ExpertHard1 markMultiple Choice
CPA · Question 20 · Area III: Property Transactions
In Year 1, a taxpayer placed the following 5-year MACRS assets in service: Asset A (Cost $100,000) on February 1; Asset B (Cost $200,000) on November 1. No other assets were placed in service. Which depreciation convention must be used?
In Year 1, a taxpayer placed the following 5-year MACRS assets in service: Asset A (Cost $100,000) on February 1; Asset B (Cost $200,000) on November 1. No other assets were placed in service. Which depreciation convention must be used?
Answer options:
A.
Half-year convention for both assets.
B.
Mid-quarter convention for both assets.
C.
Half-year for Asset A and Mid-quarter for Asset B.
D.
Mid-month convention for both assets.
How to approach this question
1. Sum total personal property basis ($300k). 2. Sum Q4 basis ($200k). 3. Is Q4 > 40% of Total? (200/300 = 66%). Yes -> Mid-Quarter applies to ALL assets.
Full Answer
B.Mid-quarter convention for both assets.✓ Correct
B
Under IRC §168(d), if more than 40% of the aggregate basis of tangible personal property placed in service during the year is placed in service during the fourth quarter, the mid-quarter convention applies to all such property placed in service during the year.
Common mistakes
Applying the convention only to the Q4 asset, or forgetting the 40% test entirely.
Practice the full CPA REG Practice Exam 3
72 questions · hints · full answers · grading
More questions from this exam
Q01A CPA is preparing an original tax return for a client who is claiming a refund based on a positi...HardQ02A practitioner is representing a taxpayer in an IRS examination. The taxpayer has a 25% ownership...HardQ03A tax return preparer willfully attempts to understate the tax liability on a client's return by ...HardQ04Which of the following scenarios would most likely result in the assessment of a penalty for fail...HardQ05Regarding the disciplinary authority of State Boards of Accountancy, which of the following state...Hard