Mid-quarter convention

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See also: Depreciation tax assumptions

You must use the mid-quarter convention when the total depreciable basis of MACRS property that was placed in service during the last three months of the client's tax year is more than 40% of the total depreciable basis of all MACRS property that was placed in service throughout the entire year. (See IRS Publication 946 for more information.)

To determine whether or not the client is required to use the mid-quarter convention, the application applies the mid-quarter test to the cost/basis (adjusted by the business use percentage) in each treatment column for all of the client's appropriate current-year assets. If the mid-quarter convention is required, the application recalculates depreciation for all current-year MACRS assets.

The application uses the current-year component of an aggregate asset acquired through a trade or a replacement of a casualty / theft in the mid-quarter convention calculation.

For qualified bonus assets, the mid-quarter determination uses the basis unadjusted for the bonus depreciation.

Assets that have been expensed under section 179 are not included in the mid-quarter determination. However, if an asset has been partially expensed, then the amount subject to depreciation will be included in the calculation.

You can explicitly include or exclude assets from the mid-quarter determination and calculation by marking the appropriate checkbox in the Mid-Quarter & Section 179 Force Options dialog. (To open this dialog, click the Mid-Quarter & Section 179 Force Options button in an asset's Other tab.) To indicate that a newly entered asset purchased in a prior year was subject to mid-quarter convention in its year of purchase, choose Tasks > Use Mid-Quarter Convention.

Notes

  • Print the MACRS Convention Detail report to view a detailed determination of the mid-quarter convention test for the current client.
  • To exclude from the mid-quarter calculation MACRS property (7, 10, 15, 20, and 25 yr) that has been forced as real property, you must mark the Exclude from mid-quarter determination (force) checkbox. To do this, click the Mid-Quarter & Section 179 Force Options button in the asset's Other tab.

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