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Taxact For 2011

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Taxact For 2011

Taxact for 2011 2. Taxact for 2011   The Tax and Filing Requirements Table of Contents Returns and Filing Requirements Payment of TaxFederal Tax Deposits Must be Made by Electronic Funds Transfer All organizations subject to the tax on unrelated business income, except the exempt trusts described in section 511(b)(2), are taxable at corporate rates on that income. Taxact for 2011 All exempt trusts subject to the tax on unrelated business income that, if not exempt, would be taxable as trusts are taxable at trust rates on that income. Taxact for 2011 However, an exempt trust may not claim the deduction for a personal exemption that is normally allowed to a trust. Taxact for 2011 The tax is imposed on the organization's unrelated business taxable income (described in chapter 4). Taxact for 2011 The tax is reduced by any applicable tax credits, including the general business credits (such as the investment credit) and the foreign tax credit. Taxact for 2011 Alternative minimum tax. Taxact for 2011   Organizations liable for tax on unrelated business income may be liable for alternative minimum tax on certain adjustments and tax preference items. Taxact for 2011 Returns and Filing Requirements An exempt organization subject to the tax on unrelated business income must file Form 990-T and attach any required supporting schedules and forms. Taxact for 2011 The obligation to file Form 990-T is in addition to the obligation to file any other required returns. Taxact for 2011 Form 990-T is required if the organization's gross income from unrelated businesses is $1,000 or more. Taxact for 2011 An exempt organization must report income from all its unrelated businesses on a single Form 990-T. Taxact for 2011 Each organization must file a separate Form 990-T, except section 501(c)(2) title holding corporations and organizations receiving their earnings that file a consolidated return under section 1501. Taxact for 2011 The various provisions of tax law relating to accounting periods, accounting methods, at-risk limits (described in section 465), assessments, and collection penalties that apply to tax returns generally also apply to Form 990-T. Taxact for 2011 When to file. Taxact for 2011   The Form 990-T of an employees' trust described in section 401(a), an IRA (including a traditional, SEP, SIMPLE, Roth, or Coverdell IRA), or an MSA must be filed by the 15th day of the 4th month after the end of its tax year. Taxact for 2011 The Form 990-T of any other exempt organization must be filed by the 15th day of the 5th month after the end of its tax year. Taxact for 2011 If the due date falls on a Saturday, Sunday, or legal holiday, the return is due by the next business day. Taxact for 2011 Extension of time to file. Taxact for 2011   A Form 990-T filer may request an automatic 3-month (6 months for corporation) extension of time to file a return by submitting Form 8868, Application for Extension of Time To File an Exempt Organization Return. Taxact for 2011 The Form 990-T filer may also use Form 8868 to apply for an additional (not automatic) 3-month extension to file the return if the original 3-month extension was not enough time. Taxact for 2011 Public Inspection Requirements of Section 501(c)(3) Organizations. Taxact for 2011   Under section 6104(d), a section 501(c)(3) organization that has gross income from an unrelated trade or business of $1,000 or more must make its annual exempt organization business income tax return (including amended returns) available for public inspection. Taxact for 2011    A section 501(c)(3) organization filing the Form 990-T only to request a credit for certain federal excise taxes paid does not have to make the Form 990-T available for public inspection. Taxact for 2011 Payment of Tax Estimated tax. Taxact for 2011   A tax-exempt organization must make estimated tax payments if it expects its tax (unrelated business income tax after certain adjustments) to be $500 or more. Taxact for 2011 Estimated tax payments are generally due by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. Taxact for 2011 If any due date falls on a Saturday, Sunday, or legal holiday, the payment is due on the next business day. Taxact for 2011   Any organization that fails to pay the proper estimated tax when due may be charged an underpayment penalty for the period of underpayment. Taxact for 2011 Generally, to avoid the estimated tax penalty, the organization must make estimated tax payments that total 100% of the organization's current tax year liability. Taxact for 2011 However, an organization can base its required estimated tax payments on 100% of the tax shown on its return for the preceding year (unless no tax is shown) if its taxable income for each of the 3 preceding tax years was less than $1 million. Taxact for 2011 If an organization's taxable income for any of those years was $1 million or more, it can base only its first required installment payment on its last year's tax. Taxact for 2011   All tax-exempt organizations should use Form 990-W (Worksheet), to figure their estimated tax. Taxact for 2011    Tax due with Form 990-T. Taxact for 2011   Any tax due with Form 990-T must be paid in full when the return is filed, but no later than the date the return is due (determined without extensions). Taxact for 2011 Federal Tax Deposits Must be Made by