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Cost Recovery (Depreciation (MACRS: Real property ( salvage value…
Cost Recovery
Depreciation
MACRS: Property other than real property
Half-year convention
Mid-quarter convention
MACRS: Real property ( salvage value ignored/subtract land cost)=buildings only
Residential rental : 27 yrs straight-line
Nonresidential : 39 yrs straight line
Mid-month convention ( MUST)
Expense deduction in lieu of depreciation ( 179 expense)
Straight-line in lieu of accelerated depreciation election
Bonus depreciation
179->bonus -> regular
Amortization
Intangibles : straight-line: 15 yrs
Others: $5k deduct +Remainder over 180( or 60, 84, 24) months
Depletion
Cost Depletion ( GAAP)
Percentage depletion ( Non-GAAP)
Other considerations related to cost recovery adjustments
After-tax cash flows
Tax savings associated with deductions =expense* marginal income tax rate