half-year convention

Half-Year Convention

In accounting, the assumption that an asset is purchased at its value exactly half-way through the calendar year in which it is purchased. For example, if one buys an asset for $1,000 on January 1st and it is worth $1,200 at the end of the second quarter, the half-year convention would assume that it was bought for $1,200. This can affect taxes owed on the asset and the depreciation allowed each year. Obviously the half-year convention can have both positive and negative impacts, depending on the price movement of the asset.

half-year convention

The assumption for tax purposes that a newly acquired asset is placed in service halfway through the year regardless of when the asset is actually acquired and placed in service. The half-year convention affects annual depreciation, taxation, and earnings calculations.

References in periodicals archive ?

the applicable recovery period), and the half-year convention (unless the mid-quarter convention applies), with a switch to the straight-line method in the year that maximizes the deduction.

Forensic Accounting Firm Gettry Marcus Shares How to Compute Depreciation for Tax Purposes

Generally, for most tangible personal property, the applicable convention is the half-year convention.

Post-deal depreciation: impact of certain nonrecognition transactions

0] can be approximated by using a half-year convention for start date.

Measuring turnover: a review of traditional measurement methods and development of measurement techniques based on survival analysis

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.

Calculating depreciation in Excel

Under the existing law, using the half-year convention, the asset's 2002 depreciation is $20,000.

Ready, set, depreciate: Highlights from the 2002 tax act

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.

Depreciation computations made easy

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.

Accounting for the costs of package designs

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.

Calculating depreciation on a like-kind exchange or an involuntary conversion: temporary regulations have modified the rules for computing depreciation on exchanged or converted property. This article focuses on the use of the optional tables for like-kind exchanges and involuntary conversions

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.

Depreciation after the 2003 tax act--part 2

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.

Practical application of the new MACRS depreciation regs

By combining the 30% bonus depreciation enacted by the Job Creation and Worker Assistance Act of 2002 (increased to 50% by the Jobs and Growth Tax Relief Reconciliation Act of 2003) with a cost-segregation study, "qualified" new property eligible for 50% bonus depreciation with a modified accelerated cost recovery system (MACRS) five-year life, using a half-year convention, could qualify for as much as 60% of cost being depreciated in the first year.

Increased cashflow for real estate owners

168(d)(4)(A) half-year convention applies to reduce first- and last-year depreciation by 50%.