Electronic Funds Transfer You must use electronic funds transfer to make all federal deposits (such as deposits of estimated tax, employment tax, and excise tax). Taxact for 2011 Forms 8109 and 8109-B, Federal Tax Deposit Coupon, are no longer in use. Taxact for 2011 Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Taxact for 2011 If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make deposits on your behalf. Taxact for 2011 Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Taxact for 2011 EFTPS is a free service provided by the Department of Treasury. Taxact for 2011 Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Taxact for 2011 To get more information about EFTPS or to enroll in EFTPS, visit www. Taxact for 2011 eftps. Taxact for 2011 gov or call 1-800-555-4477. Taxact for 2011 Additional information about EFTPS is available in Publication 966, The Secure Way to Pay Your Federal Taxes. Taxact for 2011 Deposits on business days only. Taxact for 2011   If a deposit is required to be made on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. Taxact for 2011 A business day is any day other than a Saturday, Sunday, or legal holiday. Taxact for 2011 For example, if a deposit is required to be made on a Friday and Friday is a legal holiday, the deposit will be considered timely if it is made by the following Monday (if that Monday is a business day). Taxact for 2011 The term "legal holiday" means any legal holiday in the District of Columbia. Taxact for 2011 Prev  Up  Next   Home   More Online Publications
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The Taxact For 2011

Taxact for 2011 Accelerated Cost Recovery System (ACRS) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: ACRS Defined What Can and Cannot Be Depreciated Under ACRSRecovery Property Nonrecovery Property How To Figure the DeductionUnadjusted Basis Classes of Recovery Property Recovery Periods Alternate ACRS Method (Modified Straight Line Method) ACRS Deduction in Short Tax Year DispositionsEarly dispositions of ACRS property other than 15-, 18-, or 19-year real property. Taxact for 2011 Dispositions — mass asset accounts. Taxact for 2011 Early dispositions — 15-year real property. Taxact for 2011 Early dispositions — 18- and 19-year real property. Taxact for 2011 Depreciation Recapture Topics - This chapter discusses: The definition of ACRS What can and cannot be depreciated under ACRS How to figure the deduction Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization The Accelerated Cost Recovery System (ACRS) applies to property first used before 1987. Taxact for 2011 It is the name given to tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. Taxact for 2011 These rules are mandatory and generally apply to tangible property placed in service after 1980 and before 1987. Taxact for 2011 If you placed property in service during this period, you must continue to figure your depreciation under ACRS. Taxact for 2011 If you used listed property placed in service after June 18, 1984, less than 50% for business in 1995, see Predominant Use Test in chapter 3. Taxact for 2011 Listed property includes cars, other means of transportation, and certain computers. Taxact for 2011 Any additions or improvements placed in service after 1986, including any components of a building (such as plumbing, wiring, storm windows, etc. Taxact for 2011 ), are depreciated using MACRS, discussed in chapter 3 of Publication 946. Taxact for 2011 It does not matter that the underlying property is depreciated under ACRS or one of the other methods. Taxact for 2011 ACRS Defined ACRS consists of accelerated depreciation methods and an alternate ACRS method that could have been elected. Taxact for 2011 The alternate ACRS method used a recovery percentage based on a modified straight line method. Taxact for 2011 The law prescribes fixed percentages to be uses for each class of property. Taxact for 2011 Property depreciable under ACRS is called recovery property. Taxact for 2011 The recovery class of property determines the recovery period. Taxact for 2011 Generally, the class life of property places it in a 3-year, 5-year, 10-year, 15-year, 18-year, or 19-year recovery class. Taxact for 2011 Under ACRS, the prescribed percentages are used to recover the unadjusted basis of recovery property. Taxact for 2011 To figure a depreciation deduction, you multiply the prescribed percentage for the recovery class by the unadjusted basis of the recovery property. Taxact for 2011 You must continue to figure your depreciation under ACRS for property placed in service after 1980 and before 1987. Taxact for 2011 For property you placed in service after 1986, you must use MACRS, discussed in chapter 3 of Publication 946. Taxact for 2011 What Can and Cannot Be Depreciated Under ACRS ACRS applies to most depreciable tangible property placed in service after 1980 and before 1987. Taxact for 2011 It includes new or used and real or personal property. Taxact for 2011 The property must be for use in a trade or business or for the production of income. Taxact for 2011 Property you acquired before 1981 or after 1986 is not ACRS recovery property. Taxact for 2011 For information on depreciating property acquired before 1981, see chapter 2. Taxact for 2011 For information on depreciating property acquired after 1986, see chapter 3 of Publication 946. Taxact for 2011 Recovery Property Recovery property under ACRS is tangible depreciable property placed in service