179 and is able to use the modified accelerated cost recovery system (MACRS) with the half-year convention
. There are no other assets purchased in 1991.
In Year 1, taking into account the half-year convention
, 5% of the land improvement cost will be recovered; the recovery percentage for the nonresidential depreciable real property will be approximately 1.8162%.
Generally, for most tangible personal property, the applicable convention is the half-year convention
. By applying the half-year convention
, a taxpayer treats all property placed in service during any tax year as placed in service on the midpoint of that tax year.
* [N.sub.0] can be approximated by using a half-year convention
for start date.
Some depreciation systems use a half-year convention
; you only take 50% of the depreciation in year 1 and then take the other half of the year's depreciation in year n+1 of the useful life.
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.
The property cost $1,000 and is a five-year property subject to the half-year convention
. The amount of additional first-year depreciation allowed under the new law is $500.
44 illustrates the alternative approaches for calculating depreciation for both five-year and seven-year MACRS properties, using an asset with an original unadjusted basis of $10,000 and assuming the half-year convention
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.