Question

The mid-quarter convention under MACRS provides that

a. Depreciation is allowable in the year of acquisition of qualified property only if the property is placed into service in the first quarter of the year
b. One half of the year of acquisition depreciation is allowed regardless of when the property is placed into service during the year. One half years depreciation is allowable in the year of disposition.
c. The cost recovery deduction is based on the number of months the property was in service in the year of acquisition. Therefore, one half month's cost recovery is allowable for the month in which the property is placed into service and for the month of disposition
d. Any property placed into service in the last 3 months of the tax year is depreciated using this convention
e. Depreciation is calculated from the middle of the quarter in which an asset is placed into service through the end of the year

Answer 1

The mid-quarter convention under MACRS calculates depreciation as if property was placed in service in the middle of the quarter of acquisition, applied to property placed in service in the last quarter of the year.

Step-by-step explanation:

The mid-quarter convention under the Modified Accelerated Cost Recovery System (MACRS) is a depreciation method in which depreciation of property is calculated as if the property was placed in service in the middle of the quarter of acquisition. Option d is correct: Any property placed into service in the last 3 months of the tax year (the mid-quarter) is depreciated using this convention.

This means regardless of the specific month within the last quarter (October, November, or December), depreciation starts from the middle of that quarter. The purpose of the mid-quarter convention is to prevent taxpayers from claiming a disproportionate amount of depreciation in the first year for property placed in service at the end of the tax year.