Asked by Kesha Boston on May 29, 2024
Verified
Which of the following methods provides a tax deduction that exceeds the cost of an asset less its expected residual value?
A) MACRS depreciation
B) group depreciation
C) percentage depletion
D) cost depletion
MACRS Depreciation
MACRS Depreciation refers to the Modified Accelerated Cost Recovery System, a method of depreciation under U.S. tax law that allows for faster recovery of assets' costs over their useful lives.
Percentage Depletion
A tax deduction method applicable to natural resources extraction, calculating the deduction as a percentage of the gross income generated from the resource.
- Grasp the fundamentals of depletion, including how to determine its value and the resultant effects on financial disclosures.
Verified Answer
DD
Danji DavidMay 29, 2024
Final Answer :
C
Explanation :
Percentage depletion allows a taxpayer to deduct a fixed percentage of the revenue generated from the extraction of natural resources, which can exceed the cost of the asset less its expected residual value. This method is unique in potentially allowing deductions that are greater than the asset's adjusted basis.
Learning Objectives
- Grasp the fundamentals of depletion, including how to determine its value and the resultant effects on financial disclosures.