Depreciation Quiz For Tax Gurus

March 10, 2019

1. Depreciation is most similar to:

A. Depression
B. Free gift from Uncle Sam
C. Loan
D. PMI payments

 

2. Depreciation recapture:

  1. Is a new thriller starring Bruce Willis

B. Applies to commercial properties only
C. Applies to all depreciated properties
D. Applies even if no depreciation was taken

 

3. Depreciation starts:

A. On the day of closing
B. On the day of "ready for rent"
C. On the day 1st lease is signed
D. On the day 1st tenant moves in

 

4. Depreciation ends:

A. After the specified number of years
B. When the property is destroyed
C. When the property is sold
D. All of the above

 

5. A property is "non-residential" (39 yrs):

A. If it has more than 4 units
B. If it is listed as "commercial" on tax roll
C. If one of the tenants is a business
D. None of the above

 

6. Land/building allocation must be based on:

A. County appraisal
B. Statement from a licensed Realtor
C. IRS-approved comps
D. Any method that you consider reasonable

 

7. Used appliances are depreciated:

A. Based on their actual cost
B. Based on their FMV (fair market value)
C. Based on the cost of similar new ones
D. Either one of the above methods

 

8. Cost of a new roof is depreciated over:

A.. 5 years, from the day it's installed
B. 5 years, after the building is fully depreciated
C. 27.5/39 years, from the day it's completed
D. the remainder of the building's 27.5/39 years

 

9. Cost segregation creates tax savings by:

A. Accelerating depreciation
B. Converting depreciation into expense
C. Increasing the value of the property
D. Avoiding depreciation recapture

 

10. Missed depreciation can be recovered:

     A. Partially, by amending the last 3 tax returns
B. In full, as long as the property is not sold
C. In full, even after the property is sold
D. Cannot be recovered at all

 

ANSWERS:

1. Depreciation is most similar to:

B. Loan

 

2. Depreciation recapture:

D. Applies even if no depreciation was taken

 

3. Depreciation starts:

B. On the day of "ready for rent"
 

4. Depreciation ends:

D. All of the above

 

5. A property is "non-residential" (39 yrs):

D. None of the above

 

6. Land/building allocation must be based on:

D. Any method that you consider reasonable

 

7. Used appliances are depreciated:

A. Based on their actual cost

 

8. Cost of a new roof is depreciated over:

C. 27.5/39 years, from the day it's completed
 

9. Cost segregation creates tax savings by:

A. Accelerating depreciation

 

10. Missed depreciation can be recovered:

B. In full, even after the property is sold

 

 

 

 

 

MICHAEL PLAKS, E.A.

Reprinted courtesy of Michael Plaks. Visit www.MichaelPlaks.com The information and opinions presented in the above article are general in nature, not intended to address specific tax situation and/or to substitute for professional consultation, and shall not be considered legal advice. Email: michael@MichaelPlaks.com  713-721-3321  The author is a Houston-based accountant, working exclusively with real estate investors. He is a federally licensed Enrolled Agent who can represent his clients in their dealings with the IRS.

 

 

 

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