The IRS and Tax Court disagree as to whether taxpayers must determine an asset's useful life to depreciate
it under ACRS (and modified ACRS (MACRS)).
In addition they will continue to depreciate
the property in accordance with the result of the study, thereby continuing to accelerate the depreciation for years to come.
These rules apply to property that can be depreciated by the buyer, even if the seller could not depreciate
the asset; see Rev.
In this case, the court ruled the income forecast method could be used to depreciate
The Company will now depreciate
leasehold improvements for stores over the lesser of the estimated useful life of the leasehold improvements or the primary term of the lease, which is typically ten years for new and relocated stores, including applicable available lease renewal option periods, where appropriate.
its assets using a basis equal to FMV, instead of adjusted basis; and
They mistakenly capitalize these costs into the project basis and depreciate
them over 39 years instead of allocating them to their true asset class lives and depreciating them over 5, 7, or 15 years.
In two recent Tax Court cases, three professional musicians were allowed to depreciate
antique bows and a 17th century bass viol, respectively.
As a result of the recently issued guidance by the SEC, the company will now begin recording those landlord reimbursements as leasehold improvement assets on its balance sheet and depreciate
those improvements over the shorter of their economic lives, which begins once the assets are ready for their intended use, or the lease term.
Such property is eligible for bonus depreciation even if the taxpayer elects to depreciate
it over an alternative depreciation system life that exceeds 20 years.
In 1999, the IRS agreed with a pro-taxpayer court decision, Hospital Corporation of America, allowing a taxpayer to segregate and depreciate
various building costs over shorter lives other than the customary long lives used for real property.
The requirement to depreciate
foreclosed assets held for sale would change net income and the asset's carrying amount, which would have been reported if the assets were not depreciated, when depreciated cost is less than fair value minus estimated costs to sell the asset.