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REG > Depreciation > Flashcards

Depreciation Flashcards

1
Q

What depreciation method does Fed tax Law Use

A

MACRS

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2
Q

What are the three ways MACRS differs from GAAP

A
  • its shorter
  • the recovery period for new and used property is identical
  • salvage values are ignored
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3
Q

Do you include salvage vale when calculating depreciation for tax

A

No - it is ignored

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4
Q

What is section 1250 for

A

Real property

land and building

depreciate only building

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5
Q

Recovery period for residential rental property

A

27.5 Years

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6
Q

Recovery period of any other type of property

A

39 Years building, business and investment

  • no land
  • salvage ignored
  • S/L NOT MACRS
  • mid month convention
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7
Q

Mid Month Convention

A

Only count 1/2 of the month that you put it into service

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8
Q

What is section 1245 property

A

This is tangible personal property - NOT realty

small tools, trucks, office furniture etc

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9
Q

What is the mid quarter convention

A

This says that if you bought over 40% of your personal property in last mont of the year you cANT take the 1/2 year convention.

You can only go mid quarter

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10
Q

Software uses what time

A

3 years - double declining

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11
Q

Autos and truck use what depreciation

A

5 years - double declining

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12
Q

Computer and printer use what depreciation

A

5 years - double declining

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13
Q

barges and vessels

A

10 years - double declining

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14
Q

Can you file an election to do S/L

A

Yes

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15
Q

What is DPAD

A

This is to encourage you to stay in US

Its on qualified production activities

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16
Q

What is Bonus depreciation

A

This is used after you take the 179 deduction

It is only in the first year

it is an additional 50% after you take the 179

17
Q

How do you depreciate intangibles

A

Section 179

Amortize S/L

15 Years
Must be started in first month you or you lose it

Franchise - done over the life of the asset

18
Q

What is a covenant not to compete

A

This is considered an intangible asset

It is a section 197 - acquired intangible asset

amortized over 15 years

19
Q

Can you capitalize real estate taxes as part of a building for depreciation

A

No - taxes are expensed not capitalized

20
Q

What are the conditions that must be met in order for a 179 property to be used

A

Must be new or used TANGIBLE depreciable property

Must be used in active trade or business

Must be purchased from an unrelated party

21
Q

What are the limitations on DPAD

A

Sole proprietorships, S Corps and LLC all qualify for DPAD

Limited to AGI

22
Q

When do you use mid month convention

A

If more than 40% of depreciable property is acquired during the 4th month - you apply the mid quarter convention -

This is even if you are using office furniture etc.

It is 1.5 Months

23
Q

What items are captured in MACRS 5 year class

A 
automobiles
light trucks
computers
office machinery ( typewriter, calculators, copiers)
peripheral equipment
24
Q

What items are captured in MACRS 3 year class

A

small tools and software in a box

25
Q

What items are captured in MACRS 7 year

A

Equipment, office furniture, desks,

26
Q

When you are figuring out you depreciable base - what can you include?

A

YES - purchase price
YES - delivery charges
YES - installation Fees
YES - Sales Tax

27
Q

When calculating DPAD - what are the rules

A

It is 9% of the lower of QPAI or 50% of W2 wages paid

Taxable income does not include NOL for the purpose of calculating the deduction

28
Q

What is true about the useful life of a depreciated asset under federal law

A

Its generally depreciated faster than useful life

29
Q

What can you apply DPAD to

A

manufacturing type activities

manufacturing
producing
growing
extracting  tangible person proerty
computer software
sound recording 
construction
films
engineering and architectural services

NO consulting services

30
Q

Can you apply DPAD to consulting services

A

NO

REG (31 decks)

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