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Court Tax Case

During the current year, Danny - a calendar-year taxpayer - acquired and placed in service the following business assets:

January: Delivery trucks $ 55,000

March: real estate building 150,000 used for warehouse.

June: Computer system 35,000

September: Automobile 25,000

November: Office equipment 95,000

Which convention(s) is(are) used to figure Danny's depreciation for the current year and why?

Solution Preview

First, there are 3 conventions:

1. Half Year: assumes assets were purchased on average at the midpoint during the year no matter when they were actually purchased. This is the normal convention unless the mid-quarter or the mid-month convention is required.

2. Mid Quarter: only applies when more than 40% of the total costs of assets were placed in service in the last three months of the year. This convention applies to personal property only because real estate is already ...

Solution Summary

The court taxpayers calendars are examined.