after 1980 and before 1987. Taxact for 2011 It generally includes new or used property that you acquired after 1980 and before 1987 for use in your trade or business or for the production of income. Taxact for 2011 Nonrecovery Property You cannot use ACRS for property you placed in service before 1981 or after 1986. Taxact for 2011 Nonrecovery property also includes: Intangible property, Property you elected to exclude from ACRS that is properly depreciated under a method of depreciation that is not based on a term of years, Certain public utility property, and Certain property acquired and excluded from ACRS because of the antichurning rules. Taxact for 2011 Intangible property. Taxact for 2011   Intangible property is not depreciated under ACRS. Taxact for 2011 Property depreciated under methods not expressed in a term of years. Taxact for 2011   Certain property depreciated under a method not expressed in a term of years is not depreciated under ACRS. Taxact for 2011 This included any property: If you made an irrevocable election to exclude such property, and In the first year that you could have claimed depreciation, you properly used the unit-of-production method or any method of depreciation not expressed in a term of years (not including the retirement-replacement-betterment method). Taxact for 2011 Public utility property. Taxact for 2011   Public utility property for which the taxpayer does not use a normalization method of accounting is excluded from ACRS and is subject to depreciation under a special rule. Taxact for 2011 Additions or improvements to ACRS property after 1986. Taxact for 2011   Any additions or improvements placed in service after 1986, including any components of a building (plumbing, wiring, storm windows, etc. Taxact for 2011 ) are depreciated using MACRS, discussed in chapter 3 of Publication 946. Taxact for 2011 It does not matter that the underlying property is depreciated under ACRS or one of the other methods. Taxact for 2011 How To Figure the Deduction After you determine that your property can be depreciated under ACRS, you are ready to figure your deduction. Taxact for 2011 Because the conventions are built into the percentage table rates, you only need to know the following: The unadjusted basis of your recovery property, The classes of recovery property, The recovery periods, and Whether to use the prescribed percentages based on accelerated methods or percentages based on using the alternate ACRS method. Taxact for 2011 Unadjusted Basis To figure your ACRS deduction, you multiply the unadjusted basis in your recovery property by its applicable percentage for the year. Taxact for 2011 Unadjusted basis is the same amount you would use to figure gain on a sale, but it is figured without taking into account any depreciation taken in earlier years. Taxact for 2011 However, reduce your original basis by the amount of amortization taken on the property and by any section 179 deduction claimed as discussed in chapter 2 of Publication 946. Taxact for 2011 If you buy property, your unadjusted basis is usually its cost minus any amortized amount and minus any section 179 deduction elected. Taxact for 2011 If you acquire property in some other way, such as by inheriting it, getting it as a gift, or building it yourself, you figure your unadjusted basis under other rules. Taxact for 2011 See Publication 551. Taxact for 2011 Classes of Recovery Property All recovery property under ACRS is in one of the following classes. Taxact for 2011 The class for your property was determined when you began to depreciate it. Taxact for 2011 3-Year Property 3-year property includes automobiles, light-duty trucks (actual unloaded weight less than 13,000 pounds), and tractor units for use over-the-road. Taxact for 2011 Race horses over 2 years old when placed in service are 3-year property. Taxact for 2011 Any other horses over 12 years old when you placed them in service are also included in the 3-year property class. Taxact for 2011 The ACRS percentages for 3-year recovery property are: Recovery Period Percentage 1st year 25% 2nd year 38% 3rd year 37% If you used the percentages above to depreciate your 3-year recovery property, your property, except for certain passenger automobiles, is fully depreciated. Taxact for 2011 You cannot claim depreciation for this property after 1988. Taxact for 2011 5-Year Property 5-year property includes computers, copiers, and equipment, such as office furniture and fixtures. Taxact for 2011 It also includes single purpose agricultural or horticultural structures and petroleum storage facilities (other than buildings and their structural components). Taxact for 2011 The ACRS percentages for 5-year recovery property are: Recovery period Percentage 1st year 15% 2nd year 22% 3rd through 5th year 21% If you used the percentages above to depreciate your 5-year recovery property, it is fully depreciated. Taxact for 2011 You cannot claim depreciation for this property after 1990. Taxact for 2011 10-Year Property 10-year property includes certain real property such as theme-park structures and certain public utility property. Taxact for 2011 Manufactured homes (including mobile homes) and railroad tank cars are also 10-year property. Taxact for 2011 You do not treat a building, and its structural components, as 10-year property by reason of a change in use after you placed the property in service. Taxact for 2011 For example, a building (15-year real property) that