New Repair and Capitalization Regulations Including the Form 3115 Final Exam

Which of the following is considered a unit of property (UOP)?

A. Is generally the entire building including the structural component

B. Tangible property used or consumed in the taxpayer’s business operations that is not inventory

C. Cost of tangible property that has an acquisition or production cost of $200 or less

D. Expenses incurred in the amount of $22,500 for a building with a cost of $750,000

When is the Form 3115 required to be filed?

A. by December 31st of the year for which the taxpayer is requesting the change

B. The original by the due date of the tax return, including extensions, and a copy to the IRS

C. By the 15th day of the 3rd month of the taxpayers tax year

D. The original by the due date of the tax return

The Simplified Procedure for Small Business Taxpayers is available for:

A. Taxpayers who have total assets that does not exceed $25 million

B. Taxpayers with average annual gross receipts of $5 million or less for three taxable years

C. Taxpayers who have total assets that are less than $10 million

D. Taxpayers with average annual gross receipts of $10 million or less for the three prior taxable years

Under the Simplified Procedure, what is the definition of total assets?

A. Assets of less than $10 million

B. Determined by the accounting method used in keeping the taxpayers books and records

C. Assets are determined by the taxpayer

D. Assets are materials and supplies purchased by the taxpayer for use within a 12 month period

When is an applicable financial statement required for purposes of the regulations?

A. If the taxpayer is using the threshold of $5,000 to expense materials and supplies reasonably expected to last less than one year

B. In order to report correctly to the shareholders the allocation of the fixed assets

C. If the taxpayer does not have a written accounting procedure

D. When the taxpayer is making an election to take advantage of one of the applicable safe harbor relief provisions

Which of the following is not a safe harbor available under the repair and capitalization regulations?

A. Routine Maintenance Safe Harbor

B. Small Taxpayer Safe Harbor

C. De minimis Safe Harbor

D. Federal Poverty Line Safe Harbor

Which of the following is a condition in order to capitalize materials and supplies?

A. If they are considered incidental mateirals and supplies

B. They must be rotable and temporary space parts the taxpayer has on hand

C. The taxpayer makes an election to capitalize repair and maintenance costs so they have the same method of reporting for both book and tax purposes

D. The taxpayer has an AFS that would allow them to capitalize all assets

Which of the following would be considered an adaption of an asset requiring the asset to be depreciated over the life of the original asset?

A. an HVAC system with several stand-alone units that are converted to a single unit system with connecting duct work and one control system.

B. The taxpayer has a piece of equipment which is obsolete and no longer functions as it was originally intended. The taxpayer hires a contractor to modernize the equipment and change its original function

C. The taxpayer pays for improvements to the manufacturing line to make it more efficient

D. A business performs a seasonal turnover of their equipment from removing snow to assisting with highway construction

The Remodel/Refresh Safe Harbor is available for which of the following taxpayers?

A. Taxpayers in the retail and restaurant industry

B. Construction contractors doing renovation on a commerical building

C. Landlords renovating an investment property due to a renter's damage

D. A taxpayer with a home based business converting part of their home to use for their home-based office

Deducting the loss on the replacement of a structural component does not include:

A. The ability to recognize a loss on the disposition of a structural component before selling the entire building

B. Requires that the work before the UOP is place in service must be capitalized

C. A cost segregation study

D. That the replacement part was considered a restoration

What are other costs required to be capitalized?

A. non-incidental materials and supplies

B. Items purchased for resale that exceeds $2,500 per line item per invoice

C. Facilitative costs incurred in the acquisition of tangible property

D. Items with a useful life, to be consumed, within a 12 month period

What is the Ten-Year Rule?

A. Routine maintenance that is reasonably expected to be performed more than once in a ten year period from when the UOP is put into service

B. Restoration caused by damage occurs during the first 10 years of ownership cannot be capitalized

C. Renovations that are expected within a 10 year period to modernize the building can be expensed

D. a. The capitalization guidelines require a 10 year look back period to determine the available amount that remains for the current year Routine Maintenance Safe Harbor

The Refresh/Remodel Safe Harbor can only be utilized if the taxpayer has:

A. An office building in need of repair

B. An Applicable Financial Statement

C. A building with a fair market value of less than $1 million

D. Initial costs to change the use of a building

Section 481(a) adjustment is used when:

A. A small business has been using a combination of Section 179 and bonus depreciation

B. There is an adjustment resulting from the correcting the depreciation

C. There is an election to use the de minimis safe harbor

D. To correct the amount of the basis being reported by the business

The final draft of Form 3115, dated December 2015, must be used for returns filed:

A. after April 19, 2016

B. after December 31, 2015

C. Filed after December 2015 and before April 2016

D. All returns which include the Form 3115

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