Depreciation

Question 1

T/F: MACRS ignores salvage values.

Answer 1

True

Question 2

What are the two types of property?

Answer 2

Real property and Tangible personal property.

Question 3

How long is the useful life for real property?

Answer 3

27.5 years for residential rental property (apartments)

39 years for most other buildings

Question 4

How long is the useful life for tangible personal property?

Answer 4

3 years-small tools, off the shelf software
5 years- automobiles, computer equipment
7 years- most other personal property, equipment and office furniture
10 years- bargs, tugs, vessels, water transportation equipment

Question 5

What is MACRS?

Answer 5

Double declining balance. Switches to straight line, when its results in a greater deduction.

Question 6

How does MACRS mid year convention work?

Answer 6

It takes whatever the normal depreciation is from the first year and divides by 2. (HALF YEAR)

Question 7

When can you use section 179 deduction?

Answer 7

For new tangible personal property, not purchased from related party.

Question 8

How does the phase out work for section 179?

Answer 8

If qualified purchases exceed maximum election, the difference is normally depreciated through MACRS.

Question 9

What is maximum dollar amount of purchases can a company make and still elect section 179?

Answer 9

Anything over $2.5 million, no section 179 can be elected at all!