was placed in service in 1981 and was converted to a theme-park structure in 1986 remains 15-year real property. Taxact for 2011 The ACRS percentages for 10-year recovery property are: Recovery Period Percentage 1st year 8% 2nd year 14% 3rd year 12% 4th through 6th year 10% 7th through 10th year 9% If you used the percentages above, you cannot claim depreciation for this property after 1995. Taxact for 2011 Example. Taxact for 2011 On April 21, 1986, you bought and placed in service a new mobile home for $26,000 to be used as rental property. Taxact for 2011 You paid $10,000 cash and signed a note for $16,000 giving you an unadjusted basis of $26,000. Taxact for 2011 On June 8, 1986, you bought and placed in service a used mobile home for use as rental property at a total cost of $11,500. Taxact for 2011 The total unadjusted basis of your 10-year recovery property placed in service in 1986 was $37,500 ($26,000 + $11,500). Taxact for 2011 Your ACRS deduction was $3,000 (8% × $37,500). Taxact for 2011 In 1987, your ACRS deduction was $5,250 (14% × $37,500). Taxact for 2011 In 1988, your ACRS deduction was $4,500 (12% × $37,500). Taxact for 2011 In 1989, 1990, and 1991, your ACRS deduction was $3,750 (10% × $37,500). Taxact for 2011 In 1992, 1993, 1994, and 1995 your deduction for each year is $3,375 (9% × $37,500). Taxact for 2011 15-Year Real Property 15-year real property is real property that is recovery property placed in service before March 16, 1984. Taxact for 2011 It includes all real property, such as buildings, other than that designated as 5-year or 10-year property. Taxact for 2011 Unlike the 3-, 5-, or 10-year classes of property, the percentages for 15-year real property depend on when you placed the property in service during your tax year. Taxact for 2011 You could group 15-year real property by month and year placed in service. Taxact for 2011 In Table 1, at the end of this publication in the Appendix, find the month in your tax year that you placed the property in service in your trade or business or for the production of income. Taxact for 2011 You use the percentages listed under that month for each year of the recovery period to determine your depreciation deduction each year. Taxact for 2011 Example. Taxact for 2011 On March 5, 1984, you placed an apartment building in service in your business. Taxact for 2011 It is 15-year real property. Taxact for 2011 After subtracting the value of the land, your unadjusted basis in the building is $250,000. Taxact for 2011 You use the calendar year as your tax year. Taxact for 2011 March is the third month of your tax year. Taxact for 2011 Your ACRS deduction for 1984 was $25,000 (10% × $250,000). Taxact for 2011 For 1985, the percentage for the third month of the second year of the recovery period is 11%. Taxact for 2011 Your deduction was $27,500 (11% × $250,000). Taxact for 2011 For the third, fourth, and fifth years of the recovery period (1986, 1987, and 1988), the percentages are 9%, 8%, and 7%. Taxact for 2011 For 1989 through 1992, the percentage for the third month is 6%. Taxact for 2011 Your deduction each year is $15,000 (6% × $250,000). Taxact for 2011 For 1993, 1994, and 1995, the percentage for the third month is 5%. Taxact for 2011 Your depreciation deduction is $12,500 (5% × $250,000) for 1993, 1994, and 1995. Taxact for 2011 Low-Income Housing Low-income housing that was assigned a 15-year recovery period under ACRS includes the following types of property: Federally assisted housing projects where the mortgage is insured under section 221(d)(3) or 236 of the National Housing Act, or housing financed or assisted by direct loan or tax abatement under similar provisions of state or local laws. Taxact for 2011 Low-income rental housing for which a depreciation deduction for rehabilitation expenditures is allowed. Taxact for 2011 Low-income rental housing held for occupancy by families or individuals eligible to receive subsidies under section 8 of the United States Housing Act of 1937, as amended, or under the provisions of state or local laws that authorize similar subsidies for low-income families. Taxact for 2011 Housing financed or assisted by direct loan or insured under Title V of the Housing Act of 1949. Taxact for 2011 The ACRS percentages for low-income housing real property, like the regular 15-year real property percentages, depend on when you placed the property in service. Taxact for 2011 Find the month in your tax year in Table 2 or 3 at the end of this publication in the Appendix that you first placed the property in service as rental housing. Taxact for 2011 Use the percentages listed under that month for each year of the recovery period. Taxact for 2011 Table 2 shows percentages for low-income housing placed in service before May 9, 1985. Taxact for 2011 Table 3 shows percentages for low-income housing placed in service after May 8, 1985, and before 1987. Taxact for 2011 Example. Taxact for 2011 In May 1986, you acquired and placed in service a house that qualified as low-income rental housing under item 3) of the above listing. Taxact for 2011 You use the calendar year as your tax year. Taxact for 2011 You use Table C–3 because the property was placed in service after May 8, 1985. Taxact for 2011 Your unadjusted basis for the property, not including the land, was $59,000. Taxact for 2011 Your deduction for 1986 through 2001 is shown in the following table. Taxact for 2011 Year Rate Deduction 1986 8. Taxact for 2011 