Generally, for most tangible personal property, the applicable convention is the half-year convention
0] can be approximated by using a half-year convention
for start date.
If you use a half-year convention
, you would add a sixth year to the depreciation table, using =IF(OR(A6=1,A6>$B$3),0.
The property cost $1,000 and is a five-year property subject to the half-year convention
Before the increase, a car needed to cost only $15,300 before the $3,060 first-year cap was triggered ($15,300 x 20%), assuming that the half-year convention
Under the existing law, using the half-year convention
, the asset's 2002 depreciation is $20,000.
The half-year convention
is used under ACRS, meaning that personalty is depreciated for one-half of the year in which it is initially placed in service.
A half-year convention
is used by treating all package designs incurred during the year as having been incurred on the midpoint of the tax year.
For example, for five-year MACRS property (assuming the half-year convention
applies) acquired for $10,000 and placed in service in January 2001, the calculation for 2003 depreciation involved identifying the applicable rate from the table 6 for year 3 (0.
If the taxpayer chooses the assets to which it will allocate the [section] 179 amount, the taxpayer also can affect whether the mid-quarter convention or the half-year convention
will apply to assets.
FIGURE 1 COMPARISON OF ANNUAL DEDUCTIONS UNDER ALTERNATIVE METHODS Method Year Pool of Cost (1) Design (2) 1 $ 1,250 $ 8,200 2 2,500 400 3 2,500 400 4 2,500 400 5 1,250 400 6 -- 200 $10,000 $10,000 (1) $10,000 amortized over 48 months utilizing the half-year convention
for the year placed in service.
Had Q placed the radio tower in service in January 1996, it would have been subject to depreciation under the 150%-declining-balance method over a 15-year recovery period and a half-year convention