I'm not quite sure what is going on here:
Rockford Corp., a calendar-year taxpayer, purchased used furniture and fixtures for use in its business and placed the property in service on December 1, 2010. The furniture and fixtures cost $112,000 and represented Rockford’s only acquisition of depreciable property during the year. Rockford did not make any special elections with regard to depreciation and did not elect to expense any part of the cost of the property under Sec. 179. What is the amount of Rockford Corp.’s depreciation deduction for the furniture and fixtures under the Modified Accelerated Cost Recovery System (MACRS) for 2010?
Answer: The requirement is to determine the MACRS deduction for the furniture and fixtures placed in service during 2010. The furniture and fixtures qualify as 7-year property and under MACRS will be depreciated using the 200% declining balance method. Regular MACRS depreciation would be computed under which a half-year convention normally applies to the year of acquisition. However, the midquarter convention must be used if more than 40% of all personal property is placed in service during the last quarter of the taxpayer's taxable year. Since this was Rockford's only acquisition of personal property and the property was placed in service during the last quarter of Rockford's calendar year, the midquarter convention must be used. Under this convention, property is treated as placed in service during the middle of the quarter in which placed in service. Since the furniture and fixtures were placed in service in December the amount of allowable MACRS depreciation is limited to ($112,000) x 2/7 x 1/8 = $4,000.
I'm not following the components of the calculation. Any help would be greatly appreciated.
(BEC) 71, 74, 77 - Becker
(FAR) 74, 77 - Becker
(REG) 63, 56, 75 - Becker + Wiley
Texas
