2007 District PROBLEM III -- Income Tax Management
Use the tables at the end of this exam to calculate depreciation on the
following item.
On April 15, 2006, Steve bought a new tractor. Steve traded his old
tractor which had a remaining book value of $2,610. Steve paid $10,000
"down" and financed the remaining $25,000 over 5 years at 8% interest.
He elected to roll the remaining basis of his old tractor into the new
one.
17. The tractor is
A.
3-year property
B.
5-year property
C.
7-year property
D.
10-year property
E.
None of the above
18. If Steve does not expense any of the cost of the tractor, then
2006 depreciation will be (use regular MACRS and mid-year
convention)
A.
$1,351.04
B.
$4,029.54
C.
$10,714.00
D.
$12,065.04
E.
None of the above
19. If Steve expenses $10,000 of the tractor cost and uses the midquarter convention and regular MACRS, then 1/1/07 remaining book
value will be
A.
$17,895.55
B.
$20,160.29
C.
$23,912.19
D.
$27,610.00
E.
None of the above
20. If Steve expenses the maximum allowable on the tractor and uses
regular MACRS with the mid-year convention, then 1/1/07 remaining
book value will be
A.
$0
B.
$2,330.36
C.
$13,147,52
D.
$24,651.86
E.
None of the above
21. If Steve does not claim an expense deduction and uses the mid-year
convention and straight line depreciation over the alternate MACRS
life, his 2006 depreciation will be
A.
$630.50
B.
$1,880.50
C.
$5,000.00
D.
$5,630.50
E.
None of the above
22. Under MACRS, a computer is classified as
A.
3-year property
B.
5-year property
C.
7-year property
D.
not depreciable
E.
None of the above
2007 District 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.