1. Don and Harvey began operations as a partnership on October 3, 2010. The company spent $60,500 on organization costs that year. How much can the company deduct in 2010 relating to these costs?
2. On May 11, 2010 Jobs Company acquired all of the assets of Gates Incorporated. Jobs paid $9,750,000 for Gates' assets. The purchase agreement stipulated that $1,200,000 of the purchase price was for goodwill (section 197 intangibles). What is jobs' deduction relating to the goodwill for 2010?
3. In May 2011, Your Company purchased the rights to a natural resource for $4,125,000. The estimated recoverable units from the natural resource amount to 5,500,000 units. During the year, Your Company sold 800,000 units at $6 per unit and incurred operating costs other than depletion of $4.50 per unit. The company is entitled to a 12 percent rate for percentage depletion. Compute the company's largest available depletion deduction for 2011.
4. Harvey purchased an apartment complex in May 2010 for $12,400,000. $1,600,000 is allocated to the land. What is the maximum cost recovery allowance for the building in year 1?
5. On May 15, 2010, Your Corporation acquired an airplane (5 year recovery period, 6 year class life) for $1,450,000. Its qualified business use is 54%. Determine the maximum cost recovery deduction available in Year 1. The corporation has taxable income of $5,000,000 before the cost recovery deduction.
6. On November 19, 2010, Kim placed in service an automobile that cost $62,800. It is used 35% for business. What is the maximum cost recovery deduction available for the car? Kim has taxable income of $175,000 before the cost recovery deduction.
7. Tim purchased a used office building on May 15, 2001, for $2,000,000. $500,000 of the purchase price was allocated to the land. On November 1, 2010 the building was sold. What is the cost recovery deduction for the year of the sale?
8. In May of 2010, a business placed in service $35,000 of property eligible for limited expensing under §179. Line 13 of Form 4562 for 2009 was $15,000. Net income before cost recovery is $57,500. What is the company's deduction related to limited expensing for 2010? I am looking for the line 12 amount on Form 4562.
9. Several years ago, a calendar year taxpayer purchased 7 year recovery property as follows.
Date: Asset Cost
May 15 Tractor $475,000
October 9 back hoe $275,000
Bonus depreciation did not apply that year and the taxpayer was above the phase out limits for §179. What was the cost recovery deduction for the back hoe in Year 3? It was sold in August of that year.
10. In May of 2010 a calendar year taxpayer, placed in service $2,137,000 of USED 15-year recovery property. The taxpayer has taxable income of $1,175,000 before the cost recovery deduction. What is the maximum cost recovery deduction that the taxpayer may claim with respect to the equipment in the year of purchase?
11. On May 19, 2010, Kim placed in service a LIGHT VAN that cost $54,850. It is used 80% for business each year. What is the maximum cost recovery deduction available for the van in 2011 (year 2)? Kim has taxable income of $875,000 before the cost recovery deductions are deducted.
12. Howard has W2 wages of $1,275,000 and has generated income and losses from gambling as follows:
Year Income Losses
2009 45,000 150,000
2010 137,000 128,000
How much of the gambling losses (after all limitations) can be deducted in 2010?
13. In 2009 and 2010 Chris engaged in a hobby that generated both income and related expenses as listed below. Chris's only other income is W2 wages of $176,000 per year.
Income Expenses Kind of expense
2009 26,000 31,000 wages and supplies
2010 27,000 36,000 wages and supplies
Chris has no other expenses that would be allowed as deductions either for or from AGI. How much of the lobby expenses can Chris deduct in 2010?
14. In 2010 Andy owned a vacation home that generated both income and related expenses as listed below. Andy's only other income is W2 wages of $176,000 per year.
Income Ad valorem taxes Management Fees
2010 $27,000 $4,500 $26,000
Andy has no other expenses that would be allowed as deductions either for or from AGI. How much of the vacation home expenses can Andy deduct in 2010? Andy files as single.
15. Janie and Steve purchased an office building in January 1997 which they actively manage. They have losses of $39,000 from the building in 2010. Their other income in as follows
Salaries $107,000
Dividends 11,000
Income from (non-rental) passive activity 9,500
What is their AGI in 2010?