9% $5,251 1987 12. Taxact for 2011 1% 7,139 1988 10. Taxact for 2011 5% 6,195 1989 9. Taxact for 2011 1% 5,369 1990 7. Taxact for 2011 9% 4,661 1991 6. Taxact for 2011 9% 4,071 1992 5. Taxact for 2011 9% 3,481 1993 5. Taxact for 2011 2% 3,068 1994 4. Taxact for 2011 6% 2,714 1995 4. Taxact for 2011 6% 2,714 1996 4. Taxact for 2011 6% 2,714 1997 4. Taxact for 2011 6% 2,714 1998 4. Taxact for 2011 6% 2,714 1999 4. Taxact for 2011 5% 2,655 2000 4. Taxact for 2011 5% 2,655 2001 1. Taxact for 2011 5% 885 18-Year Real Property 18-year real property is real property that is recovery property placed in service after March 15, 1984, and before May 9, 1985. Taxact for 2011 It includes real property, such as buildings, other than that designated as 5-year, 10-year, 15-year real property, or low-income housing. Taxact for 2011 The ACRS percentages for 18-year real property depend on when you placed the property in service in your trade or business or for the production of income during your tax year. Taxact for 2011 There are also tables for 18-year real property in the Appendix. Taxact for 2011 Table 4 shows the percentages for 18-year real property you placed in service after June 22, 1984, and before May 9, 1985. Taxact for 2011 Table 5 is for 18-year real property placed in service after March 15, 1984, and before June 23, 1984. Taxact for 2011 Find the month in your tax year that you placed the property in service in a trade or business or for the production of income. Taxact for 2011 Use the percentages listed under that month for each year of the recovery period. Taxact for 2011 Example. Taxact for 2011 On April 28, 1985, you bought and placed in service a rental house. Taxact for 2011 The house, not including the land, cost $95,000. Taxact for 2011 This is your unadjusted basis for the house. Taxact for 2011 You use the calendar year as your tax year. Taxact for 2011 Because the house was placed in service after June 22, 1984, and before May 9, 1985, it is 18-year real property. Taxact for 2011 You use Table 4 to figure your deduction for the house. Taxact for 2011 April is the fourth month of your tax year. Taxact for 2011 Your deduction for 1985 through 2003 is shown in the following table. Taxact for 2011 Year Rate Deduction 1985 7. Taxact for 2011 0% $6,650 1986 9. Taxact for 2011 0% 8,550 1987 8. Taxact for 2011 0% 7,600 1988 7. Taxact for 2011 0% 6,650 1989 7. Taxact for 2011 0% 6,650 1990 6. Taxact for 2011 0% 5,700 1991 5. Taxact for 2011 0% 4,750 1992 5. Taxact for 2011 0% 4,750 1993 5. Taxact for 2011 0% 4,750 1994 5. Taxact for 2011 0% 4,750 1995 5. Taxact for 2011 0% 4,750 1996 5. Taxact for 2011 0% 4,750 1997 5. Taxact for 2011 0% 4,750 1998 4. Taxact for 2011 0% 3,800 1999 4. Taxact for 2011 0% 3,800 2000 4. Taxact for 2011 0% 3,800 2001 4. Taxact for 2011 0% 3,800 2002 4. Taxact for 2011 0% 3,800 2003 1. Taxact for 2011 0% 950 19-Year Real Property 19-year real property is real property that is recovery property placed in service after May 8, 1985, and before 1987. Taxact for 2011 It includes all real property, other than that designated as 5-year, 10-year, 15-year, or 18-year real property, or low-income housing. Taxact for 2011 The ACRS percentages for 19-year real property depend on when you placed the property in service in a trade or business or for the production of income during your tax year. Taxact for 2011 Table 6 shows the percentages for 19-year real property. Taxact for 2011 You find the month in your tax year that you placed the property in service. Taxact for 2011 You use the percentages listed under that month for each year of the recovery period. Taxact for 2011 Recovery Periods Each item of recovery property is assigned to a class of property. Taxact for 2011 The classes of recovery property establish the recovery periods over which the unadjusted basis of items in a class is recovered. Taxact for 2011 The classes of property are: 3-Year property 5-Year property 10-Year property 15-Year real property Low-income housing 18-Year real property 19-Year real property Alternate ACRS Method (Modified Straight Line Method) ACRS provides an alternate ACRS method that could be elected. Taxact for 2011 This alternate ACRS method uses a recovery percentage based on a modified straight line method. Taxact for 2011 This alternate ACRS method generally uses percentages other than those from the tables. Taxact for 2011 If you elected the alternate ACRS method, you determine the recovery period by using the following schedule. Taxact for 2011 This schedule is for other than 18- and 19-year real property and low-income housing: In the case of: You could have elected a recovery period of: 3-year property 3, 5, or 12 years 5-year property 5, 12, or 25 years 15-year real property 15, 35, or 45 years Percentages. Taxact for 2011   The straight-line percentages for the alternate ACRS method are: Recovery Period Percentage 5 years 20. Taxact for 2011 00% 10 years 10. Taxact for 2011 00% 12 years 8. Taxact for 2011 333% 15 years 6. Taxact for 2011 667% 25 years 4. Taxact for 2011 00% 35 years 2. Taxact for 2011 857%   You apply the percentage to the unadjusted basis(defined earlier) of the property to figure your ACRS deduction. Taxact for 2011 There are tables for 18- and 19-year real property later in this publication in the Appendix. Taxact for 2011 For 15-year real property, see 15-year real property, later. Taxact for 2011 3-, 5-, and 10-year property. Taxact for 2011   If you elected to use