[jags2899]

I am trying to work through some of the Becker simulations and I am having trouble with MACRS, and the explanation doesn’t help. In context, it gives several situations and you have to say the life, convention, and amount.

1–” A computer is purchased on March 30 for $100,000. Other furniture in the amount of $80,000 was purchased in November.”

Answer: Computers are 5 year property and use the half year convention, which is built into the table. However, more than 40% of the assets were purchased in the fourth quarter. Therefore, we must use the mid quarter convention. 35% is the amount in the table for first quarter purchases. 100,000 X 35% = 35,000.

2–“A computer was purchased on March 30 for $100,000. A building in the amount of $500,000 was purchased in November.”

Answer: Computers are 5 year property and use the half year convention, which is built into the table. The purchase of additional real estate is not relevant and we still use the half year convention for the computer. 20% is the amount in the table. 100,000 X 20% = 20,000.

My issue here is how do you know when the other property is relevant?

Thanks in advance

AUD--Passed
FAR--Passed
REG--Passed
BEC--Passed

[mmcgrad1]

“The mid-quarter convention. Use this convention if the mid-month convention does not apply and the total depreciable bases of MACRS property you placed in service during the last 3 months of the tax year (excluding nonresidential real property, residential rental property, any railroad grading or tunnel bore, property placed in service and disposed of in the same year, and property that is being depreciated under a method other than MACRS) are more than 40% of the total depreciable bases of all MACRS property you placed in service during the entire year. “

https://www.irs.gov/publications/p946/ch04.html

NIU CPA Review Correspondence is awesome!

I passed all four sections on the first attempt

[Shay]

In simple words

Half year and mid Quarter applies to Equipment, machinery PP&E.

Mid-month applies to Buildings.

[jags2899]

Thanks, I realize the difference between the two conventions, my issue is when there are multiple properties. So, in my first example is the reason why it's mid-quarter is because the addition furniture is not real estate, and if it were real estate purchased in November, it would be mid-month?

AUD--Passed
FAR--Passed
REG--Passed
BEC--Passed

[Shay]

A computer purchased Mar. 30 for $100,000. Other furniture for $80,000 in November

5-year and Mid-Quarter applies. $100,000 x 35% (MACRS Mid-Quater table %) ==35,000. I am little confused on what to do with $80,000 Furniture??

[Author]

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