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Universities » University of North Florida (UNF.. » TAX - Taxation » 3001 - Federal Income Tax » Flash Cards

Personal Income Tax exam 2 chaps 6-10 - Flashcards

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Class:TAX 3001 - Federal Income Tax
Subject:Taxation
University:University of North Florida
Term:Fall 2011
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      Mode:   CARDS LIST       ? pages   PRINT EXIT
Code Section 162 Trade and Business Expenses
In order to take 162 deduction, you need 4 requirements Your expenses must be Ordinary, Necessary, Reasonable and Incurred in carrying on a trade or business
Ordinary If another, similar business in the same area would incur the same expense.
Necessary Either appropriate or helpful in developing and maintaining a business.
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Reasonable The code says SALARIES must be reasonable, the courts say ALL expenses must be reasonable.
Can you take a deduction for paying out a dividend? NO
2 Requirements for carrying on Trade or Business Activities 1. Show that the activity was done with the exception of profit 
2. Regularity or Continuity to the work done. 
Code section 165 allows individual to deduct 3 types of losses, what are they? 1. Trade or business losses: NET OPERATING LOSS
2. Transactions entered for profit.
3. Personal losses from FIRESTORM, SHIPWRECK, and CAUSALITY & THEFT losses 
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Code Section 212 taxpayer may deduct 1 of these 3 expenses related to production of income Production or collection of income OR management, conservation or maintenance of property that produces income OR determination, collection, or refund of any tax

Examples are: investment counsel fees, rent of safe deposit box at bank and attorneys fees.
Is SS162 For or From AGI? For AGI Trade or Business Deductions 
Is SS165 For or From AGI? Losses: IT DEPENDS. Any losses related to Trade or Business are always FOR AGI, Personal losses when deductible are FROM AGI. 
Is SS212 For or From AGI? Miscellaneous Itemized deduction: Sub category of FROM AGI which is subject to the 2% of AGI floor. 
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You have $2800 of Misc. expenses and $100k AGI. Whats your deduction? AGI x .02 = 2% floor; Misc expenses - 2% floor = DEDUCTIBLE amount. $800
Is there a deduction if deductible amount sub. to 2% floor is negative? if it is NEGATIVE there is NO DEDUCTION 
are the SS212 expenses for rent or royalty FOR or FROM AGI? FOR AGI, which is an exception to the general rule of FROM AGI. Schedule E
Renting Collecting a fee for the use of property. These 212 expenses are FOR agi, which are normally FROM agi.
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Royalty Income
When can you deduct expense if taxpayer uses CASH accounting? Take deduction for expenses in the same year you receive the income
When can you deduct Prepaid expense if taxpayer uses CASH accounting? If the amount of prepaid expenses is substantially longer than the end of the tax year you are NOT ALLOWED TO DEDUCT THE ENTIRE AMOUNT FOR THAT YEAR.
Dec 20x1 prepaid $54000/36mo. lease of business property, whats deductible? Time extends substantially beyond the end of tax year so:  $54000/36mo. = $1500 per month x 12 months = $18000.
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1 year rule for prepayment expenses and 3 requirements may deduct prepaid expenses as long as they expire at the end of the tax yer following the year of the prepayment.
1. must be required prepayment. 2. deductibles will not materially distort income. 3. CANNOT apply to prepaid interest
When can you deduct expense if taxpayer uses ACCRUAL accounting? After everything occurred that creates the liability AND you know the amount of the liability with reasonable certainty AND the Economic performance test: you have received property or services.
T enters contract Oct 20x1 to pay $75k for r&d to be performed in nov 2012 when is deductible? This is the economic performance test: answer, 2012
2 Exceptions to the Economic Performance test 1) Reoccurring Item Exception: must occur within reasonable time period,  AND reoccurring in nature AND not a material expense or must match income and expenses.