an alternate recovery percentage, you have to use the same recovery percentage for all property in that class that you placed in service in that tax year. Taxact for 2011 This applies throughout the recovery period you selected. Taxact for 2011 Half-year convention. Taxact for 2011   If you elected the alternate method, only a half-year of depreciation was deducted for the year you placed the property in service. Taxact for 2011 This applied regardless of when in the tax year you placed the property in service. Taxact for 2011 For each of the remaining years in the recovery period, you take a full year's deduction. Taxact for 2011 If you hold the property for the entire recovery period, a half-year of depreciation is allowable for the year following the end of the recovery period. Taxact for 2011 Example. Taxact for 2011 You operate a small upholstery business. Taxact for 2011 On March 19, 1986, you bought and placed in service a $13,000 light-duty panel truck to be used in your business and a $500 electric saw. Taxact for 2011 You elected to use the alternate ACRS method. Taxact for 2011 You did not elect to take a section 179 deduction. Taxact for 2011 You decided to recover the cost of the truck, which is 3-year recovery property, over 5 years. Taxact for 2011 The saw is 5-year property, but you decided to recover its cost over 12 years. Taxact for 2011 For 1986, your ACRS deduction reflected the half-year convention. Taxact for 2011 In the first year, you deducted half of the amount determined for a full year. Taxact for 2011 Your ACRS deduction for 1986 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. Taxact for 2011 00     Electric saw   12 years straight line = 8. Taxact for 2011 333% 8. Taxact for 2011 333% ÷ $500 = $41. Taxact for 2011 67 Half-year convention -½ of $41. Taxact for 2011 67= 20. Taxact for 2011 84 Total ACRS deduction for 1986 $1,320. Taxact for 2011 84       You take a full year of depreciation for both the truck and the saw for the years 1987 through 1990. Taxact for 2011 Your ACRS deduction for each of those years is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600     Electric saw     12 years straight line = 8. Taxact for 2011 333% 8. Taxact for 2011 333% ÷ $500 = $41. Taxact for 2011 67 Total annual ACRS deduction for 1987 through 1990 $2,641. Taxact for 2011 67       In 1991, you take a half-year of depreciation for the truck and a full year of depreciation for the saw. Taxact for 2011 Your ACRS deduction for 1991 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. Taxact for 2011 00     Electric saw   12 years straight line = 8. Taxact for 2011 333% 8. Taxact for 2011 333% ÷ $500 = $41. Taxact for 2011 67 Total ACRS deduction for 1991 $1,341. Taxact for 2011 67       The truck is fully depreciated after 1991. Taxact for 2011 You take a full year of depreciation for the saw for the years 1992 through 1997. Taxact for 2011 Your ACRS deduction for each of those years is as follows: Electric saw     12 years straight line = 8. Taxact for 2011 333% 8. Taxact for 2011 333% ÷ $500 = $41. Taxact for 2011 67 Total annual ACRS deduction for 1992 through 1997 $41. Taxact for 2011 67       You take a half-year of depreciation for the saw for 1998. Taxact for 2011 Your ACRS deduction for 1998 is as follows: Electric saw   12 years straight line = 8. Taxact for 2011 333% 8. Taxact for 2011 333% ÷ $500 = $41. Taxact for 2011 67 Half-year convention -½ of $41. Taxact for 2011 67= 20. Taxact for 2011 84 Total ACRS deduction for 1998 $20. Taxact for 2011 84       The saw is fully depreciated after 1998. Taxact for 2011 15-year real property. Taxact for 2011   Under ACRS, you could also elect to use the alternate ACRS method for 15-year real property. Taxact for 2011 The alternate ACRS method allows you to depreciate your 15-year real property using the straight line ACRS method over the alternate recovery periods of 15, 35, or 45 years. Taxact for 2011 If you selected a 15-year recovery period, you use the percentage (6. Taxact for 2011 667%) from the schedule above. Taxact for 2011 You prorate this percentage for the number of months the property was in service in the first year. Taxact for 2011 If you selected a 35- or 45-year recovery period, you use either Table 11 or 15. Taxact for 2011 Alternate periods for 18-year real property. Taxact for 2011   For 18-year real property, the alternate recovery periods are 18, 35, or 45 years. Taxact for 2011 The percentages for 18-year real property under the alternate method are in Tables 7, 8, 10, 11, 14, and 15 in the Appendix. Taxact for 2011 There are two tables for each alternate recovery period. Taxact for 2011 One table shows the percentage for property placed in service after June 22, 1984. Taxact for 2011 The other table has the percentages for property placed in service after March 15, 1984, and before June 23, 1984. Taxact for 2011 Alternate periods for 19-year real property. Taxact for 2011   For 19-year real property, the alternate recovery periods are 19, 35, or 45 years. Taxact for 2011 If you selected a 19-year recovery period, use Table 9 to determine your deduction. Taxact for 2011 If you select a 35- or 45-year recovery period, use either Table 13 or 14. Taxact for 2011 Example. Taxact for 2011 You placed in service an apartment building on August 3, 1986. Taxact for 2011 The building is 19-year real property. Taxact for 2011 The sales contract allocated $300,000 to the building and $100,000 to the land. Taxact