MACRS - apartment buildings 39-year All nonresidential real...

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1 Depreciation: Modified Accelerated Cost Recovery System (MACRS) Tuitional BBA Business Finance P’ O MACRS • Created several classes of assets. • The MACRS class life bears only a rough relationship to the expected useful economic life. • A major effect of the MACRS system is giving businesses larger tax deductions and thereby increasing their cash flows available for investment • Higher depreciation expenses result on lower tax, hence higher cash flows. Major Classes and Asset Lives for MARCS Class Type of Property 3-Year Certain special manufacturing tools 5-year Automobiles, light-duty trucks , computer, and certain special manufacturing equipment 7-year Most industrial equipment, office furniture, and fixtures. 10-year Certain longer-lived types of equipment 27.5-year Residential rental real property such as
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Unformatted text preview: apartment buildings 39-year All nonresidential real property, including commercial and industrial buildings Half-Year Convention Under MACRS, the assumption is generally made that property is placed in service in the middle of the first year. The effect of the half-year convention is to extend the recovery period out one more year. So 3-year class life property is depreciated over four calendar year. 2 Recovery Allowance Percentage Source : Brigham & houton Property in the 27.5- and 39-year categories (real estate) must be depreciated by straight line method But 3-, 5-, 7-, and 10-year property can be depreciated either by the accelerated method using the MACRS rates or by an alternate straight line method....
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MACRS - apartment buildings 39-year All nonresidential real...

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