2) prepayment exception:  If you can reasonably expect economic performance within 3 1/2 months, you can take the deduction in the same year. 
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12/1/11 pay 50k for goods to receive 3/12/12 an Accrual taxpayer can deduct when? date of payment 12/1/11, date expected to receive 3/12/12. This is less than THREE and a HALF months and is deductible in 2011. 
When is SS162 not deductible? 1. Fines and penalties 2. Foreign bribes or kickbacks 3. domestic bribes or kickbacks 4. cannot deduct 2/3 of a TREBLE (TRIPLE) damage award. 
Illegal Businesses can deduct: anything a legal business can
Exception to illegal business deductions and what is exception to the exception? Cannot take deductions if your illegal activity is Drug Dealing
May take deduction for cost of goods sold.
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SS276 Political contributions
Political Contributions Not deductible directly or indirectly
Direct and indirect political contributions Direct: send $100 to Barak Obama
Indirect: advertising expenses used to pay for ad space in political advertising that goes to that political party.
SS 162 (E) lobbying expenses Not deductible: expenses incurred to infuence state, federal or high ranking officials
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What are exceptions to be able to deduct lobbying expenses? 1) Dues to a trade organization that lobbies. The portion of dues used by the organization to lobby are still non deductible, but you may prorate it to the amount used for other activities. If the percent isnt givin, all of the income is taxed at 35%.

2) Deminimus Exception; in house lobbying expenses are deductible under $2000
Dues $8000/yr, lobbying amount $2000,business expenses $6000, what is deductible? $2000, not deductible, $6000, deductible
In house lobbying Not engaging another lobbyist, I do the lobbying. Lobbying to influence a local organization. Monitoring legislative activities is deductible if you do it or pay a fee to have it done.
SS162(m) Excessive executive compensation APPLIES ONLY TO CEO and 4 other highest compensated officers. puts a cap on how much a company can deduct. only for public corporations. amount of COMPENSATION of covered executives deductible is $1 MILLION EACH
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Compensation Everything except comission, performance based compensation approved by board, pmt to qualified retirement plans, fringe benefits and other parts that are excludable from employers gross income.
Business investigations expenses to buy a compnay Business your investigating is the same or very similar. Its a business your not in and you dont aquire. business your not in and you aquire it. 
Capitalize, expense deduction, must amortize over 180 month period
business investigation deduction 5k expenses. total exp over $50k amt over 50k reduces $1for$1
SS276 Stock Attributions who owns the stock
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constructive ownership if a stock owned by an entity, the stock is owned perportionally by the corps shareholders.
AB partnership owns 100% of stock; A 60%, B40% owners in business how much of stock owned by each? 60% owns 60% of stock 40% owns 40% of stock

More than 50% is related; less than 50% is not related
Father owns land 15k basis, sells to son 5k is there loss? since he is the son, there is no loss on sale of property for father. 

if son sells that land for 18k to someone outside family, this is what happens.
normally fathers sale would have had a 10k loss: 5k-15k=10k so sons sale is 18k-5k(orig basis) = 13k-10k(the loss that the father could have taken) = 3k gain
SS267 expenses unpaid to related party at year end Must have these for rule to kick in: related party taking the deduction must be ACCRUAL and the other party that shows income must be CASH
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Ordinary loss Loss on ordinary income
SS1244 a loss on the sale of common or preferred stock is? An Ordinary loss if 3 requirements are met
SS1244 3 requirements to take an ordinary loss deduction on common or preferred stock 1)  Small business corporation - total amount of money and other property required for issuance of stock cant exceed $1 MILLION.
2)  Must be an operating company - More than 50% of GROSS INCOME for past 5 years must be from active business operations -NOT PASSIVE INCOME.
3) Must be held by an eligible stockholder - must be a person - can be an individual in a partnership. Stock issued to a partnership, the partnership takes a loss
What is the amount of ordinary loss you can have per year? 50k for single and 100k for married filing jointly.
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Stock value now 100k, basis is 185k what is ordinary loss and what is capital loss? Married filing jointly 100k-185k=85k all is ordinary loss. For single 100k-185k=85k-50k (ordinary loss) =35k CAPITAL LOSS because its whats left over. the 35k must be put into the netting processs of capital losses so:35-3=32k which is your final amount of CAPITAL LOSS
Casualty A loss from fire, storm, shipwreck or other casualty. All must be a SUDDEN and UNEXPECTED force. Be sure to reduce amount of loss by any insurance compensation received to replace damage.
What is not casualty anything that is GRADUAL DAMAGE like moth damage
When do you deduct a Theft Loss? Deduction in the year you DISCOVER the theft.
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When do you deduct a Casualty loss? Deduction in the year it OCCURRED
What is the Federal Disaster Option with Casualty Losses? Option to take deduction in YEAR OF or YEAR BEFORE the event. This is so you can get immediate cash if you amend a prior years return because of a Federal Disaster. 
Limitations on Casualty theft deduction do not apply for? Business use and production of income PROPERTY
Amount of loss - Insurance Amount = Deductible 
Limitations on Casualty and Theft Deduction Personal use property there are limitations on the 1)amount of loss- Total casualty and  theft must be GREATER than 10% of AGI 2) Insurance benefit 3) $100 floor per occurrence/event 
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Theft of ring 2.5k, Storm damage 2k, AGI is 30k, what is deductible? ring 2500-100=2400 ; 2000-100=1900 ; 2400+1900=4300 ; 30,000 x 0.10 = 3000 ; 4300-3000= 1300 deduction from casualty and theft.
For Casualty and Theft, what is from and what is for agi? Business use = FOR ; Personal use = FROM ; Production of income = DEPENDS - if RENTAL INCOME its FOR AGI - if NOT RENTAL or ROYALTY its FROM and NOT subject to 2% floor
SS172 FOR TEST- Net Operating Loss Deduction Can take losses from one year and apply them BACK 2 YEARS and FORWARD 20 YEARS
If its an individual, its not a Net Operating Loss, because there is a lot of stuff not applicable 
SS174 Research and Experimental expenses 1) EXPENSE IT. OR
2) Expenses Deferred and amoritized 60 months or longer BEGINS FIRST MONTH of benefit from expenses. OR
3) Capitalize Expense

