Question

What Depreciation Calculation System can be used using IRS tables and in certain cases your accountant may be able to save you money by using this system?

a) Double Declining Balance
b) Straight-Line
c) MACRS
d) Sum-of-the-Years-Digits

Answer 1

The Modified Accelerated Cost Recovery System (MACRS) is the depreciation calculation system used with IRS tables that might save money by providing greater deductions in the early years of an asset's life.

Step-by-step explanation:

The depreciation calculation system that can be used using IRS tables and may save you money when chosen appropriately by your accountant is c) MACRS, which stands for Modified Accelerated Cost Recovery System.

MACRS is the current tax depreciation system in the United States and allows for accelerated depreciation of property under certain conditions. This system is more complex than straight-line depreciation but it provides greater deductions in the earlier years of an asset’s life.

There are various classes of assets under MACRS, each with its own depreciable life and applicable convention. The General Depreciation System (GDS) and the Alternative Depreciation System (ADS) are two different systems under MACRS. Most businesses will use GDS unless specifically required to use ADS.

Your accountant might analyze several factors to determine the best depreciable method, potentially resulting in significant tax savings.

Therefore, the correct answer is c) MACRS.