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18 Cards in this Set
- Front
- Back
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What is depreciation?
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The deduction of a reasonable allowance for the wear and tear of assets used in a trade or business or held for the production of income.
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What are the requirements for property to be depreciated?
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Taxpayer must own the property; property must be used in business or be income-producing; property must have a determinable useful life; and property must last longer than one year.
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What is MACRS?
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Modified Accelerated Cost Recovery System (MACRS) is the depreciation method generally used for most assets placed in service after 1986.
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What information is found on the CLADR table?
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The asset class, description of the asset and recovery period in years.
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What does it mean by the half-year convention?
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Assets placed in service during the year are considered to be placed in service half-way through the year
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What does it mean by the mid-month convention?
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Assets placed in service during the year are considered to be placed in service during the middle of the month they are actually placed in service.
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How do you depreciate residential rental real property?
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Using the straight-line method over 27 ½ years.
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When a taxpayer claims depreciation, what forms might possibly be needed to report the deduction?
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The Depreciation Worksheet; Form 4562 and Schedule A, C, E, or F.
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Under what circumstances would Form 4562 be used?
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If property is placed in service during the current tax year, if there is a Section 179 deduction or if the depreciation claimed is for an automobile or other listed property.
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If Form 4562 is not needed, where do you enter the information from the depreciation worksheet?
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Directly on the appropriate Schedule (A, C, E, or F).
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Straight-line method for depreciation is another option for depreciating personal-type property.
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General straight-line depreciation results in depreciation being spread more evenly over the recovery period.
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What are some examples of listed property?
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Most passenger automobiles, cell phones, computers, etc…
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What are the restrictions for listed property used 50% or less for business?
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No Section 179 or special depreciation deduction is allowed and the property must be depreciated using the alternative straight-line depreciation method
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what are the ANTI-CHURNING RULES
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Depreciable property placed in service after 1986 (the start of MACRS), after being owned or used by a taxpayer prior to 1987 (era of older depreciation methods) MUST be depreciated using the system that results in the lower deduction for the first year of business use
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When might you have a difference in depreciation on the Oregon and federal returns?
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When an asset was placed in service on or after 1985 and the Federal Investment credit was taken or when an asset was transferred into Oregon and a different depreciation method was used
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If differences occur, what happens on the Oregon return?
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If Oregon depreciation is more than federal, then you have a subtraction. If it is less than federal, then you have an addition.
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What is basis?
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A measure of the taxpayer’s investment in an item of property.
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