Essco Inc., a calendar year taxpayer, made two asset purchases this year. The first purchase was a machine costing $836,000, and the second purchase was equipment costing $494,000. Both assets are 7-year recovery property. Essco placed the machine in service on July 21 and the equipment in service on October 14. How many months of MACRS depreciation is Essco allowed for each asset this year?

Question

Quizplus · Accepted Answer

Under the Modified Accelerated Cost Recovery System (MACRS), assets placed in service during the tax year are generally treated as though they were placed in service in the middle of the year, regardless of the actual date they were placed in service. This is known as the half-year convention. Therefore, Essco is allowed six months of depreciation for both the machine and the equipment, regardless of the specific service start dates within the year.

Essco Inc, a Calendar Year Taxpayer, Made Two Asset Purchases This