ACC250 Chapter 9 Flashcards
The depreciation system enacted by Congress in 1981 that is based on the concept of set recovery periods and accelerated depreciation methods.
ACCELERATED COST RECOVERY SYSTEM (ACRS)
The taxpayer’s acquisition basis plus capital improvements less depreciation or amortization.
ADJUSTED BASIS
The method of recovering the cost of intangible assets over a specific time period.
AMORTIZATION
Additional depreciation allowed in the acquisition year for new tangible personal property with a recovery period of 20 years or less.
BONUS DEPRECIATION
The method of recovery the cost of a natural resource that allows a taxpayer to estimate or determine the number of units that remain in the resource at the beginning of the year and allocate a pro rata share of the remaining basis to each unit of the resource that is sold or extracted each year.
COST DEPLETION
The method by which a company expenses the cost of acquiring capital assets. This can take the form of amortization, depreciation or depletion.
COST RECOVERY
A contractual promise to refrain from conducting business or professional activities similar to those of another party.
COVENANT NOT TO COMPETE
The cost recovery method to allocate the cost of natural resources as they are removed.
DEPLETION
The cost recovery method to allocate the cost of tangible personal and real property over a specific time period.
DEPRECIATION
A convention that allows owners of intangibles to deduct an entire month’s amortization in the month of purchase and the month of disposition.
FULL-MONTH CONVENTION
A depreciation convention that allows owners of tangible personal property to take one-half year’s worth of depreciation in the year of purchase and in the year of disposition regardless of when the asset was actually placed into service or sold.
HALF-YEAR CONVENTION
Assets that do not have physical characteristics. Examples include goodwill, covenants not to compete, organizational expenditures, and research and experimentation expenses.
INTANGIBLE ASSETS
Business assets that are often used for personal purposes. Depreciation on this type of property is limited to the business use portion of the asset.
LISTED PROPERTY
An automobile on which the amount of annual depreciation expense is limited because the cost of the automobile exceeds a certain threshold. The definition excludes vehicles with gross vehicle weight exceeding 6,000 lbs.
LUXURY AUTOMOBILE
A convention that allows owners of real property to take one-half of a month’s depreciation during the month when property was placed in service and in the month it was disposed of.
MID-MONTH CONVENTION
A depreciation convention for tangible personal property that allows for one-half of a quarter’s worth of depreciation in the quarter of purchase and in the quarter of disposition. This convention must be used when more than 40% of tangible personal property is put into service in QIV of the tax year.
MID-QUARTER CONVENTION
The current tax depreciation system for tangible personal and real property. Depreciation under this system is calculated by finding the depreciation method, recovery period, and applicable convention.
MODIFIED ACCELERATED COST RECOVERY SYSTEM (MACRS)
Expenditures to form and organize a business in the form of a corporation or partnership.
ORGANIZATIONAL EXPENDITURES
A method of recovering the cost of a natural resource that allows a taxpayer to recover or expense an amount based on a statutorily determined percentage.
PERCENTAGE DEPLETION
All tangible property other than real property.
PERSONAL PROPERTY
Land and structures permanently attached to land.
REAL PROPERTY
A length of time prescribed by statute in which business property is depreciated or amortized.
RECOVERY PERIOD
Expenses for research including costs of research laboratories (salaries, materials, and other related expenses). Taxpayers can elect to amortize these costs over not less than 60 months from the time benefits are first derived from the research.
RESEARCH AND EXPERIMENTATION (R & E) COSTS
An incentive for small businesses that allows them to immediately expense a certain amount of tangible personal property placed in service during the year.
SECTION 179 ELECTION
Intangible assets that are purchased that must be amortized over 180 months regardless of their actual useful lives.
SECTION 197 PURCHASED INTANGIBLES
Expenses that would be classified as business expenses except that the expenses are incurred before the business begins.
START-UP COSTS
The amount of a taxpayer’s unrecovered cost of or investment in an asset.
TAX BASIS
