REG3 Flashcards
For assets acquired after 1986, what is the recovery method for 3-, 5-, 7-, and 10-year property (MACRS)?
200% Declining balance- estimated salvage value is not considered. Taxpayer may choose straight-line depreciation in lieu of 200% and 20-year property uses the 150% declining balance method.
What is the half-year convention?
6 months of depreciation is taken in the year of acquisition and the year of disposal. When straight-line elected, half year still applicable. The method is applied to all personal property acquired that year in that given property class.
What is the mid-quarter convention?
Replaces the half-year convention if greater than 40% of taxpayer’s property is placed in service during the last 3 months of tax year. It treats all property placed in service during any quarter of the tax year as being placed in service at mid-point of quarter.
What is the mid-month convention?
Used to calculate depreciation of real property and treated as if placed in service in the middle of month of acquisition.
What is the expense deduction (Section 179) in lieu of depreciation?
$25,000 of acquisition cost of personal property used in trade or business may be deducted in any one year. Limits:
- Reduce $1 for each $1 of qualifying property in excess of $200,000
- Deduction is not permitted when a net loss exists or if deduction would create loss.
What are Section 1231 assets?
Generally, depreciable property used in trade or business held over 12 months. Net all gains/losses. If gains>losses, treat net amount as long-term capital gain. If losses<gains, treat net amount as ordinary loss.
What is the tax treatment of Section 1245 assets?
Generally, depreciable personal property or amortizable personal property used in business over one year (ex. patents, copyrights, leaseholds, prof. sports contracts). Nonresidential real property acquired after 1980 but before 1987 if ACRS depreciation was claimed. Recapture all accumulated dep. as ordinary income and any excess gain is Section 1231 gain.
Identify the tax treatment given to Section 1250 assets
Generally, real property used in a business and held for more than one year. Gain/loss treated as ordinary income to the extent of excess accelerated dep. over straight line.
