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Federal Depreciation Handbook

Federal Depreciation Handbook

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The Federal Depreciation Handbook from Thomson Reuters provides expert guidance on tax depreciation and other cost recovery issues to help tax practitioners make tax-efficient decisions and elections when an asset is placed in service. The Handbook also explains how to structure business property transactions to optimize federal income tax results when performing general tax planning or transactional consulting services, and includes guidance on applying the “tangible property regulations,” which specify the allowable tax treatment of costs to acquire, repair or improve tangible property.

The Federal Depreciation Handbook is an all-in-one resource for quick reference and in-depth coverage of depreciation and other cost recovery tax issues. It features detailed tax compliance guidance and is updated annually for legislative, regulatory, judicial, and administrative changes in the tax law, rules, and forms.

The Handbook provides the accurate answers you need quickly with:

  • Guidance addressing frequently encountered and often challenging depreciation and cost recovery issues.
  • Numerous quick-reference tables and charts providing easy access to key information, including easy-to-read depreciation tables for MACRS (with or without bonus depreciation), ADS, AMT, and ACRS.
  • Real-life examples that illustrate how the tax rules apply and how to report depreciation-related items on a tax return.
  • A 2013 Developments Summary section that summarizes significant tax law changes.
  • References to relevant Internal Revenue Code sections, IRS regulations and rulings, as well as court cases.
  • Coverage of property dispositions, including tricky tax rules for installment sales, like-kind exchanges and depreciation recapture.
  • Guidance on applying the “tangible property regulations,” which specify the allowable tax treatment of costs to acquire, repair or improve tangible property in tax years beginning after 2013 (or electively in tax years beginning after 2011).

Federal Depreciation Calculator (included with the Federal Depreciation Handbook on Checkpoint)

The Federal Depreciation Handbook on Checkpoint comes with a new Depreciation Calculator to perform quick and easy depreciation calculations for tax planning or for determining the most appropriate depreciation elections when an asset is placed into service. The new Depreciation Calculator also generates a depreciation schedule for the life of the asset.

With the Depreciation Calculator tax practitioners will be able to:

  • Determine depreciation deductions for MACRS assets
  • Generate printable and savable depreciation schedules for single assets
  • Enter User Notes to document conclusions (e.g., elections)

List of Content (Click any title to expand the list)

