Section 179/Decpreciation and amortization Flashcards
Explain Section 179 deductions and limits
Sec. 179 allows a taxpayer to treat up to $500,000 of the cost of Sec. 179 property acquired in 2015 as an expense rather than as a capital expenditure. There are certain limitations that can reduce the allowable deduction. One limitation is that the amount deductible under Sec. 179 must be reduced by the amount by which the cost of Sec. 179 property placed in service during the year exceeds $2,000,000. Another limitation is that the total cost that can be deducted is limited to the taxable income from the active conduct of any trade or business during the tax year.
For residential rental property using MACRS, over how many years can it be depreciate, using what depreciation method and what conversion?
Recovery period for residential rental property is 27.5 years.
SL method shall be used for residential rental property.
Mid-month convention shall be used for residential rental property.
How many years are intangibles/covenants not to compete are depreciates over?
15 years.
What is included in 5 year property?
Common 5-year property includes computers, office machinery (e.g., copier), cars, trucks, and R&E equipment.
Over how many months are organization and start up costs amortized over? and when does it begin?
A corporation may elect to amortize its organizational expenditures over at least 180 months, and its start-up costs over at least 180 months, beginning with the month in which the corporation starts business.
How is the depreciation deduction of nonresidential real property, placed in service in 2015, determined for regular tax purposes using MACRS?
Nonresidential real estate placed in service in 2015 has a 39-year recovery period using the straight-line depreciation method.
When does half year convention applies?
The half-year convention applies to all property placed in service after 1986 except for residential rental and nonresidential real property (to which the mid-month convention applies) and except when the mid-quarter convention applies. Under the half-year convention, all property to which it applies is treated as placed in service or disposed of at the midpoint of the year.
When is ADS used?
ADS is required by law for any tangible property used predominantly outside the United States, any tax-exempt use property, and any tax-exempt bond-financed property.
In order for a property to be expensed under Sec. 179, it must be:
In order for a property to be expensed under Sec. 179, it must be both purchased for use in the taxpayer’s active trade or business as well as be purchased from an unrelated party.
Whendoes mid quarter get used?
Under the MACRS rules, the mid-quarter convention must be used for all personal property placed in service during the year if substantial property was placed in service during the last 3 months of the year [Sec. 168(d)(3)]. Substantial property is defined as greater than 40% of the aggregate bases of personal property placed in service during the year.