ONCE ONE IS CHOSEN, MUST USE THAT FROM THEN ON.
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ACRS Accelerated Cost Recovery System. Good to know because it is the basis for MACRS.
MACRS The Modified Accelerated Cost Recovery System is the current tax depreciation system in the United States.
4 rules to determine Tax Depreciable Basis 1) What is the Determinable life of the property to be depreciated?
2) Is it Business use, Production of income use, or personal property?
3) What is the tax depreciable basis? 
calculation: % in table x unadjusted basis = depreciable basis 
4) allowable depreciation -put all property into a Classes and put classes into PERIODS
What is depreciable if you convert personal property to business property? Personal PC = $2500 and Fair market value at conversion to business property = 1400 ; The basis of pc for depreciation is $1400.

If the PC is sold; sale at fair market value 1400 - 2500 purchase price =  1100 LOSS. 
No deduction if its personal property
Yes deduction if business property
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When can you begin depreciating? When property is READY and ABLE to be used. Doesnt have to be used yet.

If you buy and sell in same year NO DEPRECIATION DEDUCTION- remember this.
Asset depreciation range in relation to what IRS says it should be 20% more or 20% less is reasonable
accelerated cost recovery system Residential RENTAL real estate 27 years DEPRECIATION
NONresidential RENTAL real estate 31 years
if put in service after 1993 NONresidential Rental real estate 39yrs.
Does a 5 year class asset purch in Jan 1 have more depreciation than if purch in dec 1? No, for the first year of ownership after property is PLACED INTO SERVICE, the TABLE reflects a half a year convention for all property. 
The year you sell you also have a half year, but is NOT built into the table and you must figure it out.
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Half year convention a taxpayer claims a half years depreciation for the first taxable year of property placed in service. REGARDLESS of when it was placed in service in that taxable year, it is assumed it was placed in service at the MIDPOINT of the year.
To compensate for this calculation, ANOTHER half year is added on at the end of the normal recovery period. 

A 5 year class asset will be fully depreciated as follows
1/2, 1, 1, 1, 1,1/2      ....that is a total of 6 years. 
3/1/20x1 put into service 5yr class asset cost 10k, table is .20 what is depreciation for 20x1? Unadjusted basis x Table % (which includes 1/2 year convention) = Depreciation using half year convention

10,000 x .2 = $2000 depreciation

if this property is sold 20x3 the half year convention applies as"
10,000 x .192(this is for full year) = 1920/2 = $960 depreciation for year of the sale.
Mid Month Convention for REAL ESTATE ONLY. Calculate only on the HOUSE and NOT on the LAND portion because you do NOT depreciate land. 
7/17/20x1 purchase res. real estate dep cost -land is 100k, table % .166what is depreciation? unadjusted basis x table % = depreciation
100k x .1667 = $1667

If sold 5/22/20x8 depreciation is:
100k x .03636 (table % is full depreciation must be halfed) x 4.5/12 = $1363.5 depreciation month of SALE

No depreciation if sale in same year as purchase.
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Mid quarter convention Use this OR half year convention. If you have more than 40% of total basis of ALL PERSONAL PROPERTY in a quarter, you MUST depreciate BY QUARTER.

