Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 9DQ
To determine
Explain whether §1245 depreciation recapture is applicable to the asset.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
At the beginning of the year 2019. Itlog Company has an investment property acquired at a cost of $ 2,000,000. On December 31, 2019, the fair value was $2,200,000 and on December 31, 2020, the fair value was $1,950,000. The property had a useful life of 25 years. Under the cost method and fair value method, what is the expense recognized in the profit or loss for the year ended December 31, 2020?
Which of the following will cause a difference in book depreciation and federal depreciation?
Choosing to depreciate a class of property using straight-line on the federal return and straight-line on the books.
Depreciating property with a useful life of less than one year.
Electing to take a Section 179 deduction on eligible property.
Placing property in service mid-year.
During 2019, Quill Corporation, a calendar year C corporation, sold the following business assets on the dates listed below. Compute the amount and character of the gain or loss Quill Corporation must report from the disposition of each asset. Then determine the sum of each type of gain or loss and the net effect these gains and losses have on Quill Corporation’s 2019 taxable income. Assume that Quill has no Section 1231 losses in prior years. Please show your work and explain your calculations.
Asset
Acquired
Sold
Cost
CostRecovery
AdjustedBasis
Sales Price
Computer
1/13/18
5/16/2019
$208,000
$74,880
$133,120
$180,000
Office equipment
8/10/15
3/10/2019
$160,000
$117,160
$42,840
$40,000
Office building
7/23/12
2/12/2019
$320,000
$60,000
$260,000
$400,000
Land
7/23/12
2/12/2019
$80,000
$0
$80,000
$100,000
Chapter 17 Solutions
Individual Income Taxes
Ch. 17 - Prob. 1DQCh. 17 - Prob. 2DQCh. 17 - Prob. 3DQCh. 17 - Prob. 4DQCh. 17 - Prob. 5DQCh. 17 - Prob. 6DQCh. 17 - Prob. 7DQCh. 17 - A depreciable business dump truck has been owned...Ch. 17 - Prob. 9DQCh. 17 - Prob. 10DQ
Ch. 17 - Prob. 11DQCh. 17 - Prob. 12DQCh. 17 - Prob. 13DQCh. 17 - Prob. 14DQCh. 17 - Prob. 15DQCh. 17 - Prob. 16DQCh. 17 - Prob. 17DQCh. 17 - Prob. 18DQCh. 17 - Prob. 19DQCh. 17 - Prob. 20DQCh. 17 - Prob. 21CECh. 17 - Prob. 22CECh. 17 - LO.3 Renata Corporation purchased equipment in...Ch. 17 - LO.3 Jacob purchased business equipment for 56,000...Ch. 17 - Sissie owns two items of business equipment. Both...Ch. 17 - Prob. 26CECh. 17 - Prob. 27CECh. 17 - LO.4 Enzo is a single taxpayer with the following...Ch. 17 - Prob. 29CECh. 17 - Prob. 30CECh. 17 - LO.1, 2 Jenny purchased timber on a 100-acre tract...Ch. 17 - Prob. 32PCh. 17 - LO.2 A sculpture that Korliss Kane held for...Ch. 17 - Prob. 34PCh. 17 - Prob. 35PCh. 17 - Prob. 36PCh. 17 - Prob. 37PCh. 17 - Prob. 38PCh. 17 - Prob. 39PCh. 17 - Prob. 40PCh. 17 - Prob. 41PCh. 17 - Prob. 43PCh. 17 - Joanne is in the 24% tax bracket and owns...Ch. 17 - Prob. 45PCh. 17 - Prob. 46PCh. 17 - Prob. 47PCh. 17 - Prob. 48PCh. 17 - Prob. 49PCh. 17 - Jasmine owned rental real estate that she sold to...Ch. 17 - Prob. 51PCh. 17 - Prob. 52PCh. 17 - Prob. 53PCh. 17 - Prob. 54PCh. 17 - Jay sold three items of business equipment for a...Ch. 17 - Prob. 1RPCh. 17 - Prob. 2RPCh. 17 - Prob. 3RPCh. 17 - Prob. 4RPCh. 17 - Prob. 1CPACh. 17 - Prob. 2CPACh. 17 - Jerry uses a building for business purposes. The...Ch. 17 - Prob. 4CPACh. 17 - Prob. 5CPACh. 17 - Prob. 6CPACh. 17 - Wally, Inc., sold the following three personal...Ch. 17 - Net Section 1231 losses are: a. Deducted as a...Ch. 17 - Prob. 9CPACh. 17 - Prob. 10CPA
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Under U.S. GAAP, in a year in which the fair value of an asset rises, should a company record depreciation expense for that asset? Why?arrow_forwardWhich of the following statements with respect to the depreciation of property under MACRS is incorrect? Under the half-year convention, one-half year of depreciation is allowed in the year the property is placed in service. If a taxpayer elects to use the straight-line method of depreciation for property in the 5 -year class, all other 5 -year class property acquired during the year must also be depreciated using the straight-line method. In some cases, when a taxpayer places a significant amount of property in service during the last quarter of the year, real property must be depreciated using a mid-quarter convention. Real property acquired after 1986 must be depreciated using the straight-line method. The cost of property to which the MACRS rate is applied is not reduced for estimated salvage value.arrow_forwardAt the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial reporting purposes, the asset has a 4-year life with no residual value and is depreciated by the straight-line method beginning in 2019. For tax purposes, the asset is depreciated under MACRS using a 5-year recovery period. Prior to 2019, Conley had no deferred tax liability or asset. The difference between depreciation for financial reporting purposes and income tax purposes is the only temporary difference between pretax financial income and taxable income. The current income tax rate is 30%, and no change in the tax rate has been enacted for future years. In 2019 and 2020, taxable income will be higher or lower than financial income by what amount?arrow_forward
