Depreciation Notes

PRE- Ragin 1981

business assigned a useful life to different types of property.

Useful Lives

Straight Line or

Accelerated method depreciation (declining balance method)

Property placed in service before 1981 is referred to as no recovery property.

*

ACRS

Beg 1981

Government assigned useful life to different property used in business and created standardized method for calculcation depreciation

ACRS 1980-1987

MACRS Modified Accelerated Cost Recovery System

Beg 1987

Government modified the assigned useful life pf business property and introduced a new system for calculation depreciation called MACRS.

If you are depreciation an asset placed in service before 1987 do not use MACRS.

Recovery Periods

The recovery period of property is the number of years over which are allowed to recovered the cost of your assets through depreciation. There are two System

GDS- General Depreciation System

ADS- Alternative Deprecation System

* I.R.C 168

Any tangible property used predominantly outside the U.S during the year shall be depreciated under the alternative depreciation system as follows:

* Property Type | * Recovery Period |

* Personal Property | * 12 years |

* Nonresidential Real and Residential Rental Property | * 40 years |

* Any Railroad grading or tunnel bore | * 50 years |

* | * |

*

If you don’t qualify GDS you fall to ADS

For most businesses GDS is the depreciation system which must be used.

ADS IS REQUIRED in certain situation.

Listed property used 50% or less for Business

Any Tax- Exempt Use property

Tangible Property used Predominantly outside of the US

All Property used Predominantly in a farming business and placed in service in any year in which election not to apply the uniform capitalization rules was made.

When Can I Choose ADS

Even if qualify for GDS you can elect to do ADS anyway.

Residential Rental and Non residential rental property can be made on a property basis....