2007 State PROBLEM III -- Income Tax Management
Use the tables at the end of this exam to calculate depreciation on
the following item.
On May 1, 2006, Mary bought a new hay baler. Mary traded her old
baler which had a remaining book value of $2,610. Mary paid $5,000
"down" and financed the remaining $15,000 over 3 years at 8% interest.
She elected to roll the remaining basis of her old baler into the new
one.
17. The baler is
A. 3-year property
B. 5-year property
C. 7-year property
D. 10-year property
E. None of the above
18. If Mary does not expense any of the cost of the baler, then 2006
depreciation will be (use regular MACRS and mid-year convention)
A. $535.70
B. $815.34
C. $2,142.80
D. $2,422.44
E. None of the above
19. If Mary expenses $5,000 of the baler cost and uses the midquarter convention and regular MACRS, then 2006 depreciation will
be
A. $349.56
B. $1,019.21
C. $2,358.51
D. $3,028.16
E. None of the above
20. If Mary expenses the maximum allowable on the baler and uses
regular MACRS with the mid-year convention, then 1/1/07 remaining
book value will be
A. $0
B. $1,886.74
C. $2,330.36
D. $20,723.26
E. None of the above
21. If Mary does not claim an expense deduction and uses the mid-year
convention and straight line depreciation over the alternate MACRS
life, her 2006 depreciation will be
A. $380.50
B. $1,000.00
C. $1,130.50
D. $2,261.00
E. None of the above
22. Under MACRS, a single purpose agricultural structure is classified
as
A. 7-year property
B. 10-year property
C. 15-year property
D. 20-year property
E. None of the above
ANNUAL DEPRECIATION PERCENTAGES FOR 5-YR PROPERTY, 150% DB
_________________________________________________________________
MID-QUARTER CONVENTION
Tax
MID-YEAR
Quarter placed in service -Year CONVENTION
1
2
3
4
1
15.000%
26.250%
18.750%
11.250%
3.750%
2
25.500
22.125
24.375
26.625
28.875
3
17.850
16.520
17,062
18.637
20.212
4-5
16.660
16.520
16.763
16.567
16.404
6
8.330
2.065
6.287
10.354
14.355
Total 100.000
100.000
100.000
100.000
100.000
_________________________________________________________________
ANNUAL DEPRECIATION PERCENTAGES FOR 7-YR PROPERTY, 150% DB
_________________________________________________________________
MID-QUARTER CONVENTION
Tax
MID-YEAR
Quarter placed in service -Year CONVENTION
1
2
3
4
1
10.714%
18.750%
13.393%
8.036%
2.679%
2
19.133
17.411
18.559
19.707
20.854
3
15.033
13.680
14.582
15.484
16.386
4
12.249
12.160
12.221
12.275
12.874
5-7
12.249
12.160
12.221
12.275
12.182
8
6.124
1.520
4.582
7.673
10.661
Total 100.000
100.000
100.000
100.000
100.000
_________________________________________________________________
ANNUAL FRACTIONS FOR STRAIGHT LINE OVER N YEARS (N less than 26)
_________________________________________________________________
MID-QUARTER CONVENTION
Tax
MID-YEAR
Quarter placed in service -Year CONVENTION
1
2
3
4
1
1/2
7/8
5/8
3/8
1/8
2-N
1
1
1
1
1
N+1
1/2
1/8
3/8
5/8
7/8
_________________________________________________________________
Depreciation formula: Basis divided by N times number from above
table.
ANNUAL FRACTIONS FOR 27 1/2 YEAR PROPERTY, REGULAR MACRS
_________________________________________________________________
Tax
Month Placed in Service -Year
1
2
3
4
5
6
7
8
9
10
11
12
1
11.5 10.5 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5
2-27
12
12
12
12
12
12
12
12
12
12
12
12
28
6.5
7.5 8.5 9.5 10.5 11.5
12
12
12
12
12
12
29
------- 0.5 1.5 2.5 3.5 4.5 5.5
_________________________________________________________________
Depreciation formula: Basis divided by 27 1/2 divided by 12 times
number from above table.
ANNUAL FRACTIONS FOR 39 YEAR PROPERTY, REGULAR MACRS
_________________________________________________________________
Tax
Month Placed in Service -Year
1
2
3
4
5
6
7
8
9
10
11
12
1
11.5 10.5 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5
2-39
12
12
12
12
12
12
12
12
12
12
12
12
40
0.5
1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5 11.5
_________________________________________________________________
Depreciation formula: Basis divided by 39 divided by 12 times number
from above table.