Question

The mid-quarter test is applied (1) (before/after) the Section 179 expense is deducted from an asset's basis, and (2) (before/after) bonus depreciation is taken.

a. Before; After
b. After; Before
c. Before; Before
d. After; After

Answer 1

The mid-quarter test is applied after Section 179 deductions and before bonus depreciation, making the correct answer 'After; Before'.

Step-by-step explanation:

The mid-quarter test is a set of rules used to determine the depreciation method for certain business assets when more than 40% of the property is placed in service in the last quarter of the tax year. The correct sequence when applying these rules is:

1. The mid-quarter test is applied after the Section 179 expense is deducted from an asset's basis.
2. The mid-quarter test is applied before bonus depreciation is taken.

This means the correct answer to the student's question is: b. After; Before.