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Flashcards in Depreciation Deck (37)
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1

What are the 2 types of property that uses MACRS depreciation?

Real property (1250) and tangible personal property (1245).

2

What is real property?

Land and anything permanently affixed to land.

3

What are the recovery periods of real property?

27.5 years for residential and 39 years for commercial.

4

Is land depreciable?

No b/c we assume land lives forever.

5

How is real property depreciated?

S/L with a mid-month convention. 1/2 depreciation in first month and 1/2 in the last month.

6

What tangible real property uses S/L?

OTS software

7

How much is depreciated in the first year of real property?

11 1/2 months.

8

How is tangible personal property depreciated?

DBB for 3/5/7 years and 150% for 15/20 years with a 1/2 year convention.

9

When would the mid-quarter convention be used?

When 40% or more of the assets were purchased in the last quarter of the year.

10

What depreciation method is used for intangibles?

S/L amortization

11

What are the 3 types of assets that may be held by a taxpayer?

Ordinary income assets, 1231 assets, and capital assets.

12

How is the sale of a 1231 asset recorded?

An ordinary loss or a capital gain.

13

How are non-business bad debt write offs treated?

Always as a ST capital loss.

14

How are inherited assets treated?

Always considered LT.

15

What is the maximum section 179 deduction?

$1M and is reduced dollar for dollar for any asset that is in excess of $2.5M.

16

How much is bonus depreciation?

100% of the property after taking into account 179 depreciation.

17

What is always a short-term capital loss?

Non-business bad debt write offs.

18

What qualifies for double declining balance (200%)?

3, 5, 7, and 10 year property.

19

What are 3 year property?

Small tools and OTS software.

20

What are 5 year property?

Cars, light trucks, copiers, computers, and printers.

21

What are 7 year property?

Equipment, office furniture, most other personal property.

22

What qualifies for 150% declining balance?

15 and 20 year property.

23

What qualifies as an intangible?

Acquired goodwill, franchises, trademarks, covenant not to compete, and customer-based intangibles.

24

How are intangibles depreciated?

15 years S/L and $5k can be expensed immediately as an organization expense.

25

What are the requirements of depreciating under Section 179?

The property must be purchased for use in the taxpayer’s active trade or business and must be purchased from an unrelated party.

26

What type of equipment qualifies for bonus depreciation?

New or used equipment.

27

Who does the unicap rules apply to?

Retailers w/avg gross receipts of $25M for the last 3 years.

28

Who are considered related parties?

Husband/wife, sister/brother, parent/child, grandparent/grandchild, ancestor/dependent, majority shareholder/corporation, and majority partner/partnership

29

Who are not considered related parties?

Aunts, uncles, cousins, nephews, nieces, and in-laws.

30

Are losses to related parties deductible?

Losses to related parties are not deductible.