CCH Axcess Tax

Modified ACRS Methods (Post July 31, 1986)

The Tax Reform Act of 1986 requires most assets, placed in service after December 31, 1986, to be depreciated using Modified Accelerated Cost Recovery System (MACRS) depreciation methods and allowed MACRS depreciation to be elected for assets placed in service after July 31, 1986. If a method of "M," "MT" or "MSL" is entered, and the life entered is not 3, 5, 7, 10, 15, 20, 25, 27.5, 31.5, 39 or 50 years, 5 years is assumed for computation purposes. A diagnostic message is also issued. The method "MRF" is only for farm real property with a life of 15 or 20 years. Enter one of the following methods for MACRS property assets:

M - Modified ACRS/Calculated

Current year depreciable basis for an asset with a method of "M" is computed as cost minus Section 179 expense, ITC basis reduction, bonus depreciation, Commercial Revitalization/Disaster clean-up & demolition expenses deduction, and accumulated depreciation.

If the recovery period life entered is 3, 5, 7 or 10 years, depreciation is computed using the 200 percent declining balance method, changing to straight line when advantageous.

If the recovery period life entered is 15 or 20 years, depreciation is computed using the 150 percent declining balance method, changing to straight line when advantageous.

If the recovery period life entered is 25, 27.5, 31.5, 39 or 50 years, depreciation is computed on a straight line basis over the recovery period life entered.

ME - Modified ACRS 150 Percent Declining Balance and Farm

Current year depreciable basis for an asset with a method of "ME" is computed as cost minus Section 179 expense, ITC basis reduction, bonus depreciation, Commercial Revitalization/Disaster clean-up & demolition expenses deduction, and accumulated depreciation.

If the recovery period life entered is 3, 5, 7, 10, 15, 20 or 25 years, depreciation is computed using the 150 percent declining balance method, changing to straight line when advantageous. Also use this method for all farm assets acquired after December 31, 1988. A diagnostic message is issued if such a farm asset does not have a method of "ME" or "MSL."

If the recovery period life entered is 27.5, 31.5, 39 or 50 years, depreciation is computed using the straight line method over the recovery period life entered.

If the life entered is other than any of the recovery period life years mentioned above, the computation is 150 percent declining balance, changing to straight line when advantageous over the recovery period life entered.

MT - Modified ACRS Using Prescribed IRS Tables

Current year depreciable basis for an asset with a method of "MT" is computed as cost minus Section 179 expense, bonus depreciation, Commercial Revitalization/Disaster clean-up & demolition expenses deduction, and ITC basis reduction.

Enter a method of "MT" to compute the current year depreciation using the tables prescribed by the IRS. The allowable recovery period life years are 3, 5, 7, 10, 15, 20, 27.5, 31.5, 39 and 50 years.

Note: Use a method of "M" if the accumulated depreciation differs from the accumulated depreciation as computed under the prescribed IRS tables, to obtain the correct current year depreciation amount. Also, the prescribed IRS tables for Alternative Minimum Tax depreciation computations are NOT used.

MSL - Modified ACRS Optional Straight Line Method

Current year depreciable basis for an asset with a method of "MSL" is computed as cost minus Section 179 expense, bonus depreciation, Commercial Revitalization/Disaster clean-up & demolition expenses deduction, and ITC basis reduction.

Enter a method of "MSL" to compute the current year depreciation using the straight line method over the recovery period life of the asset. The allowable recovery period life years are 3, 5, 7, 10, 15, 20, 25, 27.5, 31.5, 39 and 50 years.

MRF - Modified ACRS 150 Percent Declining Balance For Farm Real Property

Current year depreciable basis for an asset with a method of "MRF" is computed as cost minus bonus depreciation, ITC basis reduction, and accumulated depreciation.

Enter a method of "MRF" to compute the current year depreciation using the 150 percent declining balance method, changing to straight line when advantageous. The allowable recovery period life years are 15 and 20 years.

ADS - Alternative Depreciation System

To compute the current year depreciation using the straight line method over the appropriate ADS recovery period life entered, enter a method of "ADS." Any ADS life can be entered in the "Life/Rate" field. The class of property is determined from the ADS life entered, using the following assumptions:

ADS Life	Class of Property
1-4	3 Year Property
5-9	5 Year Property
10-15	7 Year Property
16-19	10 Year Property
20-24	15 Year Property
25	20 Year Property
27.5	27.5 Year Property
31.5	31.5 Year Property
39	40 Year Property
50	50 Year Property

If a life of 27.5, 31.5 or 39 years is entered with method "ADS," depreciation is computed using the straight line method over 40 years. A life of 40 years for real property can also be entered.

Indian Reservation Property

To compute the current year depreciation using the accelerated recovery periods allowed for "Qualified Indian Reservation Property" enter a valid MACRS method (M, MT, ME, or MSL), an "I" in the ITC Code, and the "Property Class" in "Life." The following recovery periods will automatically apply for both regular and AMT depreciation:

Property Class	Accelerated Recovery Periods
3 Year Property	2 Years
5 Year Property	3 Years
7 Year Property	4 Years
10 Year Property	6 Years
15 Year Property	9 Years
20 Year Property	12 Years
Nonresidential Real Property	22 Years

Empowerment Zone Property

Enter an "EZ" in the "ITC Code" to indicate that the property qualifies for the specialized handling of Section 179 for Empowerment Zone Property. Also enter the appropriate dollar limitation in the "Section 179 Maximum Dollar Limitation" field on the Depreciation and Depletion Options and Overrides > Depreciation Options section to override the customary maximum Section 179 dollar limitation.

For a married filing separately return, also enter the appropriate dollar allocation in the "Maximum Section 179 Expense if Married Filing Separately" field on the Depreciation and Depletion Options and Overrides > Depreciation Options section to override the customary maximum Section 179 dollar limitation for married filing separately taxpayers.