[I'm, Ron Burgundy?]

I’m working on Becker SIMS and I’m a bit confused. Hopefully someone can help me out. Here is the premise of the SIM:

Q. A Computer is purchased on March 30 for $100,000. Other furniture in the amount of $80,000 was purchased in November. What is the MACRS Life, Convention and Depreciation amount?

A. MACRS Life: 5 years, Convention is Mid Quarter, Amount is $35,000 (based on table)

My confusion is on the Convention. It was my understanding that the office furniture would be mid-quarter due to being purchased in November and the Computer would maintain it’s half-year convention. However, this answer indicates that all property purchased in that year is subject to mid-quarter because over 40% was purchased in the 4th quarter. So does this mean that when ALL assets combined are subjected to the mid-quarter convention when 40% of assets are purchased in the 4th quarter? It was my understanding that the conventions were applied to each asset group independently.

Can anyone provide clarification?

"If you're going through hell, keep going"
- Winston Churchill

"I've missed over 9,000 shots in my career. I've lost over 300 games. 26 times I've been trusted to take the game winning shot, and missed. I've failed, over and over and over again in my life. And that is why, I succeed."
- Michael Jordan

BEC: (54), (72), 80 (losing credit on 02/02/15 - nervous)
AUD: 78
REG: (74), 91
FAR: (71)

[M.O.D.]

Yes, from what I remember from my tax classes. If a certain percent of the assets is purchased in the last quarter, then the Tax Code forces the use of the quarter convention. This is to prevent companies from purchasing all of their assets in the last days of the year and then claim a depreciation expense deduction for the entire year.

The quarter convention limits them to just one quarter's worth of deduction for that calendar year.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[M.O.D.]

Yes, from what I remember from my tax classes. If a certain percent of the assets is purchased in the last quarter, then the Tax Code forces the use of the quarter convention. This is to prevent companies from purchasing all of their assets in the last days of the year and then claim a depreciation expense deduction for the entire year.

The quarter convention limits them to just one quarter's worth of deduction for that calendar year.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Gatorbates]

What ^^^ this person said. 40% or more in a year, all is Mid Quarter. 100k as of Feb 15 and 80k as of Nov 15.

Licensed Florida CPA:
B: 71, 73, 79
A: 83
R: 78 (expired), 77
F: 74, 74, 80

It's finally freaking over.

[Gatorbates]

What ^^^ this person said. 40% or more in a year, all is Mid Quarter. 100k as of Feb 15 and 80k as of Nov 15.

Licensed Florida CPA:
B: 71, 73, 79
A: 83
R: 78 (expired), 77
F: 74, 74, 80

It's finally freaking over.

[Tucker3434]

Straight from irs.gov:

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.

Now it won't trick you on the test. +1 point

[Tucker3434]

Straight from irs.gov:

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.

Now it won't trick you on the test. +1 point

[wool1]

yes, you would apply the mid quarter convention to both properties. the point in their making you use mid-quarter over mid-year is to spread them out accurately but fairly, not to punish you for lumping purchases at the end of the year.

[wool1]

yes, you would apply the mid quarter convention to both properties. the point in their making you use mid-quarter over mid-year is to spread them out accurately but fairly, not to punish you for lumping purchases at the end of the year.

[Author]

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