Study Guide

1. If an asset’s actual useful life is longer than the assigned recovery period, the MACRS tables cannot be used. (True / False)

2. Under MACRS, the same method of depreciation (accelerated or straight-line) must be used for all property in a given class placed in service during that year. (True / False)

3. Taxpayers must use the straight-line method of depreciation for all productive assets. (True / False)

4. In applying the statutory rates from the MACRS tables, the cost of the asset must first be reduced by the prior year’s depreciation. (True / False)

5. Depreciation on property in the five-year MACRS class is claimed over a period of six tax years due to the half-year convention. (True / False)

6. Taxpayers may expense the cost of depreciable personal property placed in service during the year and used in a trade or business in an amount up to a maximum of $20,000 annually. (True / False)

7. Choose the incorrect statement.

|a. |Books and records may be kept on a different year-end basis than the year-end used for tax purposes. |

|b. |The choice to file on a fiscal year-end basis must be made with an initial tax return. |

|c. |Almost all individuals file tax returns using a calendar year accounting period. |

|d. |An individual may request IRS approval to change to a fiscal year-end basis if certain conditions are met. |

8. The Dot Corporation has changed its year-end from a calendar year-end to July 31. The income for its short period from January 1 to July 31 is $35,000. The tax for this short period is:

|a. |$5,250 |

|b. |$5,833 |

|c. |$9,000...