for 2011 You use the calendar year as your tax year. Taxact for 2011 You chose the alternate ACRS method over a recovery period of 35 years. Taxact for 2011 For 1986, you figure your ACRS deduction usingTable 13. Taxact for 2011 August is the eighth month of your tax year. Taxact for 2011 The percentage from Table 13 for the eighth month is 1. Taxact for 2011 1%. Taxact for 2011 Your deduction was $3,300 ($300,000 ÷ 1. Taxact for 2011 1%). Taxact for 2011 The deduction rate from ACRS Table 13 for years 2 through 20 is 2. Taxact for 2011 9% so that your deduction in 1987 through 2005 is $8,700 ($300,000 ÷ 2. Taxact for 2011 9%). Taxact for 2011 Alternate periods for low-income housing. Taxact for 2011   For low-income housing, the alternate recovery periods are 15, 35, or 45 years. Taxact for 2011 If you selected a 15-year period for this property, use 6. Taxact for 2011 667% as the percentage. Taxact for 2011 If you selected a 35- or 45-year period, use either Table 11, 12, or 15. Taxact for 2011 Election. Taxact for 2011   You had to make the election to use the alternate ACRS method by the return due date (including extensions) for the tax year you placed the property in service. Taxact for 2011 Revocation of election. Taxact for 2011   Your election to use an alternate ACRS method, once made, can be changed only with the consent of the Commissioner. Taxact for 2011 The Commissioner grants consent only in extraordinary circumstances. Taxact for 2011 Any request for a revocation will be considered a request for a ruling. Taxact for 2011 ACRS Deduction in Short Tax Year For a tax year that is less than 12 months, the ACRS deduction is prorated on a 12-month basis. Taxact for 2011 Figure the amount of the ACRS deduction for a short tax year as follows: First, you figure the ACRS deduction for a full year. Taxact for 2011 You figure this by multiplying the unadjusted basis by the recovery percentage. Taxact for 2011 You then multiply the ACRS deduction determined for a full tax year by a fraction. Taxact for 2011 The numerator (top number) of the fraction is the number of months in the short tax year and the denominator (bottom number) is 12. Taxact for 2011 For example, a corporation placed in service in June 1986 an item of 3-year property with an unadjusted basis of $10,000. Taxact for 2011 The corporation files a tax return, because of a change in its accounting period, for the 6-month short tax year ending June 30, 1986. Taxact for 2011 The full year's ACRS deduction for this item is $2,500 ($10,000 ÷ 25%), the first year percentage from the 3-year table. Taxact for 2011 The ACRS deduction for the short tax year is $1,250 ($2,500 ÷ 6/12). Taxact for 2011 You use the full ACRS percentages during the remaining years of the recovery period. Taxact for 2011 For the first tax year after the recovery period, the unrecovered basis will be deductible. Taxact for 2011 Exception. Taxact for 2011   For the tax year in which you placed 15-, 18-, or 19-year real property in service or in the tax year you dispose of it, you compute the ACRS deduction for the number of months that the property is in service during that tax year. Taxact for 2011 You compute the number of months using either a full month or mid-month convention. Taxact for 2011 This is true regardless of the number of months in the tax year and the recovery period and method used. Taxact for 2011 Dispositions A disposition is the permanent withdrawal of property from use in your trade or business or in the production of income. Taxact for 2011 You can make a withdrawal by sale, exchange, retirement, abandonment, or destruction. Taxact for 2011 You generally recognize gain or loss on the disposition of an asset by sale. Taxact for 2011 However, nonrecognition rules can allow you to postpone some gain. Taxact for 2011 See Publication 544. Taxact for 2011 If you physically abandon property, you can deduct as a loss the adjusted basis of the asset at the time of its abandonment. Taxact for 2011 Your intent must be to discard the asset so that you will not use it again or retrieve it for sale, exchange, or other disposition. Taxact for 2011 Early dispositions. Taxact for 2011   The disposal of an asset before the end of its specified recovery period, is referred to as an early disposition. Taxact for 2011 When an early disposition occurs, the depreciation deduction in the year of disposition depends on the class of property involved. Taxact for 2011 Early dispositions of ACRS property other than 15-, 18-, or 19-year real property. Taxact for 2011   Generally, you get no ACRS deduction for the tax year in which you dispose of or retire recovery property, except for 15-, 18-, and 19-year real property. Taxact for 2011 This means there is no depreciation deduction under ACRS in the year you dispose of or retire any of your 3-, 5-, or 10-year recovery property. Taxact for 2011 Dispositions — mass asset accounts. Taxact for 2011   The law provides a special rule to avoid the calculation of gain on the disposition of assets from mass asset accounts. Taxact for 2011 A mass asset account includes items usually minor in value in relation to the group, numerous in quantity, impractical to separately identify, and not usually accounted for on a separate basis, but on a total dollar value. Taxact for 2011 Examples of mass assets include minor items of office, plant, and store furniture and fixtures. Taxact for 2011   Under the special rule, if you elected to use