Final answer:
The mid-quarter test is applied before the Section 179 expense is deducted from an asset's basis and before bonus depreciation is taken.
Step-by-step explanation:
The mid-quarter convention is a rule used in the United States for depreciation purposes, particularly for tangible property placed in service during the tax year. Under the mid-quarter convention, if more than 40% of the total depreciable property (by cost) is placed in service during the last three months of the tax year, a mid-quarter convention applies.
The convention requires that the depreciation calculations be adjusted based on whether the property is placed in service in the first, second, third, or fourth quarter of the tax year. It is applied before taking into account Section 179 expense deductions and bonus depreciation.