ExpertHard1 markMultiple Choice
CPA · Question 17 · Area III: Property Transactions
Company X purchased 5-year MACRS property for $200,000 and placed it in service on November 15 of the current year. This was the only personal property placed in service during the year. Which depreciation convention must Company X use?
Company X purchased 5-year MACRS property for $200,000 and placed it in service on November 15 of the current year. This was the only personal property placed in service during the year. Which depreciation convention must Company X use?
Answer options:
A.
Half-year convention
B.
Mid-quarter convention
C.
Mid-month convention
D.
Full-month convention
How to approach this question
Check the '40% rule': If >40% of tangible personal property is placed in service in the last 3 months (Q4), use Mid-Quarter.
Full Answer
B.Mid-quarter convention✓ Correct
The mid-quarter convention applies to all personal property placed in service during the year if more than 40% of the total basis of such property is placed in service during the last three months of the tax year. Since 100% of the property was placed in service in November (Q4), the mid-quarter convention applies.
Common mistakes
Defaulting to Half-Year convention without checking the 40% test.
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