Table % does NOT give option for PRIOR quarters and gives 1/2 for first quarter like the rest.
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 Code Section 162Trade and Business Expenses
 In order to take 162 deduction, you need 4 requirementsYour expenses must be Ordinary, Necessary, Reasonable and Incurred in carrying on a trade or business
 OrdinaryIf another, similar business in the same area would incur the same expense.
 NecessaryEither appropriate or helpful in developing and maintaining a business.
 ReasonableThe code says SALARIES must be reasonable, the courts say ALL expenses must be reasonable.
 Can you take a deduction for paying out a dividend?NO
 2 Requirements for carrying on Trade or Business Activities1. Show that the activity was done with the exception of profit 
2. Regularity or Continuity to the work done. 
 Code section 165 allows individual to deduct 3 types of losses, what are they?1. Trade or business losses: NET OPERATING LOSS
2. Transactions entered for profit.
3. Personal losses from FIRESTORM, SHIPWRECK, and CAUSALITY & THEFT losses 
 Code Section 212 taxpayer may deduct 1 of these 3 expenses related to production of incomeProduction or collection of income OR management, conservation or maintenance of property that produces income OR determination, collection, or refund of any tax

Examples are: investment counsel fees, rent of safe deposit box at bank and attorneys fees.
 Is SS162 For or From AGI?For AGI Trade or Business Deductions 
 Is SS165 For or From AGI?Losses: IT DEPENDS. Any losses related to Trade or Business are always FOR AGI, Personal losses when deductible are FROM AGI. 
 Is SS212 For or From AGI?Miscellaneous Itemized deduction: Sub category of FROM AGI which is subject to the 2% of AGI floor. 
 You have $2800 of Misc. expenses and $100k AGI. Whats your deduction?AGI x .02 = 2% floor; Misc expenses - 2% floor = DEDUCTIBLE amount. $800


 Is there a deduction if deductible amount sub. to 2% floor is negative?if it is NEGATIVE there is NO DEDUCTION 
 are the SS212 expenses for rent or royalty FOR or FROM AGI?FOR AGI, which is an exception to the general rule of FROM AGI. Schedule E
 RentingCollecting a fee for the use of property. These 212 expenses are FOR agi, which are normally FROM agi.
 Royalty Income 
 When can you deduct expense if taxpayer uses CASH accounting?Take deduction for expenses in the same year you receive the income
 When can you deduct Prepaid expense if taxpayer uses CASH accounting?If the amount of prepaid expenses is substantially longer than the end of the tax year you are NOT ALLOWED TO DEDUCT THE ENTIRE AMOUNT FOR THAT YEAR.
 Dec 20x1 prepaid $54000/36mo. lease of business property, whats deductible?Time extends substantially beyond the end of tax year so:  $54000/36mo. = $1500 per month x 12 months = $18000.
 1 year rule for prepayment expenses and 3 requirementsmay deduct prepaid expenses as long as they expire at the end of the tax yer following the year of the prepayment.
1. must be required prepayment. 2. deductibles will not materially distort income. 3. CANNOT apply to prepaid interest
 When can you deduct expense if taxpayer uses ACCRUAL accounting?After everything occurred that creates the liability AND you know the amount of the liability with reasonable certainty AND the Economic performance test: you have received property or services.
 T enters contract Oct 20x1 to pay $75k for r&d to be performed in nov 2012 when is deductible?This is the economic performance test: answer, 2012
 2 Exceptions to the Economic Performance test1) Reoccurring Item Exception: must occur within reasonable time period,  AND reoccurring in nature AND not a material expense or must match income and expenses.

2) prepayment exception:  If you can reasonably expect economic performance within 3 1/2 months, you can take the deduction in the same year. 
 12/1/11 pay 50k for goods to receive 3/12/12 an Accrual taxpayer can deduct when?date of payment 12/1/11, date expected to receive 3/12/12. This is less than THREE and a HALF months and is deductible in 2011. 
 When is SS162 not deductible?1. Fines and penalties 2. Foreign bribes or kickbacks 3. domestic bribes or kickbacks 4. cannot deduct 2/3 of a TREBLE (TRIPLE) damage award. 
 Illegal Businesses can deduct:anything a legal business can
 Exception to illegal business deductions and what is exception to the exception?Cannot take deductions if your illegal activity is Drug Dealing
May take deduction for cost of goods sold.

