The Deweys Are Expecting to Save on Their Taxes for 2011.Not

question 132

Essay

The Deweys are expecting to save on their taxes for 2011.Not only have both incurred large medical expenses,but both reached age 65.During the year,they also recognized a $30,000 loss on some land they sold which was purchased as an investment several years ago.Are the Deweys under a mistaken understanding regarding their tax position? Explain.

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Definitions:

Property, Plant & Equipment

Tangible long-lived assets owned by a business for the purpose of producing goods or services and not intended for sale during the normal course of business.

Land Improvements

Enhancements made to a parcel of land to increase its value or utility, such as landscaping, fencing, or installing utilities, which are capitalized and depreciated over time.

Lease Improvements

These are modifications made to rental premises in order to tailor the space to the needs of the tenant.

Straight-Line Method

A method of allocating an asset's cost evenly over its useful life, commonly used in depreciation and amortization calculations.