  • Federal Depreciation Handbook
  • Tab 1: Depreciation Basics
    • What is Depreciation?
    • When Depreciation Begins
    • Table: Selected Assets—Placed in Service Date
    • Table: Selected Assets—Placed in Service Date (Continued)
    • When Depreciation Ends
    • Who Is Entitled to the Depreciation Deduction?
    • Leased Property
    • When Is Property Used in a Trade or Business?
    • Table: Trade or Business Requirement Not Met—Selected Court Cases
    • Table: Trade or Business Requirement Not Met—Selected Court Cases (Continued)
    • Table: Trade or Business Requirement Met—Selected Court Cases
    • Basis for Depreciation When a Business is Acquired
    • Table: Residual Method of Allocating Purchase Price—Asset Classes
    • Table: Residual Method of Allocating Purchase Price—Asset Classes (Continued)
    • Reporting—Form 4562
  • Tab 2: Depreciable Property
    • What Property Can Be Depreciated?
    • Lease vs. Purchase
    • Depreciable Basis
    • Tangible Property Regulations
    • Property Acquired By Purchase or Produced
    • Currently Deductible Repairs
    • Capitalized Improvements
    • Table: Tax Cases/IRS Rulings—Capitalization Issues
    • Materials and Supplies
    • Rotable, Temporary And Standby Emergency Spare Parts
    • Restaurant Smallwares
    • Property Converted From Personal Use
    • Inherited Property
    • Property Acquired as a Gift
    • Property Acquired in Tax-Free Transactions
    • Table: Depreciable Property—Quick Chart of Selected Cases and Rulings1
    • Example of a Closing Statement—Purchase of a Rent House
  • Tab 3: MARCS Summary
    • MACRS General Rules
    • General Depreciation System (GDS)
    • Alternative Depreciation System (ADS)
    • Assigning the Recovery Period
    • Conventions
    • Computing Depreciation
    • Placed In and Taken Out of Service
    • Alternative Minimum Tax (AMT) Depreciation
    • Adjusted Current Earnings (ACE)—C Corporations
    • Farm Property
    • Short Tax Years
    • Special (Bonus) Depreciation
    • Qualified Disaster Assistance Property
    • General Asset Accounts
    • Changes in an Asset’s Use
  • Tab 4: MARCS In Depth
    • Table: MACRS Recovery Periods (2013)
    • Introduction
    • Property Eligible for MACRS Depreciation
    • Available Depreciation Methods
    • Applicable Conventions
    • MACRS Recovery Periods
    • Three-Year MACRS Recovery Property
    • Five-Year MACRS Recovery Property
    • Seven-Year MACRS Recovery Property
    • 10-Year MACRS Recovery Property
    • 15-Year MACRS Recovery Property
    • 20-Year MACRS Recovery Property
    • Real Property
    • Qualified Indian Reservation Property
    • Ineligible MACRS Property
    • General Asset Accounts and Multiple Asset Accounts
  • Tab 5: Bonus Depreciation in Depth
    • Introduction
    • General Rules and Effective Dates
    • Table: Placed-in-Service Dates and Applicable Rules for Bonus Depreciation
    • Section 168(k) Bonus Depreciation Eligibility Tests
    • Qualified Property for Section 168(k) Bonus Depreciation
    • Original Use Test for Section 168(k) Bonus Depreciation
    • Timely Acquisition Test for Section 168(k) Bonus Depreciation
    • Placed-in-Service Test for Section 168(k) Bonus Depreciation
    • Election Not to Claim Bonus Depreciation
    • Effect of Section 754 Election on Bonus Depreciation for Qualified Property
    • Bonus Depreciation for Qualified Property Placed in Service and Disposed of in the Same Year
    • Bonus Depreciation for Qualified Property With a Change in Use
    • Bonus Depreciation for New York (NY) Liberty Zone Property
    • Bonus Depreciation for Qualified Gulf
    • Opportunity (GO) Zone Property
    • Table: Hurricane Katrina Disaster Areas
    • Table: Hurricane Katrina Disaster Areas (Continued)
    • Table: Hurricane Rita Disaster Areas
    • Table: Hurricane Wilma Disaster Areas
    • Bonus Depreciation for Qualified Recovery Assistance Property Located in the Kansas Disaster Area
    • Table: Kansas Disaster Area Counties
    • Bonus Depreciation for Qualified Disaster Assistance Property
    • Bonus Depreciation for Biofuel Plant Property
    • Bonus Depreciation for Qualified Reuse and Recycling Property
  • Tab 6: MACRS Depreciation Tables
    • Depreciation Table Acronyms
    • Quick Guide to MACRS Depreciation Tables
    • Table 1—Three-Year MACRS
    • Table 2—Five-Year MACRS
    • Table 3—Seven-Year MACRS
    • Table 4—10-Year MACRS
    • Table 5—15-Year MACRS
    • Table 6—20-Year MACRS
    • Table 7—MACRS Residential Rental Property (27.5-Year)
    • Table 8—MACRS Nonresidential Real Property (31.5-Year)