- Question 2 During 2019, Quill Corporation, a calendar year C corporation, sold the following business assets on the dates listed below. Compute the amount and character of the gain or loss Quill Corporation must report from the disposition of each asset. Then determine the sum of each type of gain or loss and the net effect these gains and losses have on Quill Corporation’s 2019 taxable income. Assume that Quill has no Section 1231 losses in prior years. Please show your work and explain your calculations. Asset Acquired Sold Cost CostRecovery AdjustedBasis Sales Price Computer 1/13/18 5/16/2019 $208,000 $74,880 $133,120 $180,000 Office equipment 8/10/15 3/10/2019 $160,000 $117,160 $42,840 $40,000 Office building 7/23/12 2/12/2019 $320,000 $60,000 $260,000 $400,000 Land 7/23/12 2/12/2019 $80,000 $0 $80,000 $100,000arrow_forwardAn entity purchased an investment property on January 1,2020 at a cost of P4,000,000. The property had a useful life of 20 years and on December 31, 2021 had a fair value of P4,800,000.On December 31, 2021 the property was sold for net proceeds of P4,500,000. The entity used the cost model to account for investment property. What is the gain to be recognized for 2021 regarding the disposal of the property? a. 900,000 b. 500,000 c. 800,000 d. 700,000arrow_forwardAn entity accounted for noncurrent assets using the cost model. On July 1, 2019, the entity classified an equipment as held for sale. At the date, the carrying amount was P5,000,000, the fair value was estimated at P3,500,000 and the cost of disposal at P100,000. On December 31, 2019, the equipment was sold for net proceeds of P2,500,000. What amount should be reported as an impairment loss for 2019? a. 1,600,000 b. 2,500,000 c. 1,500,000 d. 900,000 2. What amount should be reported as loss on disposal for 2019? a. 1,500,000 b. 2,500,000 c. 1,600,000 d. 900,000arrow_forward
- Cake, Inc. purchased a machinery on January 1, 2020, at a cost of P1,250,000. It is being depreciated using the straight-line method over its projected useful life of 8 years. On December 31, 2021, the asset's fair value was P1,125,000. Accordingly, an entry was made on that date to recognize the revaluation surplus. Revaluation is recorded maintaining the proportionate relationship between the asset account and accumulated depreciation. It is the company policy to transfer a portion of revaluation surplus to retained earnings every period. What is the amount of revaluation surplus reported in equity on December 31, 2022?*arrow_forwardBili Company acquired a building on January 1, 2019 for P 9,000,000. At that date the building had a useful life of 30 years. On December 31, 2019, the fair value of the building was P 9,600,000 and on December 31, 2020, the fair value is P 9,800,000. The building was classified as an investment property and accounted for under the cost model. What amount should be carried in the statement of financial position for the year ended 2020?. 8,700,000 8,400,000 9,000,000 9,800,000arrow_forwardMaxine Corporation purchased an investment property on January 1, 2017 for a cost of $2,200,000. The property had a useful life of 40 years and at December 31, 2019 had fair value of $3,000,000. On January 1, 2020 the property was sold for net proceeds of $2,900,000. Maxine Corporation uses the cost model to account for the investment property. How much is the gain (loss) on disposal of property to be recognized for the year ended December 31, 2020?arrow_forward
- An entity purchased equipment for P5,000,000 on January 1, 2020 with a useful life of 10 years and no residual value. On December 31, 2021, the entity classified the asset as held for sale. The fair value less cost of disposal of the equipment on December 31, 2021 is P3,200,000. On December 31, 2022, the fair value less cost of disposal of the equipment is P3,600,000. requirement: What amount should be recorded as a debit to equipment on January 1, 2020 What amount should be recorded to remove the asset from property, plant and equipment and classify it as held for sale on December 31, 2021arrow_forwardFareed sells a piece of equipment used in a business for $31,500 during 2021. The equipment was purchased on July 1, 2019, at a cost of $22,000. Fareed has taken $6,600 of depreciation on the equipment. What are the amount and classification of the gain on the sale by Fareed? Group of answer choices $9,500 Section 1231 gain. $16,100 ordinary income under Section 1245. $16,100 Section 1231 gain. $6,600 ordinary income under Section 1245 and $9,500 Section 1231 gain.arrow_forwardIf a depreciable property is revalued at the middle of the current year, how is the depreciation expense for the year determined when the entity has a calendar year-end? a.Depreciation for the first half of the year is based on cost and for the second half on revalued amount. b.Depreciation for the year is based on the average of the depreciation based on cost and on revalued amount. c.Depreciation for the entire year is based on revalued amount. d.Depreciation for the entire year is based on cost.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Depreciation -MACRS; Author: Ronald Moy, Ph.D., CFA, CFP;https://www.youtube.com/watch?v=jsf7NCnkAmk;License: Standard Youtube License