[smalltimeauditor]

Wiley Question –

In year 1, combine has basis of 35,000. Using 7 year table, depreciation is calculated as 35,000 x .1071 = 3,749. Ok great.

For year 2, they calculate depreciation for the combine using 35,000 x .1913 = 6,696.

So, shouldn’t they be reducing the original depreciable basis (35,000) less year 1’s depreciation expense for year 2’s calculation? ie. 31,251 x .1913 = 5,978.

Thanks.

B - Passed
A - Passed
R - Passed
F - Passed

[Jiddy78]

The table adds up to 100%, so you use the original basis (assuming 100% business use) when using the table.

Be weary that year 1 only gives you a half year…and all other years give you a full year. So you have to reduce any year of disposal to 1/2 of the table number in a disposal year (if disposed before fully depreciated, of course).

AUD - Passed 8/2/12
BEC - Passed 8/30/12
FAR - Passed 10/27/12
REG - Passed 11/29/12

[smalltimeauditor]

I should've added that the assets were put into place on 1/1/XX – so you would take the full deduction for that year, correct?

Now, if it was placed in March, would you still take the half-year as opposed to using 3/4 of the year?

B - Passed
A - Passed
R - Passed
F - Passed

[Jiddy78]

No, you would still take a half year deduction (as per the table) on that asset regardless of 1/1 vs. 3/31…Doesn't matter…There are rules for end of year purchase using a mid-quarter amount…so you should review that as well in your materials. Also, mid-month rules apply to realty. So yeah, don't think this is anything like FAR and get your i's dotted and t's crossed.

AUD - Passed 8/2/12
BEC - Passed 8/30/12
FAR - Passed 10/27/12
REG - Passed 11/29/12

[Jiddy78]

Clarification:

You WOULD be taking a 1/2 year deduction for year 1 of that asset as per the table. That .1071 represents 1/2 of the year's depreciation.

You would be taking a full year depreciation in year 2 as per the table. (assuming not disposed)

Both numbers would be calculated based upon the original depreciable basis, as all numbers in the table add up to 100% (if you are bored and feel like tallying them down to check, you can. 😉 )

AUD - Passed 8/2/12
BEC - Passed 8/30/12
FAR - Passed 10/27/12
REG - Passed 11/29/12

[smalltimeauditor]

I understand. Thanks for your explanations.

B - Passed
A - Passed
R - Passed
F - Passed

[Author]

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