    • Table 9—MACRS Nonresidential Real Property (39-Year)
    • Table 10—150% Declining Balance—All Lives—Half-Year Convention
    • Table 11—150% Declining Balance—All Lives—Mid-Quarter Convention, Property Placed in Service 1st Quarter
    • Table 12—150% Declining Balance—All Lives—Mid-Quarter Convention, Property Placed in Service 2nd Quarter
    • Table 13—150% Declining Balance—All Lives—Mid-Quarter Convention, Property Placed in Service 3rd Quarter
    • Table 14—150% Declining Balance—All Lives—Mid-Quarter Convention, Property Placed in Service 4th Quarter
    • Table 15—Straight-Line—All Lives—Half-Year Convention
    • Table 16—Straight-Line—All Lives—Mid-Quarter Convention, Property Placed in Service 1st Quarter
    • Table 17—Straight-Line—All Lives—Mid-Quarter Convention, Property Placed in Service 2nd Quarter
    • Table 18—Straight-Line—All Lives—Mid-Quarter Convention, Property Placed in Service 3rd Quarter
    • Table 19—Straight-Line—All Lives—Mid-Quarter Convention, Property Placed in Service 4th Quarter
    • Table 21—MACRS with 50% Special (Bonus) Depreciation—All Lives—Half-Year Convention
    • Table 22—MACRS with 50% Special (Bonus) Depreciation—All Lives—Mid-Quarter Convention, Property Placed in Service in First Quarter
    • Table 23—MACRS with 50% Special (Bonus) Depreciation—All Lives—Mid-Quarter Convention, Property Placed in Service in Second Quarter
    • Table 24—MACRS with 50% Special (Bonus) Depreciation—All Lives—Mid-Quarter Convention, Property Placed in Service in Third Quarter
    • Table 25—MACRS with 50% Special (Bonus) Depreciation—All Lives—Mid-Quarter Convention, Property Placed in Service in Fourth Quarter
    • Table 20—Straight-Line—40-Year Mid-Month Convention
    • Table 26—Two-Year Qualified Indian Reservation Property, 200% Declining Balance—Half-Year and Mid-Quarter Conventions
    • Table 27—Four-Year Qualified Indian Reservation Property, 200% Declining Balance—Half-Year and Mid-Quarter Conventions
    • Table 28—Six-Year Qualified Indian Reservation Property, 200% Declining Balance—Half-Year and Mid-Quarter Conventions
    • Table 29—22-Year Qualified Indian Reservation Property, Straight-Line—Mid-Month Convention
  • Tab 7: Section 179 Expensing
    • Expensing Assets Under Code Section 179
    • Annual Deduction Limit
    • Increased Limits for Targeted Areas
    • Business Taxable Income Limit
    • Pass-Through Entities
    • Qualifying Property
    • Comparing Special Depreciation and Section 179 Expensing
    • Making the Section 179 Election
    • Section 179 Recapture
    • Table: State Conformity to Federal Special (Bonus) Depreciation
    • and Section 179 Expensing Rules
    • Table: State Conformity to Federal Special (Bonus) Depreciation and Section 179 Expensing Rules (Continued)
  • Tab 8: Vehicles and Listed Property
    • Table: Business Vehicles—Quick Facts
    • Special Rules for Listed Property
    • Business Use Requirement for Listed Property
    • Lessee’s Income Inclusion Amount—Listed
    • Property Other Than Autos
    • Limits on Vehicle Depreciation
    • Special Depreciation and the Section 280F Limit
    • Section 179 Expensing Rules
    • Standard Mileage Rates vs. Actual Costs
    • Leased Vehicles
    • Alternative Motor Vehicle Credit
    • Credits for Plug-In Vehicles
    • Lease Income Inclusion Table—Electric Autos
    • Lease Income Inclusion Tables A & B—Property
    • Other Than Passenger Automobiles
    • Lease Income Inclusion Tables—Passenger Autos
  • Tab 9: Real Property
    • Table: Depreciable Real Property (2013)1
    • What Is Real Property?
    • Residential Rental Property
    • Open-Air Parking Structures
    • Billboards
    • Gas Stations and Convenience Stores
    • Farm Buildings
    • Business Use of Home
    • Converting a Residence to Rental Property
    • Effect of Rental or Business Use on Sale of Residence
    • Land Improvements
    • Table: Land Preparation Costs Summary
    • Table: Road Building Costs
    • Energy-Efficient Commercial Building Deduction
    • Builders of Energy-Efficient New Homes Credit
    • Nonbusiness Energy Property Credit
    • Residential Energy-Efficient Property Credit
    • Leasehold Improvements
    • Finding Personal Property Included in a Building’s Cost
    • (Cost Segregation)
    • Structural Component vs. Personal Property
    • IRS View of Cost Segregation Studies
    • Table: Quick List—Court Cases on Real vs. Personal Property1
    • Table: Guide to Assets Used in Casino/Hotel Industry
    • Table: Guide to Assets Used in the Restaurant Industry
    • Table: Guide to Assets Used in a Retail Business
