fixed asset assignment

Answer the questions about fixed assets:

  • Explain the differences and similarities between personal property, real property, intangible property, and natural resources. Also, provide an example of each type of asset.
  • What is the difference in the recovery periods used by MACRS and those used under generally accepted accounting principles (GAAP)?
  • What are the two depreciation conventions that apply to tangible personal property under MACRS?Explain each.
  • What is Section 179? Explain the two limitations placed on the §179 deduction.
  • What is a §197 intangible?How do taxpayers recover the costs of these intangibles?
  • Jose purchased a delivery van for his business through an online auction. His winning bid for the van was $24,500. In addition, Jose incurred the following expenses before using the van: shipping costs of $650; paint to match the other fleet vehicles at a cost of $1,000; registration costs of $3,200 which included $3,000 of sales tax and a registration fee of $200; wash and detailing for $50; and an engine tune-up for $250. What is Jose’s cost basis for the delivery van?
  • GMW Corporation acquired and placed in service the following assets during the year:
  1. At the beginning of the year, Winifred began a calendar-year dog boarding business called Gizzy’s’s Palace. Winifred bought and placed in service the following assets during the year:

Asset

Date Acquired

Cost Basis

Computer equipment

3/23

$5,000

Dog grooming furniture

5/12

$7,000

Pickup truck

9/17

$10,000

Commercial building

10/11

$270,000

Land (one acre)

10/11

$80,000

Assuming Winifred does not elect §179 expensing and elects not to use bonus depreciation, answer the following questions:

  1. What is Winifred’s year 1 depreciation deduction for each asset?
  2. What is Winifred’s year 2 depreciation deduction for each asset?

Asset

Date Acquired

Cost Basis

Computer equipment

2/17

$10,000

Furniture

5/12

$17,000

Commercial building

11/1

$270,000

Assuming GMW does not elect §179 expensing and elects not to use bonus depreciation, answer the following questions:

  1. What is GMW’s year 1 cost recovery for each asset?
  2. What is GMW’s year 3 cost recovery for each asset if GMW sells all of these assets on 1/23 of year 3?

 

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