Chapter 7 Flashcards
Cost recovery period: Realty
27.5 - residential real estate
39 - non residential real estate
Tax Basis
After tax investment: Cost - A/D
Half year convention
Half year depreciation in the first and last year
Mid-month convention
Acquired in the middle of the month (includes year of disposal)
Ex: purchased in Oct = 9.5 months
Section 179 deductions
Bucket full of deductions, you choose where to apply.
Annual deduction is reduced dollar for dollar above the Personalty Purchase threshold.
Any extra can be carried forward
Bonus depreciation
Asset by asset without limit
Intangible Assets: General Rule for amortization
Amortization allowed for intangible assets with a fixed and determinable remaining economic life.
Straight line, take full month for the first month
15 year (180 months) amortization
For self created or purchased intangible assets
S/L over the 180 months
Organizational costs
Legal, regulatory, or accounting fees to establish a partnership/corporation.
Deduct the first 5000, amortize the rest over 180 months
5000 immediate reduction is reduced dollar for dollar above 50,000
Start up Costs
Costs incurred for a new business before it opens for business.
Deduct the first 5000, amortize the rest over 180 months
5000 immediate reduction is reduced dollar for dollar above 50,000
Depletion of natural resources
(Cost vs percentage)
Cost: unit sold/est units in ground @ start of year X tax basis
Percentage: Gross Income X statutory %
Pick the higher of the 2 on a year to year basis!
Business Acquisition Intangibles
Trumps all other rules.
Must amortize over 180 months
- parent goodwill
