Answer the following statements true (T) or false (F)

Question

1. Land, buildings, equipment, and common stock are examples of tangible property.
2. If personal-use property is converted to trade or business use, the basis for depreciation is the lesser of adjusted basis or FMV on the date of conversion.
3. Because Jim and his family enjoy camping, he bought a pickup truck last year for personal use. The truck cost $40,000. Jim is starting a landscaping business this year and will now be using the truck in the business full-time. Based on online searches, similar trucks are selling for $32,000. When determining his business income, Jim will be able to calculate depreciation on the truck, using the $40,000 cost as basis.
4. Under the MACRS rules, salvage value is not considered in the computation of the cost-recovery or depreciation amount.
5. Under the MACRS system, depreciation rates for real property must always use the mid-month convention in the year of acquisition.

Answer 1

1. FALSE
Stock is intangible property.
2. TRUE
This lower of cost or market rule prevents taxpayers from taking deductions for loss on a personal asset.
3. FALSE
If personal-use property is converted to trade or business use, the basis for depreciation is the lesser of adjusted basis or FMV on the date of conversion.
4. TRUE
Depreciation calculations for tax purposes takes the full property basis into account. If a depreciable asset is used for its entire tax life, its adjusted basis will be depreciated to $0.
5. TRUE
The partial year convention mandated by tax law for real property is the mid-month convention.