 SS276Political contributions
 Political ContributionsNot deductible directly or indirectly
 Direct and indirect political contributionsDirect: send $100 to Barak Obama
Indirect: advertising expenses used to pay for ad space in political advertising that goes to that political party.
 SS 162 (E) lobbying expensesNot deductible: expenses incurred to infuence state, federal or high ranking officials
 What are exceptions to be able to deduct lobbying expenses?1) Dues to a trade organization that lobbies. The portion of dues used by the organization to lobby are still non deductible, but you may prorate it to the amount used for other activities. If the percent isnt givin, all of the income is taxed at 35%.

2) Deminimus Exception; in house lobbying expenses are deductible under $2000
 Dues $8000/yr, lobbying amount $2000,business expenses $6000, what is deductible?$2000, not deductible, $6000, deductible

 In house lobbyingNot engaging another lobbyist, I do the lobbying. Lobbying to influence a local organization. Monitoring legislative activities is deductible if you do it or pay a fee to have it done.
 SS162(m) Excessive executive compensationAPPLIES ONLY TO CEO and 4 other highest compensated officers. puts a cap on how much a company can deduct. only for public corporations. amount of COMPENSATION of covered executives deductible is $1 MILLION EACH
 CompensationEverything except comission, performance based compensation approved by board, pmt to qualified retirement plans, fringe benefits and other parts that are excludable from employers gross income.
 Business investigations expenses to buy a compnayBusiness your investigating is the same or very similar. Its a business your not in and you dont aquire. business your not in and you aquire it. 
Capitalize, expense deduction, must amortize over 180 month period
 business investigation deduction 5k expenses. total exp over $50k amt over 50k reduces $1for$1 
 SS276 Stock Attributionswho owns the stock
 constructive ownershipif a stock owned by an entity, the stock is owned perportionally by the corps shareholders.


 AB partnership owns 100% of stock; A 60%, B40% owners in business how much of stock owned by each?60% owns 60% of stock 40% owns 40% of stock

More than 50% is related; less than 50% is not related
 Father owns land 15k basis, sells to son 5k is there loss?since he is the son, there is no loss on sale of property for father. 

if son sells that land for 18k to someone outside family, this is what happens.
normally fathers sale would have had a 10k loss: 5k-15k=10k so sons sale is 18k-5k(orig basis) = 13k-10k(the loss that the father could have taken) = 3k gain
 SS267 expenses unpaid to related party at year endMust have these for rule to kick in: related party taking the deduction must be ACCRUAL and the other party that shows income must be CASH


 Ordinary lossLoss on ordinary income
 SS1244 a loss on the sale of common or preferred stock is?An Ordinary loss if 3 requirements are met
 SS1244 3 requirements to take an ordinary loss deduction on common or preferred stock1)  Small business corporation - total amount of money and other property required for issuance of stock cant exceed $1 MILLION.
2)  Must be an operating company - More than 50% of GROSS INCOME for past 5 years must be from active business operations -NOT PASSIVE INCOME.
3) Must be held by an eligible stockholder - must be a person - can be an individual in a partnership. Stock issued to a partnership, the partnership takes a loss
 What is the amount of ordinary loss you can have per year?50k for single and 100k for married filing jointly.
 Stock value now 100k, basis is 185k what is ordinary loss and what is capital loss?Married filing jointly 100k-185k=85k all is ordinary loss. For single 100k-185k=85k-50k (ordinary loss) =35k CAPITAL LOSS because its whats left over. the 35k must be put into the netting processs of capital losses so:35-3=32k which is your final amount of CAPITAL LOSS
 CasualtyA loss from fire, storm, shipwreck or other casualty. All must be a SUDDEN and UNEXPECTED force. Be sure to reduce amount of loss by any insurance compensation received to replace damage.
 What is not casualtyanything that is GRADUAL DAMAGE like moth damage
 When do you deduct a Theft Loss?Deduction in the year you DISCOVER the theft.
 When do you deduct a Casualty loss?Deduction in the year it OCCURRED
 What is the Federal Disaster Option with Casualty Losses?Option to take deduction in YEAR OF or YEAR BEFORE the event. This is so you can get immediate cash if you amend a prior years return because of a Federal Disaster. 
 Limitations on Casualty theft deduction do not apply for?Business use and production of income PROPERTY
Amount of loss - Insurance Amount = Deductible 
 Limitations on Casualty and Theft DeductionPersonal use property there are limitations on the 1)amount of loss- Total casualty and  theft must be GREATER than 10% of AGI 2) Insurance benefit 3) $100 floor per occurrence/event 
 Theft of ring 2.5k, Storm damage 2k, AGI is 30k, what is deductible?ring 2500-100=2400 ; 2000-100=1900 ; 2400+1900=4300 ; 30,000 x 0.10 = 3000 ; 4300-3000= 1300 deduction from casualty and theft.
 For Casualty and Theft, what is from and what is for agi?Business use = FOR ; Personal use = FROM ; Production of income = DEPENDS - if RENTAL INCOME its FOR AGI - if NOT RENTAL or ROYALTY its FROM and NOT subject to 2% floor
 SS172 FOR TEST- Net Operating Loss DeductionCan take losses from one year and apply them BACK 2 YEARS and FORWARD 20 YEARS
If its an individual, its not a Net Operating Loss, because there is a lot of stuff not applicable 

