My question is about the half-year convention. There are two questions.

1. A purchased depreciable equipment in 2011 for 523,000 and claimed the maximum sec179 deduction for that year of 500,000. The equipment qualified as 5-year property. A sold all of this equipment on June 30, 2012. The depreciation rates for 5-year property for the first 2 years, assuming 200%-declining-balance switching to straight-line, are 20% and 32%, respectively. What is the amount of A's MACRS deduction for 2012?

The answer is (523000-500000)*32%*1/2=3680.

2. A taxpayer purchased and placed in service during the year a $100,00 piece of equipment. The equipment is 7-year property. The first-year depreciation for 7-year property is 14.29%. Assume that there is an allowable sec179 limit in the current year of 25000. What amount is the maximum allowable depreciation?

The answer is (100000-25000)*14.29%=10718.

My question is why the second question does not multiply 1/2 since the rule of half-year convention allows one-half year depreciation in the year of acquisition and one-half year depreciation in the year of disposition.

Thanks.

The two questions are testing you on different concepts.

Question 1 is asking about the year of disposal and you are only allowed to take 1/2 of a full-year depreciation, so that is why you multiply by 1/2. 

Question 2 is asking about the year of acquisition, and after looking at the MACRS table in my textbook, the 14.29% is correctly multiplied by the depreciable base leftover after any Sec179.  In the year of acquisition, the percentage given on the MACRS table already incorporates the 1/2 year rule.  

Note:  You only need to multiply by 1/2 if you dispose of the Equipment in any year other than the year of acquisition or the last year of depreciation.