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gregmey, CPA
Category: Tax
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1. Compare and contrast MACRS depreciation guidelines with

Customer Question

1. Compare and contrast MACRS depreciation guidelines with the limitations on Listed Property.
2. Discuss whether bonus depreciation is appropriate and/or meets the intended economic goals of the provision.
Submitted: 2 years ago.
Category: Tax
Expert:  gregmey replied 2 years ago.

gregmey :

1. Listed property is defined as tangible property that has mixed use, part business and part personal use. Sec. 280F(b) provides that any listed property which is not used more than 50% of the time in a qualified trade or business does not qualify for MACRS depreciation. Instead, the taxpayer must use the alternative depreciation system (ADS).


 



2. Bonus depcreciation is not allowed for listed property that is used more than 50% of the time in a qualified trade or business. This is because the the first year deduction is limited to the appropriate ADS amount so bonus depreciation under Section 179 is prohibited. ADS requires straight-line recovery over the class life (and not the MACRS life) of the property.

gregmey, CPA
Category: Tax
Satisfied Customers: 146
Experience: Certified Public Accountant & Certified Financial Planner
gregmey and other Tax Specialists are ready to help you
Expert:  Anne replied 2 years ago.
Hi

Thank you for using justanswer. I'm afraid you got some incorrect information from my colleague.

Listed property,when used more than 50% in your business or trade is absolutely qualified for Section 179 (which the above expert already noted), but it also qualifies for the bonus depreciation, and MACRS.

Please see page 62, of Publication 946 right hand column. (GDS declining balance is another way to describe MACRS.) where it notes that listed property is eligible for Section 179 and special depreciation allowance (otherwise known as bonus depreciation)

Both Section 179 and bonus depreciation are subject to Recapture found on page 64 ofPublication 946 if the business use drops under 50%.

Knowing the above rules, if the tax payer is not sure that they will be using the asset more than 50% of the time each year, then bonus depreciation may not be beneficial due to the recapture provision.

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