On which of the following is depreciation permitted?
Answer(s): B
residential property not used for business. Depreciation is only permitted on income-producing property.
In terms of depletion, percentage depletion is better than cost depletion because it:
Answer(s): A
permits recovery of more than the original cost. Percentage depletion is only available for small producing wells.
Which of the following is not an intangible drilling cost?
Answer(s): C
machinery and pipe. These are tangible fixed assets and not associated with intangible drilling costs.
Limited partnerships try to avoid recapture because:
it turns potential capital gains into current taxable income. Recapture is taxed as ordinary income, not capital gain. The other choices are not true.
If recaptured deductions are added to income, recaptured investment tax credits are added to:
Answer(s): D
taxes. Tax credits are not deductible expenses and have no effect on basis.
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