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71. Jorge purchased a copyright for use in his business in
the current year. The purchase occurred on July
15th and the purchase price was $75,000. If the patent has a
remaining life of 75 months, what is the total
amortization expense Jorge may deduct during the current
year?
A. $0
B. $5,500
C. $6,000
D. $12,000
E. None of the above
72. Geithner LLC patented a process it developed in the
current year. The patent is expected to create
benefits for Geithner over a 10 year period. The patent was
issued on April 15th and the legal costs
associated with the patent were $43,000. In addition,
Geithner had unamortized research expenditures of
$15,000 related to the process. What is the total
amortization expense Geithner may deduct during the
current year?
A. $2,417
B. $2,559
C. $4,108
D. $4,350
E. None of the above
73. Santa Fe purchased the rights to extract turquoise on a
tract of land over a five-year period. Santa Fe
paid $300,000 for extraction rights. A geologist estimates
that Santa Fe will recover 5,000 pounds of
turquoise. During the current year, Santa Fe extracted 1,500
pounds of turquoise, which it sold for
$200,000. What is Santa Fe’s cost depletion expense for the
current year?
A. $60,000
B. $90,000
C. $110,000
D. $300,000
E. None of the above
74. Santa Fe purchased the rights to extract turquoise on a
tract of land over a five-year period. Santa Fe
paid $300,000 for extraction rights. A geologist estimated
that Santa Fe will recover 5,000 pounds of
turquoise. During the past several years, 4,000 pounds were
extracted. During the current year, Santa
Fe extracted 1,500 pounds of turquoise, which it sold for
$250,000. What is Santa Fe’s cost depletion
expense for the current year?
A. $60,000
B. $90,000
C. $190,000
D. $160,000
E. None of the above
75. Lucky Strike Mine (LLC) purchased a silver deposit for
$1,500,000. It estimated it would extract 500,000
ounces of silver from the deposit. Lucky Strike mined the
silver and sold it reporting gross receipts of
$1.8 million, $2.5 million, and $2 million for years 1
through 3, respectively. During years 1 – 3, Lucky
Strike reported net income (loss) from the silver deposit
activity in the amount of ($100,000), $400,000,
and $100,000, respectively. In years 1 – 3, Lucky Strike
actually extracted 300,000 ounces of silver as
follows:
What is Lucky Strike’s depletion expense for year 2 if the
applicable percentage depletion for silver is 15
percent?
A. $200,000
B. $375,000
C. $400,000
D. $450,000
E. None of the above
76. Janey purchased machinery on April 8th of the current
year. The relevant costs for the year are as follows:
machinery for $10,000, $800 shipping, $50 for delivery
insurance, $500 for installation, $750 for sales
tax, $150 for the annual tune up, and $200 of property taxes
(an annual tax on business property). What is
Janey’s tax basis for the machinery?
77. Jaussi purchased a computer several years ago for $2,200
and used it for personal purposes. On
November 10th of the current year, when the fair market
value of the computer was $800, Jaussi
converted it to business use. What is Jaussi’s tax basis for
the computer?
78. Flax, LLC purchased only one asset during 2011. It
placed in service a computer (5-year property) on
January 16 with a basis of $14,000. Calculate the maximum
depreciation expense (ignoring section 179
and bonus expensing).
79. Roth, LLC purchased only one asset during the current
year. It placed in service computer equipment (5-
year property) on November 1st with a basis of $42,500.
Calculate the maximum depreciation expense
(ignoring section 179 and bonus expensing).
80. Eddie purchased only one asset during the current year.
It placed in service furniture (7-year property)
on May 1st with a basis of $26,500. Calculate the maximum
depreciation expense, rounded to the nearest
whole number (ignoring section 179 and bonus expensing).

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