Question

During the year, Far-Out Furniture, a manufacturer of dormitory furniture, purchased the following assets:

2/15/20X0 Machine $40,000

10/31/20X0 Equipment $50,000

12/9/20X0 Warehouse $110,000

In computing depreciation of these assets, which of the following conventions will be used by this calendar-year taxpayer?

		Half-year, mid-month
		Half-year, mid-quarter, mid-month
		Mid-quarter, mid-month
		Mid-quarter only

Answer 1

Answer : Option - B, Half-year, mid-quarter, mid-month

Explanation :

1. 2/15/20X0 Machine $40,000 :-

According to depreciation convention if property is purchased and place it in service between January to September then we must use half year convention.

2. 10/31/20X0 Equipment $50,000 :-

According to depreciation convention if property is purchased and place it in service in the last quarter of the year i.e. October, November, December then we must use mid quarter convention.

3.12/9/20X0 Warehouse $110,000 :-

According to depreciation convention apply to realty here depreciation convention followed is mid month.