IG_C08 - CHAPTER 8 DEPRECIATION, COST RECOVERY,...

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CHAPTER 8 DEPRECIATION, COST RECOVERY, AMORTIZATION, AND DEPLETION LECTURE NOTES OVERVIEW 1. Date Placed in Service (see Concept Summary 8-1 in the text ). The applicable system of depreciation or cost recovery is dependent on the date the property is placed in service . a. Section 167 . Section 167 depreciation applies to property placed in service before January 1, 1981 , and certain other property placed in service after 1980. b. Pre-TRA of 1986 ACRS . ACRS applies to property placed in service after December 31, 1980, and before January 1, 1987 . c. Post-TRA of 1986 ACRS or Modified ACRS (MACRS) . MACRS applies to property placed in service after December 31, 1986 . d. Additional First-Year Depreciation . Additional first-year depreciation applies to new property acquired after September 10, 2001, and before September 11, 2004 , and placed in service before January 1, 2005 . e. Additional First-Year Depreciation Increased. Increased additional first-year depreciation applies to new property acquired after May 5, 2003 and placed in service before January 1, 2005 . 2. Depreciation and Cost Recovery Rules . 3. Qualifying Property . a. Business or income-producing property . Property must be used in a trade or business or in the production of income to qualify and can either be personalty (e.g., furniture, equipment, machinery) or realty (e.g., buildings but not land). 8-1
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8-2 2009 Comprehensive Volume/Instructor’s Guide with Lecture Notes b. Limited life for depreciable property . Property must be subject to wear, tear, and obsolescence. c. Property basis . The basis of property for depreciation is generally the adjusted cost basis . d. The relevant date to begin depreciating an asset is the date an asset is placed in service . e. If personal use assets are converted to business or income-producing use , the basis for cost recovery and for loss is the lower of the adjusted basis or the fair market value at the time the property was converted. MODIFIED ACCELERATED COST RECOVERY SYSTEM (MACRS) 4. General Considerations . a. Original ACRS rules . For property placed in service after December 31, 1980, and before January 1, 1987 , the original ACRS rules apply (see Concept Summary 8-1 in the text ). b. ACRS was revised or modified (MACRS) by TRA of 1986 . For property placed in service after December 31, 1986 , ACRS has been revised or modified by TRA of 1986. 5. Personalty: Recovery Periods and Methods . a. ACRS . ACRS provides that the cost of eligible personalty (and certain realty) is recovered over 3, 5, 7, 10, 15 or 20 years. Because all of the cost of any ACRS property has already been recovered, there will be no further discussion of the technical rules governing ACRS personal or real property . b.
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This note was uploaded on 03/17/2009 for the course ACC 483 taught by Professor Susankuniyoshi during the Spring '08 term at University of Phoenix.

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IG_C08 - CHAPTER 8 DEPRECIATION, COST RECOVERY,...

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