Question

Which is not an allowable method under MACRS?

A. 150 percent declining balance
B. 200 percent declining balance
C. Straight line
D. Sum of the years digits
E. All of these are allowable methods under MACRS

Answer 1

The 'Sum of the years digits' is not an allowable depreciation method under the Modified Accelerated Cost Recovery System (MACRS); allowable methods include the 200 percent and 150 percent declining balance methods, and straight line over GDS or ADS recovery periods.

Step-by-step explanation:

The Modified Accelerated Cost Recovery System (MACRS) is a method of depreciation for tax purposes in the United States that allows businesses to deduct the depreciatable cost of assets over a specified life. The allowable methods under MACRS include: 200 percent declining balance method over a GDS (General Depreciation System) recovery period, 150 percent declining balance method over a GDS recovery period, and the straight line method over a GDS recovery period or an ADS (Alternative Depreciation System) recovery period. The method not allowable under MACRS is Sum of the years digits. This method was available under previous tax laws but is not permitted under the current MACRS rules.