ACCT 401 Taxation Chapter 9
(1). Jose purchased a delivery van for his business through anonline auction. His winning bid for the van was $25,500. Inaddition, Jose incurred the following expenses before using thevan: shipping costs of $750; paint to match the other fleetvehicles at a cost of $1,990; registration costs of $2,616, whichincluded $2,400 of sales tax and a registration fee of $216; washand detailing for $78; and an engine tune-up for $349.
What is Joseâs cost basis for the delivery van?
Cost basis
(2). Wanting to finalize a sale before year-end, on December 29,WR Outfitters sold to Bob a warehouse and the land for $171,000.The appraised fair market value of the warehouse was $124,500, andthe appraised value of the land was $139,500. (Do not roundintermediate calculations. Round your answers to the nearest dollaramount.)
a.
What is Bobâs basis in the warehouse and in the land?
Bobâs Basis
Warehouse
Land
b.
What would be Bobâs basis in the warehouse and in the land ifthe appraised value of the warehouse is $109,500, and the appraisedvalue of the land is $154,500?
Bobâs Basis
Warehouse
Land
c.
Which appraisal would Bob likely prefer?
Appraised value in part (a)
Appraised value in part (b)
(3). Phil owns a ranch business and uses four-wheelers to domuch of his work. Occasionally, though, he and his boys will go fora ride together as a family activity. During year 1, Phil put 1,119miles on the four-wheeler that he bought on January 15 for $9,600.Of the miles driven, only 239 miles was for personal use. Assumefour-wheelers qualify to be depreciated according to the five-yearMACRS schedule and the four-wheeler was the only asset Philpurchased this year. (Use MACRS Table 1, Table 2, Table 3, Table4and Table 5.) (Do not round intermediate calculations.Round your final answers to the nearest whole dollaramount.)
a.
Calculate the allowable depreciation for year 1 (ignore the §179expense and bonus depreciation).
Depreciation expense
b.
Calculate the allowable depreciation for year 2 if total mileswere 1,405 and personal use miles were 530 (ignore the §179 expenseand bonus depreciation).
Depreciation expense
(4). Nicole organized a new corporation. The corporation beganbusiness on April 1 of year 1. She made the following expendituresassociated with getting the corporation started:
Attonmey fees for articles ofincorporation Feb10 $39,000
March 1 - March 30wages Mar30 6,100
Stock issuancecosts Apr1 27,000
April 1- May30wages May30 15,250
a.
What is the total amount of the start-up costs andorganizational expenditures for Nicole's corporation?
Total amount of the start-up costs
Organizational expenditures
b.
What amount of the start-up costs and organizationalexpenditures may the corporation immediately expense in year 1?
Total amount of the start-up costs
Organizational expenditures
c.
What amount can the corporation deduct as amortization expensefor the organizational expenditures and for the start-up costs foryear 1 (not including the amount it immediately expensed)?(Round intermediate calculations to 2 decimal places andfinal answer to the nearest whole dollar amount.)
Start-up costs amortized
Organizational expenditures amortized
d.
What would be the allowable organizational expenditures,including immediate expensing and amortization, if Nicole started asole proprietorship instead?
Allowable organizational expenditure
ACCT 401 Taxation Chapter 9
(1). Jose purchased a delivery van for his business through anonline auction. His winning bid for the van was $25,500. Inaddition, Jose incurred the following expenses before using thevan: shipping costs of $750; paint to match the other fleetvehicles at a cost of $1,990; registration costs of $2,616, whichincluded $2,400 of sales tax and a registration fee of $216; washand detailing for $78; and an engine tune-up for $349. |
What is Joseâs cost basis for the delivery van? |
Cost basis
(2). Wanting to finalize a sale before year-end, on December 29,WR Outfitters sold to Bob a warehouse and the land for $171,000.The appraised fair market value of the warehouse was $124,500, andthe appraised value of the land was $139,500. (Do not roundintermediate calculations. Round your answers to the nearest dollaramount.) |
a. | What is Bobâs basis in the warehouse and in the land? |
Bobâs Basis
Warehouse
Land
b. | What would be Bobâs basis in the warehouse and in the land ifthe appraised value of the warehouse is $109,500, and the appraisedvalue of the land is $154,500? |
Bobâs Basis
Warehouse
Land
c. | Which appraisal would Bob likely prefer? | ||||||||
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(3). Phil owns a ranch business and uses four-wheelers to domuch of his work. Occasionally, though, he and his boys will go fora ride together as a family activity. During year 1, Phil put 1,119miles on the four-wheeler that he bought on January 15 for $9,600.Of the miles driven, only 239 miles was for personal use. Assumefour-wheelers qualify to be depreciated according to the five-yearMACRS schedule and the four-wheeler was the only asset Philpurchased this year. (Use MACRS Table 1, Table 2, Table 3, Table4and Table 5.) (Do not round intermediate calculations.Round your final answers to the nearest whole dollaramount.) | |||||||||
a. | Calculate the allowable depreciation for year 1 (ignore the §179expense and bonus depreciation). |
Depreciation expense
b. | Calculate the allowable depreciation for year 2 if total mileswere 1,405 and personal use miles were 530 (ignore the §179 expenseand bonus depreciation). |
Depreciation expense
| (4). Nicole organized a new corporation. The corporation beganbusiness on April 1 of year 1. She made the following expendituresassociated with getting the corporation started: Attonmey fees for articles ofincorporation Feb10 $39,000 March 1 - March 30wages Mar30 6,100 Stock issuancecosts Apr1 27,000 April 1- May30wages May30 15,250 |
a. | What is the total amount of the start-up costs andorganizational expenditures for Nicole's corporation? |
Total amount of the start-up costs
Organizational expenditures
b. | What amount of the start-up costs and organizationalexpenditures may the corporation immediately expense in year 1? |
Total amount of the start-up costs
Organizational expenditures
c. | What amount can the corporation deduct as amortization expensefor the organizational expenditures and for the start-up costs foryear 1 (not including the amount it immediately expensed)?(Round intermediate calculations to 2 decimal places andfinal answer to the nearest whole dollar amount.) |
Start-up costs amortized
Organizational expenditures amortized
d. | What would be the allowable organizational expenditures,including immediate expensing and amortization, if Nicole started asole proprietorship instead? |
Allowable organizational expenditure
