CH10_Presentation - Chapter 10 Cost Recovery on Property:...

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Chapter 10 Cost Recovery on Property: Depreciation,  Depletion, and Amortization
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10-2 Concept Review The capital recovery concept allows a taxpayer to recover all invested capital before income is taxed An asset’s basis is the maximum investment that qualifies as capital for recovery Legislative grace allows the capital to be recovered systematically over the life of the asset
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10-3 Methods of Recovery Depreciation: used for tangible assets that Are used for a business or production of income purpose Have a determinable life Depletion: used for wasting assets Amortization: used for intangible assets
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10-4 History of Depreciation Based on facts and circumstances related to asset life and taxpayer’s situation ACRS Based on method and life prescribed by law MACRS Based on method and life prescribed by law; less accelerated than ACRS 1981 1987 Section 179 Election to Expense Assets
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10-5 Section 179 Election Promotes administrative convenience Treated as a depreciation deduction A taxpayer may elect to expense rather than capitalize qualifying property placed in service during the year.
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10-6 Section 179 Election Qualifying Property Tangible, personal property Real estate does not qualify Used in a trade or business Investment property does not qualify
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10-7 Section 179 Election Deduction Limitations Limitations apply to each entity Cannot exceed $128,000 Cannot exceed taxable income from the business Excess may be carried forward
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Section 179 Election Deduction Phase-Out Deduction decreased if total cost of qualifying property placed in service exceeds $510,000 by $1 for every $1 of value over $510,000
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This note was uploaded on 02/20/2009 for the course H ADM 422 taught by Professor Lhensley during the Fall '08 term at Cornell University (Engineering School).

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CH10_Presentation - Chapter 10 Cost Recovery on Property:...

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