tax recovery methods, including depreciation, amortization, and depletion, as well as specific rules regarding luxury automobiles, listed property, and the §179 immediate expensing election. Additionally, it highlights changes in tax treatment for research expenditures and the use of historical data for determining recovery periods.

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Renaldo Ribeiro
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843 views3 pages

Chp2-Mutiple Choice

Gessner LLC patented a process in 2023, incurring legal costs of $43,000 and having unamortized research expenditures of $15,000, allowing for a total amortization deduction of $4,350 for the current year. The document also discusses various tax recovery methods, including depreciation, amortization, and depletion, as well as specific rules regarding luxury automobiles, listed property, and the §179 immediate expensing election. Additionally, it highlights changes in tax treatment for research expenditures and the use of historical data for determining recovery periods.

Uploaded by

Renaldo Ribeiro
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Gessner LLC patented a process it developed in the current year.

The patent
is expected to create benefits for Gessner over a 10-year period. The patent
was issued on April 15th and the legal costs associated with the patent were
$43,000. In addition, Gessner had unamortized research expenditures of
$15,000 related to the process. What is the total amortization amount
Gessner may deduct during the current year?

(($43,000 + $15,000)*(9 (12-4) / 120 month) = 4350


T

Limits are placed on the depreciation of luxury automobiles.

Goodwill and customer lists are examples of §197 amortizable assets.

Tax cost recovery methods include depreciation, amortization, and depletion.

The MACRS depreciation tables automatically switch to the straight-line


method when the straight-line method yields a higher annual depreciation
amount than the declining balance method.

Bonus depreciation is used as a stimulus tool by tax policy makers.

Depletion is the method taxpayers use to recover their capital investment in


natural resources.

Businesses deduct percentage depletion when they sell the natural resource
and they deduct cost depletion in the year they produce or extract the
natural resource.

The mid-month convention applies to real property in the year of acquisition


and disposition.

Business assets that tend to be used for both business and personal
purposes are referred to as listed property.

The method for tax amortization is always the straight-line method.


F

Taxpayers may use historical data to determine the recovery period for tax
depreciation.

After 2021, businesses may immediately expense research and


experimentation expenditures, or they may elect to capitalize these costs
and amortize them using the straight-line method over a period of not less
than 60 months.

The §179 immediate expensing election phases out based upon a taxpayer's
taxable income.

Taxpayers use the half-year convention for all assets.

After 2021, businesses may immediately expense research and


experimentation expenditures, or they may elect to capitalize these costs
and amortize them using the straight-line method over a period of not less
than 60 months.

If the business-use percentage for listed property falls below 50 percent, the
only adjustment is that all future depreciation must be calculated under the
straight-line method.

If a business mistakenly claims too little depreciation, the business must only
reduce the asset's basis by the depreciation actually taken rather than by the
amount of the allowable depreciation.

In general, major integrated oil and gas producers may take the greater of
cost or percentage depletion.

All taxpayers may use the §179 immediate expensing election on certain
property.

Taxpayers may always expense a portion of start-up costs and organizational


expenditures.

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