mnorthrup
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Joined: 19 Jun 2012
Location: United States
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Posts: 1
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| Posted: 19 Jun 2012 at 18:14 | IP Logged
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I am working on Simulation 4 in Chapter 3-Corporate Taxation (BECKER).
We are asked to choose the MACRS year, the convention, and the corresponding table number. The first problem is how I understand this convention to work, but the next answer seems to be conflicting. I am
thinking that there are certain assets that are supposed to be grouped
together but I don't know/can't find online what those class of assets are.
1. A computer purchased March 30 for $100,000. Other furniture in the
amount of $80,000 was purchased in November.
Answer: 3. 5 years, mid quarter convention, $5,000. Computers are 5 year
property and use the half year convention, which is built into the table.
However, more than 40% of the assets were purchased in the fourth quarter.
Therefore, we must use the mid quarter convention. 5% is the amount in
the table for fourth quarter purchases. 100,000 X 5% = 5,000.
2. A building was purchased on September 30 in the amount of $800000
and used as residential rental property. Other equipment in the amount of
$1,000,000 was purchased in November.
Answer: 27.5 years, mid month convention, $8,488. Residential rental real
estate is 27.5 year property and uses the mid month convention. The
additional purchase of equipment does not have any effect on this. 1.061%
is the amount in the table for an asset placed in service in the ninth month .
800,000 X 1.061% = 8,488.
Does anyone know why the 2nd problem is not mid quarter convention?
Thanks
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Topic: Mid-Quarter Convention
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