2011 Regulation 3 Text Update - This first page gives a...

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This first page gives a listing of the corrected lecture text pages that follow. Print these corrected pages and insert in the lecture text. REGULATION Date Added Lecture Page Number Description 03/14/2011 R-3 28 Text change 03/14/2011 R-3 30 Delete text 03/14/2011 R-3 51 Add text 03/14/2011 R-3 84 Text change (QID CPA-01974) 04/18/2011 R-3 5 Delete text
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Regulation 3 Becker Professional Education | CPA Exam Review R3- 28 © 2010 DeVry/Becker Educational Development Corp. All rights reserved. B. MACRS – Real Estate (salvage value ignored / subtract land cost) 1. Residential Rental Property (27.5-year straight-line) Examples of residential rental property include apartments and duplex rental homes. 2. Non-residential Real Property (39-year straight-line) Examples of non-residential real property (real property that is not residential rental property and that does not have an ADR midpoint of more than 27.5 years) include office buildings and warehouses. Tenant improvements made to the interior of certain nonresidential real property and restaurant renovations qualify for depreciation over 15 years. 3. Mid-month Convention Straight-line depreciation is computed based upon the number of months the property was in service. One half month is taken in the month the property is placed in service. One half month is taken for the month in which the property is disposed of. C. Expense Deduction in Lieu of Depreciation (§179) Each tax year, a taxpayer may deduct a fixed amount of depreciable (machinery and equipment) property. 1. 2010 and 2011 Rules The limit is $500,000 of new or used property that is acquired from an unrelated party during the year. a. The maximum amount is reduced dollar for dollar by the amount of property placed in service during the taxable year that exceeds $2,000,000. b. The deduction is not permitted when a net loss exists or if the deduction would create a net loss. c. SUVs: Section 179 limits the cost of a sport utility vehicle (SUV) that may be expensed to $25,000. This does not eliminate the exemption from the luxury auto depreciation limits for SUVs or other vehicles with a gross vehicle weight rating in excess of 6,000 pounds. For this purpose, an SUV is defined as a four- wheeled vehicle with a gross vehicle weight of more than 6,000 pounds, but less than 14,000 pounds. Because this definition would include heavy pickup trucks, vans, and small buses in addition to SUVs, the term "sport utility vehicle" is further defined to exclude any of the following vehicles: (1)
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