Ch 10 Flashcards
MACRS: salvage value
MACRS doesn’t consider salvage value in computation
Of depreciation amount
What depreciation method must be used for property placed in service after December 31, 1986?
Modified Cost Recovery System (MACRS)
MACRS: asset classes
Both tangible personal and real property are placed into
specific asset classes
Asset classes refer to number of years asset is depreciated
Over (5-year, 7 yr.)
MACRS: depreciation methods
MACRS uses fewer depreciation methods and methods
Are built into MACRS tables
Both accelerated and straight line methods are used in
MACRS
What are accelerated methods not permissible for?
Real property
Half year convention
Generally required for all tangible personal property
Assumes all asset acquisitions or dispositions are made at
Midpoint of tax year
Mid month convention
For real estate
Assumes all asset acquisitions or dispositions are made
At midpoint of month in which transaction occurs
Property excluded from MACRS depreciation 3
1 Property depreciated in non year expressed terms
2 intangible assets: goodwill or copyrights
3 films, videotapes, sound recordings
Section. 179 Expensing Election
Taxpayers in 2013 may elect to expense up to $500,000
Of acquisition cost as an ordinary deduction in yr. property
Is placed in service
Generally not applicable to real estate
Limitations and special rules that apply to sec. 179 Expensing Election
1 Limited to property with more than 50% business use
2 Reduced on a dollar for dollar basis after $2,000,000
So no deduction is permitted if property is over $2,500,000
3 Deduction can’t exceed taxpayers taxable income
When does MACRS require the use of mid quarter convention (40% test)
If aggregate basis of all personal property placed in service
During the last 3 months of year exceeds 40% of all property
Placed in service during the tax year
MACRS: Year of disposition
MACRS requires depreciation be taken in year of disposition
Using same convention that applied to acquisition
