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32 Cards in this Set
- Front
- Back
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Immediate Expensing |
Special Cost Recovery Rule -a.k.a. S 179 expense -option of deducting up to $500,000 of tangible personal property placed in service 2014, business $250,000 qualified real property -if applied, must deduct the expense before calculating MACRS depreciation |
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Limits on Immediate expensing |
Phaseout- reduce $500,000 max by every dollar over the amount of tangible personal property purchased and placed in service 2014 over $2,000,000 (maxed phaseout $2,500,000) -does not carry over to another year -cannot exceed the businesses income (nonrefundable), but can be carried forward to apply next year |
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What items for S 179 deduction? |
The items that have the lowest first year under half-year method |
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When is S 179 computed? |
Deducted before determining the convention (mid-QTR or Half-year) |
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Bonus Depreciation |
-tangible personal property -recovery period of 20yrs or less -can elect to deduct 50% of qualified property -must be NEW property, not used -calculated after s179, but before depreciation |
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Listed Property |
business assets that tend to be used for both personal and business. -limited deduction of 50% of business use % is deductible -if exceed 50% business-use it is eligible for s179 expensing and bonus depreciation |
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business use < personal use |
compute depreciation for the asset using straight-line method over MACRS alternative system -5 yrs is still 5yrs -7yrs in now 10yrs |
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Switching use percentage |
if B use > personal then switches to B use< personal, all previous years must be recomputed under alternative MACRS method at use percentage -excess deducted in past years reduces the current year's deduction |
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Luxury Cars |
-weighs less than 6000lbs -max depreciation limit each year (table) -compute regular, verify that it is larger, if so then deduct the limit -s179 does apply, but on the limit amount and including the s179 expense |
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How to compute business use of auto? |
Miles driven business use / total miles driven in year |
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Recalculation of AMT depreciation |
-AMT uses regular depreciation (straight-line or 150%) -if double declining basis is used they must recalculate it for AMT purposes |
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3 Year Recovery Period |
Software (regular tax and AMT) |
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5 year Recovery Period |
(regular Tax and AMT) Cars, Light general purpose trucks, computers and technical equipment |
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7 Year Recovery Period |
(Regular tax and AMT) Office furniture, fixtures, machinery, and equipment |
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27.5 year Recovery Period |
(Regular Tax and AMT) Residential Real Porperty |
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39 year Recovery Period |
-Regular Tax and AMT -Nonresidential Real Property |
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Amortization |
Recovery of the cost of Intangibles using straight-line method -section 197 -start-up expenses -research and experimentation expenses -patents and copyrights |
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Section 197 |
Intangible asset/property -180 months (15 years) regardless of Financial Accounting methods -Full-month convention (also applies in sale or disposition) |
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Organizational Expenditures |
Expenses to form and organize a business in the form of a corporation or partnership Ex: meetings, state fees, accounting service costs, legal service expenditures, creating terms of original stock certificates (Organization expenses) |
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Limits/ terms on Organizational Expenses |
-may immediately expense up to $5,000 of organizational expenses -$50,000 of expenses start phaseout dollar for dollar over -full phaseout $55,000 |
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Start-up Costs |
For all companies when the begin (1st year of business) -investigation, creation, acquisition -include expenses that would have been deducted as business expenses, except they were incurred before the business began -$5,000 immediately expensed ($50,000 phaseout) |
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Research and Experimentation Expenses |
-research lab fees, salaries for lab personnel, materials, etc. -immediately expense, or elect to capitalize over usable life or a period of 60 months or more, if indeterminable (straight-line) |
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R & E expenses after Patent |
Research and Experimentation expenses that have not been deducted will be added onto the basis of the Patent and amortized with it |
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Patents and Copyrights |
-Purchased: (that does not apply to Sec. 197) amortize cost over remaining life -self-created: amortize over legal life (max 17 years for patents and 28 years for copyrights) |
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Self-created Patent or copyright |
costs include: legal fees, unamortized Research and Experimentation expenses |
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Depletion |
method of recovering cost for natural resources Ex: mining, oil, gas, forestry... -must estimate or determine number of units or reserves that remain at he beginning of the year and allocate expenses to # extracted or used during year (pro rata) - not limits like percentage depletion |
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Depletion for Tax purposes |
Not allowed because based on estimate. Instead use percentage depletion. |
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Percentage Depletion |
allowed for tax purposes. determined by multiplying Gross Income from the resource by by a fixed percentage based on the type of rescource. ( 5% gravel, 14% Asphalt and clay, 15% gold and silver, 15% domestic oil and gas, 22% platium, sulfur, and titanium) |
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Which depletion method can they deduct? |
The greater of annual cost or percentage depletion |
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When is percentage depletion deducted? |
When they sell the resource |
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When is cost depletion deducted? |
In the year they produce orextract the rescource |
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Limit on Percentage depletion |
Deduction cannot exceed 50% of TAXABLE income from the natural resource before depletion expense |
