2010_CCH_Essentials_Chapter_08

2010_CCH_Essentials_Chapter_08 - CCH Essentials of Federal...

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Chapter 8 Depreciation and Amortization ©2009 CCH . All Rights Reserved. 4025 West Peterson Ave. Chicago, IL 60646-6085 www.CCHGroup.com CCH Essentials of Federal Income Taxation
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CCH Essentials of Federal Income Taxation 2 of 18 Depreciation Expense Whether the property is real property or tangible personal property When they placed the property in service When taxpayers buy business property with a useful life of more than one year, they recover the cost over several years by taking annual deductions (called depreciation expense) from gross income. How quickly taxpayers depreciate business property depends on: Chapter 8
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CCH Essentials of Federal Income Taxation 3 of 18 Real Property Real property includes all real estate, such as office buildings, physical plants, and warehouses. Land is also a type of real property, but it is not depreciable. Chapter 8
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CCH Essentials of Federal Income Taxation 4 of 18 Tangible Personal Property Tangible personal property includes tangible property other than real estate, such as furniture and fixtures, machinery and equipment, and vehicles. Chapter 8
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CCH Essentials of Federal Income Taxation 5 of 18 Additional “Bonus” First-Year Depreciation Was available for purchases of new personal property acquired after September 10, 2001 and placed in service before December 31, 2004, and for purchases made during 2008 or 2009. After deducting the bonus depreciation, the remainder of the cost is eligible for MACRS depreciation. Chapter 8
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CCH Essentials of Federal Income Taxation 6 of 18 Modified Accelerated Cost Recovery System (MACRS) for Personal Property MACRS cost basis of the property × Percentage taken from an IRS-provided table = Depreciation expense using MACRS Chapter 8
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CCH Essentials of Federal Income Taxation 7 of 18 Half-Year vs. Mid-Quarter Averaging Conventions The half-year convention assumes that taxpayers place personal
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2010_CCH_Essentials_Chapter_08 - CCH Essentials of Federal...

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