    • Table: Guide to Assets Used in the Biotech/Pharmaceutical Industry
    • Table: Guide to Assets Used in the Auto Dealership Industry
    • Table: IRS Evaluation of Cost Segregation Studies
  • Tab 10: Sales and Dispositions
    • Disposing of Business Assets (Section 1231 Transactions)
    • Depreciation Recapture
    • Section 1245 Depreciation Recapture
    • Section 1250 Depreciation Recapture
    • Other Recapture Events
    • Sales of Depreciable Real Property
    • Installment Sales
    • Borrower’s Property Is Foreclosed or Repossessed
    • Repossessing Personal Property
    • Foreclosing on Seller-Financed Real Estate
  • Tab 11: Exchanging Property
    • Like-Kind Exchanges
    • Held for Business or Investment Use
    • What Is Like-Kind Property?
    • Recognizing Gain on an Exchange
    • Basis and Holding Period of Property Received
    • Depreciating Property After a Like-Kind Exchange
    • Exchanging Property Subject to Debt
    • Deferred Exchanges
    • Qualified Intermediaries
    • Multi-Party Exchanges
    • Like-Kind Exchange Example
    • Involuntary Conversions
    • Condemned Real Estate
    • Exchanging Life Insurance and Annuity Contracts
    • Filled-In Form 8824 Example 1
    • Filled-In Form 8824 Example 2
  • Tab 12: Correcting Depreciation Errors
    • Making Depreciation Changes
    • Depreciation as an Accounting Method
    • Requesting an Accounting Method Change
    • Section 481(a) Adjustments
    • Depreciation Changes for Disposed Assets
    • Changing Special (Bonus) Depreciation
    • Errors Corrected on an Amended Return
    • Example—Change in Accounting Method
    • Sample Filled-In Form 3115
    • Form 3115 Instructions
  • Tab 13: Intangible Assets
    • Amortizable Intangibles
    • Depreciable Intangibles
    • Section 197 Intangibles
    • Amortizing Section 197 Assets
    • Disposing of Section 197 Assets
    • Computer Software
    • Safe Harbor For Creative Property Costs
    • Intangible Drilling Costs
    • Business Start-Up Costs
    • Organizational Costs
    • Geological and Geophysical Costs
    • Reforestation Costs
    • Research and Experimental Expenditures
    • Income Forecast Method
  • Tab 14: Other Depreciation Methods
    • Accelerated Cost Recovery System (ACRS)
    • Alternate ACRS (Modified Straight-Line) Method
    • ACRS Deductions in Short Tax Years
    • Other Depreciation Methods
    • Assets Placed in Service Before 1981
    • ACRS Tables
  • Tab 15: ACRS in Depth
    • Accelerated Cost Recovery System (ACRS)
    • Property Depreciated Under ACRS
    • How to Calculate the ACRS Deduction
    • Classes of Recovery Property
    • Alternate ACRS Method
    • Conventions
    • ACRS Deduction in a Short Tax Year
    • Dispositions of Property
  • Tab 16: Pre-1981 Rules—In General
    • Introduction
    • Useful-Life Depreciation Methods
    • Multiple Asset Account Useful-Life Depreciation
    • Post-1970 Class Life Guideline Depreciation
  • Tab 17: Pre-1981 Rules—Class Life Asset Depreciation Range (ADR) System
    • The Class Life Asset Depreciation Range (ADR) System
    • The Basic Elements of the ADR System
    • The ADR Election
    • Advantages and Disadvantages of the ADR System
    • Vintage Accounts
    • Basis of a Vintage Account
    • Property Eligible for the ADR Election
    • Classification of Property Under the ADR System
    • ADR Depreciation Methods
    • First-Year Averaging Conventions
    • Depreciation Period
    • Salvage Value
    • Depreciation Reserves
    • Retirements of ADR Property
    • Tax Consequences of Ordinary Retirements of ADR Property
    • Tax Consequences of ExtraordinaryRetirements of ADR Property
    • Retirement of Last Asset in a Section 1245 Vintage Account
    • Sales of ADR Property Held for Rent or Sale Were Treated as Retirements
    • Asset Removed From a Multiple Asset Account when Depreciation Method Changes
    • Optional Treatment of Salvage Value
  • Tab 18: Selected IRS Materials
    • Rev. Proc. 87-56 (Class Lives and
    • Recovery Periods)
    • Tables of Class Lives and Recovery Periods
    • Rev. Proc. 2011-14—Section 6 of the Appendix (Depreciation or Amortization Accounting Method Changes)
  • Tab 19: Selected Regulations
    • Code Section 162 Selected Regulations For Business Expenses
    • Code Section 167 Selected Regulations for Depreciation
    • Former Code Section 168 Selected Proposed Regulations for ACRS Property
    • Code Section 168 Selected Regulations for MACRS Property
    • Code Section 179 Selected Regulations for Expensing
    • Code Section 263 Selected Regulations for
    • Capital Expenditures