Reference no: EM131997440
Questions -
1. George Corporation acquires a business automobile for $30,000 on December 31 of the current year but does not actually place the automobile into service until January 1 of the following year. What tax issues should Georgia Corporation consider?
2. Paula is planning to either purchase or lease a $50,000 automobile.
She anticipates that business use of the auto will be 60% for the first two years but will decline to 40% in years three through five.
Currently, Paula's marginal tax rate is 15% but she anticipates that her marginal tax rate will be 39.6% after a few years.
What tax issues should Paula consider relative to the decision to purchase or lease the automobile?
3. MACRS 40% Test and Bonus Depreciation. Small Corporation purchased and placed in service the following 100% business-use assets (assume all of the assets were purchased new). Small did not elect Sec. 179 expense on any of these properties but claimed 50% bonus depreciation on all eligible property in 2013.
- Truck (light-duty, modified non-personal use) costing $20,000: Placed in service on February 15, 2013 with a 5-year MACRS recovery period.
- Machinery costing $50,000: Placed in service on May 1, 2013 with a 7-year MACRS recovery period.
- Land-costing $60,000: Placed in service on July 1, 2013.
- Building costing $100,000: Placed in service on December 1, 2013 with a 39-year MACRS recovery period.
- Equipment costing $40,000: Acquired on December 24, 2013 and placed in service on January 5, 2014 with a 5-year MACRS recovery period.
What are Small's total depreciation deductions in 2013 and 2014?
4. Amortization of Intangibles. On January 1 of the current year, Palm Corporation purchases the net assets of Vicki's unincorporated business for $600,000. The tangible net assets have a $300,000 book value and a $400,000 FMV. The purchase agreement states that Vicki will not compete with Palm Corporation by starting a new business in the same area for a period of five years. The stated consideration received by Vicki for the covenant not to compete is $50,000. Other intangible assets included in the purchase agreement are as follows:
- Goodwill: $70,000
- Patents (12-year remaining legal life): $30,000
- Customer list: $50,000
a. How would Vick's assets be recorded for tax purposes by Palm Corporation?
b. What is the amortization amount for each intangible asset in the current year?
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