The Taxpayer-Use Test for Qualifying Replacement Property

question 38

Multiple Choice

The taxpayer-use test for qualifying replacement property

• A)applies only to personalty
• B)requires replacement property used by the taxpayer to be used in the same business as the converted property
• C)only requires leased realty to be replaced with other leased realty
• D)Is more restrictive than the functional-use test

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Definitions:

Internal Rate Of Return

A financial metric used to evaluate the profitability of potential investments, representing the interest rate at which the net present value of all the cash flows from a project or investment equals zero.

Labor Savings

A reduction in the amount of labor required or a decrease in labor costs, often as a result of improved efficiency or automation.

Useful Life

The estimated period over which an asset is expected to be used before it is fully depreciated.

Profitability Index

A ratio that compares the present value of future cash flows of a project to its initial investment, used to assess the desirability of projects.