a mass asset account, you recognize gain to the extent of the proceeds from the disposition of the asset. Taxact for 2011 You leave the unadjusted basis of the property in the account until recovered in future years. Taxact for 2011 If you did this, include the total proceeds realized from the disposition in income on the tax return for the year of disposition. Taxact for 2011 Early dispositions — 15-year real property. Taxact for 2011   If you dispose of 15-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. Taxact for 2011 You use a full-month convention. Taxact for 2011 For a disposition at any time during a particular month before the end of the recovery period, no deduction is allowed for the month of disposition. Taxact for 2011 This applies whether you use the regular ACRS method or elected the alternate ACRS method. Taxact for 2011 Example. Taxact for 2011 You purchased and placed in service a rental house on March 2, 1984, for $98,000 (not including the cost of land). Taxact for 2011 You file your return based on a calendar year. Taxact for 2011 Your rate from Table 1 for the third month is 10%. Taxact for 2011 Your ACRS deduction for 1984 was $9,800 ($98. Taxact for 2011 000 ÷ 10%). Taxact for 2011 For 1985 through 1988, you figured your ACRS deductions using 11%, 9%, 8%, and 7% ÷ $98,000. Taxact for 2011 For 1989 through 1992, you figured your ACRS deductions using 6% for each year. Taxact for 2011 The deduction each year was $98,000 ÷ 6%. Taxact for 2011 For 1993 and 1994, the ACRS deduction is ($98,000 ÷ 5%) $4,900 for each year. Taxact for 2011 You sell the house on June 1, 1995. Taxact for 2011 You figure your ACRS deduction for 1995 for the full year and then prorate that amount for the months of use. Taxact for 2011 The full ACRS deduction for 1995 is $4,900 ($98,000 ÷ 5%). Taxact for 2011 You then prorate this amount to the 5 months in 1995 during which it was rented. Taxact for 2011 Your ACRS deduction for 1995 is $2,042 ($4,900 ÷ 5/12). Taxact for 2011 Early dispositions — 18- and 19-year real property. Taxact for 2011   If you dispose of 18- or 19-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. Taxact for 2011 For 18-year property placed in service before June 23, 1984, use a full-month convention on a disposition. Taxact for 2011 For 18-year property placed in service after June 22, 1984, and for 19-year property, determine the number of months in use by using the mid-month convention. Taxact for 2011 Under the mid-month convention,treat real property disposed of any time during a month as disposed of in the middle of that month. Taxact for 2011 Count the month of disposition as half a month of use. Taxact for 2011 Example. Taxact for 2011 You purchased and placed in service a rental house on July 2, 1984, for $100,000 (not including the cost of land). Taxact for 2011 You file your return based on a calendar year. Taxact for 2011 Your rate from Table 4 for the seventh month is 4%. Taxact for 2011 You figured your ACRS deduction for 1984 was $4,000 ($100,000 ÷ 4%). Taxact for 2011 In 1985 through 1994, your ACRS deductions were 9%, 8%, 8%, 7%, 6%, 6%, 5%, 5%, and 5% ÷ $100,000. Taxact for 2011 You sell the house on September 24, 1995. Taxact for 2011 Figure your ACRS deduction for 1995 for the months of use. Taxact for 2011 The full ACRS deduction for 1995 is $5,000 ($100,000 ÷ 5%). Taxact for 2011 Prorate this amount for the 8. Taxact for 2011 5 months in 1995 that you held the property. Taxact for 2011 Under the mid-month convention, you count September as half a month. Taxact for 2011 Your ACRS deduction for 1995 is $3,542 ($5,000 ÷ 8. Taxact for 2011 5/12). Taxact for 2011 Depreciation Recapture If you dispose of property depreciated under ACRS that is section 1245 recovery property, you will generally recognize gain or loss. Taxact for 2011 Gain recognized on a disposition is ordinary income to the extent of prior depreciation deductions taken. Taxact for 2011 This recapture rule applies to all personal property in the 3-year, 5-year, and 10-year classes. Taxact for 2011 You recapture gain on manufactured homes and theme park structures in the 10-year class as section 1245 property. Taxact for 2011 Section 1245 property generally includes all personal property. Taxact for 2011 See Section 1245 property in chapter 4 of Publication 544 for more information. Taxact for 2011 You treat dispositions of section 1250 real property on which you have a gain as section 1245 recovery property. Taxact for 2011 You recognize gain on this property as ordinary income to the extent of prior depreciation deductions taken. Taxact for 2011 Section 1250 property includes most real property. Taxact for 2011 See Section 1250 property in chapter 4 of Publication 544 for more information. Taxact for 2011 This rule applies to all section 1250 real property except the following property: Any 15-, 18-, or 19-year real property that is residential rental property. Taxact for 2011 Any 15-, 18-, or 19-year real property that you elected to depreciate using the alternate ACRS method. Taxact for 2011 Any 15-, 18-, or 19-year real property that is subsidized low-income housing. Taxact for 2011 For these recapture rules, you treat the section 179 deduction and 50% of the investment credit that reduced your basis as depreciation. Taxact for 2011 See Publication 544 for further discussion of dispositions of section 1245 and 1250 property. Taxact for 2011 Prev  Up  Next   Home   More Online Publications