Deductions: Capitalization and Depreciation of Property Used in Trade or Business or Held for Production of Income

Question 1

Capitalization and Depreciation of Property Used in Trade or Business or Held for Production of Income

Answer 1

Basic Test:

• To protect the useful life of the product

When to depreciate?

• If item will last longer than a year

Exception:

• Allowed to take an immediate deduction for advertising

Question 2

Definition of depreciation

Answer 2

the cost of an item should be recovered during the period in which it’s being used