The following items represent tax assumptions built into the application.
Note: If you want to create a result different than the application's results, you can enter (force) the desired depreciation for any asset.
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- IRS regulations state that for assets acquired in a pre-ACE year, the first ACE recovery year begins on the first day of the first tax year beginning after 1989. Therefore, luxury auto limits are based on the new "acquisition date."
- No monthly, half-year, or mid-quarter conventions are used for ACRS/MACRS assets acquired in pre-ACE years. (A full year is taken unless there is a disposition.)
- ACRS personal property assets' recovery periods are not entered by the application. A popup window will request the ADS life. ACRS real property is assigned a recovery period based on a 40-year ADS life.
- AMT calculation
- California 1120C depreciation
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The application assumes that any date after 12/31/29 is in the 1900s and any date before 01/01/30 is in the 2000s.
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When calculating earnings and profits for ACRS real property and low-income housing using the optional straight-line method, the application uses a formula-based calculation because tables for the 40-year optional straight-line method do not exist.
Depreciation for assets with section 179 expense is taken over five taxable years with short years counting as full years. Assets with partial section 179 expense are treated as two assets: one-fifth of 179 expense per year and the remaining depreciable basis (after subtracting 100% section 179 expense) straight-line over the earnings and profits life.
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For Form 4255, line 6, the application uses the greater of the amount claimed or the amount calculated.
- Like-kind exchanges
- Luxury auto
- MACRS/ACRS
- Mid-quarter convention
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If an asset's remaining amount to be depreciated is $1.01 or less, the application automatically adds it to the current depreciation amount and sets the remaining amount to zero to prevent later rounding problems.
- Section 179 total property
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The application only allows you to enter one date placed in service for each asset. This date applies to all treatments. If the client's assets require a different date placed in service for the Book treatment than for the Tax treatment, you need to set up two clients - one for Book and one for Tax.
2018 UltraTax CS