 SS174 Research and Experimental expenses1) EXPENSE IT. OR
2) Expenses Deferred and amoritized 60 months or longer BEGINS FIRST MONTH of benefit from expenses. OR
3) Capitalize Expense

ONCE ONE IS CHOSEN, MUST USE THAT FROM THEN ON.
 ACRSAccelerated Cost Recovery System. Good to know because it is the basis for MACRS.
 MACRSThe Modified Accelerated Cost Recovery System is the current tax depreciation system in the United States.
 4 rules to determine Tax Depreciable Basis1) What is the Determinable life of the property to be depreciated?
2) Is it Business use, Production of income use, or personal property?
3) What is the tax depreciable basis? 
calculation: % in table x unadjusted basis = depreciable basis 
4) allowable depreciation -put all property into a Classes and put classes into PERIODS

 What is depreciable if you convert personal property to business property?Personal PC = $2500 and Fair market value at conversion to business property = 1400 ; The basis of pc for depreciation is $1400.

If the PC is sold; sale at fair market value 1400 - 2500 purchase price =  1100 LOSS. 
No deduction if its personal property
Yes deduction if business property
 When can you begin depreciating?When property is READY and ABLE to be used. Doesnt have to be used yet.

If you buy and sell in same year NO DEPRECIATION DEDUCTION- remember this.
 Asset depreciation range in relation to what IRS says it should be20% more or 20% less is reasonable
 accelerated cost recovery systemResidential RENTAL real estate 27 years DEPRECIATION
NONresidential RENTAL real estate 31 years
if put in service after 1993 NONresidential Rental real estate 39yrs.
 Does a 5 year class asset purch in Jan 1 have more depreciation than if purch in dec 1?No, for the first year of ownership after property is PLACED INTO SERVICE, the TABLE reflects a half a year convention for all property. 
The year you sell you also have a half year, but is NOT built into the table and you must figure it out.
 Half year conventiona taxpayer claims a half years depreciation for the first taxable year of property placed in service. REGARDLESS of when it was placed in service in that taxable year, it is assumed it was placed in service at the MIDPOINT of the year.
To compensate for this calculation, ANOTHER half year is added on at the end of the normal recovery period. 

A 5 year class asset will be fully depreciated as follows
1/2, 1, 1, 1, 1,1/2      ....that is a total of 6 years. 
 3/1/20x1 put into service 5yr class asset cost 10k, table is .20 what is depreciation for 20x1?Unadjusted basis x Table % (which includes 1/2 year convention) = Depreciation using half year convention

10,000 x .2 = $2000 depreciation

if this property is sold 20x3 the half year convention applies as"
10,000 x .192(this is for full year) = 1920/2 = $960 depreciation for year of the sale.
 Mid Month Conventionfor REAL ESTATE ONLY. Calculate only on the HOUSE and NOT on the LAND portion because you do NOT depreciate land. 
 7/17/20x1 purchase res. real estate dep cost -land is 100k, table % .166what is depreciation?unadjusted basis x table % = depreciation
100k x .1667 = $1667

If sold 5/22/20x8 depreciation is:
100k x .03636 (table % is full depreciation must be halfed) x 4.5/12 = $1363.5 depreciation month of SALE

No depreciation if sale in same year as purchase.
 Mid quarter conventionUse this OR half year convention. If you have more than 40% of total basis of ALL PERSONAL PROPERTY in a quarter, you MUST depreciate BY QUARTER.

Table % does NOT give option for PRIOR quarters and gives 1/2 for first quarter like the rest.
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