CPA Regulation (REG) : Taxation of Property Transactions
Study concepts, example questions & explanations for CPA Regulation (REG)
All CPA Regulation (REG) Resources
Example Questions
Example Question #2 : Cost Recovery (Depreciation, Depletion, & Amortization)
Gold Corp. purchased all the assets of a sole proprietorship, including the following intangible assets:
- Goodwill: $50,000
- Covenant not to compete: 13,000
For tax purposes, what amount of these purchased intangible assets should Gold amortize over the specific statutory cost recovery periods?
$0
$50,000
$13,000
$63,000
$63,000
All intangible assets (e.g., goodwill, licenses, franchises, trademarks) may be amortized on the straight-line basis over 15 years. This treatment differs from US GAAP, where indefinite-lived assets are not amortized, and definite-lived assets are amortized over their useful lives (which may vary between intangible assets).
Example Question #3 : Cost Recovery (Depreciation, Depletion, & Amortization)
Under the MACRS method of depreciation for property placed in service after 1986:
No type of straight-line depreciation is allowable
The recovery period for depreciable realty must be 27.5 years
Used tangible depreciable property is excluded from the computation
Salvage value is ignored for purposes of computing the MACRS deduction
Salvage value is ignored for purposes of computing the MACRS deduction
Under the MACRS method for property places in service after 1986, salvage value is ignored for purposes of computing the deduction.
Example Question #4 : Cost Recovery (Depreciation, Depletion, & Amortization)
Of the following conditions, which must be satisfied for a taxpayer to expense in the year of purchase under IRC 179, the cost of new or used tangible depreciable personal property? A) The property must be purchased for use in the taxpayer’s active trade or business B) The property must be purchased from an unrelated party.
Neither
B
A
Both
Both
To qualify for IRC 179, the property must be tangible personal property acquired by purchase from an unrelated party for use in the active conduct of a trade or business
Example Question #5 : Cost Recovery (Depreciation, Depletion, & Amortization)
Per IRS tax or MACRS depreciation, _____ is never used for calculation purposes.
Straight line
Positive adjustments to basis
Salvage value
Adjusted basis
Salvage value
Under MACRS depreciation, salvage value is never used. Straight-line may be used, and any sort of basis would be relevant.
All CPA Regulation (REG) Resources
