comprehensive volume c8-1 chapter 8 depreciation, cost recovery, amortization, and depletion...

C8-C8-11Comprehensive VolumeComprehensive Volume

Chapter 8Chapter 8

Depreciation, Cost Recovery, Amortization, and Depletion

Depreciation, Cost Recovery, Amortization, and Depletion

Copyright ©2010 Cengage Learning

Comprehensive Volume


Cost RecoveryCost Recovery

• Recovery of the cost of business or income-producing assets is through:– Cost recovery or depreciation: tangible assets– Amortization: intangible assets– Depletion: natural resources

• Recovery of the cost of business or income-producing assets is through:– Cost recovery or depreciation: tangible assets– Amortization: intangible assets– Depletion: natural resources


Nature of PropertyNature of Property

• Property includes both realty (real property) and personalty (personal property)– Realty generally includes land and buildings permanently affixed

to the land– Personalty is defined as any asset that is not realty

• Personalty includes furniture, machinery, equipment, and many other types of assets

• Personalty (or personal property) should not be confused with personal use property– Personal use property is any property (realty or personalty) that is

held for personal use rather than for use in a trade or business or an income-producing activity

• Write-offs are not allowed for personal use assets

• Property includes both realty (real property) and personalty (personal property)– Realty generally includes land and buildings permanently affixed

to the land– Personalty is defined as any asset that is not realty

• Personalty includes furniture, machinery, equipment, and many other types of assets

• Personalty (or personal property) should not be confused with personal use property– Personal use property is any property (realty or personalty) that is

held for personal use rather than for use in a trade or business or an income-producing activity

• Write-offs are not allowed for personal use assets


General Considerations(slide 1 of 3)


• Basis in an asset is reduced by the amount of cost recovery that is allowed and by not less than the allowable amount– Allowed cost recovery is cost recovery actually taken– Allowable cost recovery is amount that could have

been taken under the applicable cost recovery method

• If no cost recovery is claimed on property – The basis of the property must still be reduced by the

amount that should have been deducted • i.e., The allowable cost recovery

• Basis in an asset is reduced by the amount of cost recovery that is allowed and by not less than the allowable amount– Allowed cost recovery is cost recovery actually taken– Allowable cost recovery is amount that could have

been taken under the applicable cost recovery method

• If no cost recovery is claimed on property – The basis of the property must still be reduced by the

amount that should have been deducted • i.e., The allowable cost recovery




• If personal use assets are converted to business or income-producing use– Basis for cost recovery and for loss is lower of

• Adjusted basis or

• Fair market value at time property was converted

– Losses that occurred prior to conversion can not be recognized for tax purposes through cost recovery

• If personal use assets are converted to business or income-producing use– Basis for cost recovery and for loss is lower of

• Adjusted basis or

• Fair market value at time property was converted

– Losses that occurred prior to conversion can not be recognized for tax purposes through cost recovery




• MACRS applies to:– Assets used in a trade or business or for the

production of income– Assets subject to wear and tear, obsolescence,

etc.– Assets that have a determinable useful life or

decline in value on a predictable basis– Assets that are tangible personalty or realty

• MACRS applies to:– Assets used in a trade or business or for the

production of income– Assets subject to wear and tear, obsolescence,

etc.– Assets that have a determinable useful life or

decline in value on a predictable basis– Assets that are tangible personalty or realty


MACRS-PersonaltyMACRS-Personalty

• MACRS characteristics: MACRS Personalty .

Statutory lives: 3, 5, 7, 10 yrs 15, 20 yrs

Method: 200% DB 150% DB

Convention: Half Yr or Mid-Quarter

DB = declining balance with switch to straight-line

Straight-line depreciation may be elected

• MACRS characteristics: MACRS Personalty .

Statutory lives: 3, 5, 7, 10 yrs 15, 20 yrs

Method: 200% DB 150% DB

Convention: Half Yr or Mid-Quarter

DB = declining balance with switch to straight-line

Straight-line depreciation may be elected


Half-Year ConventionHalf-Year Convention

• General rule for personalty

• Assets treated as if placed in service (or disposed of) in the middle of taxable year regardless of when actually placed in service (or disposed of)

• General rule for personalty

• Assets treated as if placed in service (or disposed of) in the middle of taxable year regardless of when actually placed in service (or disposed of)


Example: Half-Year ConventionExample: Half-Year Convention

• Purchased and placed an asset in service on March 15 (Tax year end is December 31)– Treated as placed in service June 30– Six months cost recovery in year 1 (and year

disposed of, if within recovery period)

• Purchased and placed an asset in service on March 15 (Tax year end is December 31)– Treated as placed in service June 30– Six months cost recovery in year 1 (and year

disposed of, if within recovery period)


Additional First-Year DepreciationAdditional First-Year Depreciation

• The Economic Stimulus Act of 2008 provided for additional first-year depreciation on qualified property– Applied to property acquired after 12/31/07 and before 01/01/09

and placed in service before 01/01/09– ARRTA of 2009 extends additional first-year depreciation for an

additional year (qualified property acquired and placed in service before January 1, 2010)

• Allows an additional 50% cost recovery in year asset is placed in service

• Qualified property includes most types of new property other than buildings– Property that is used but new to the taxpayer does not qualify

• The Economic Stimulus Act of 2008 provided for additional first-year depreciation on qualified property– Applied to property acquired after 12/31/07 and before 01/01/09

and placed in service before 01/01/09– ARRTA of 2009 extends additional first-year depreciation for an

additional year (qualified property acquired and placed in service before January 1, 2010)

• Allows an additional 50% cost recovery in year asset is placed in service

• Qualified property includes most types of new property other than buildings– Property that is used but new to the taxpayer does not qualify


Example: Additional First-Year DepreciationExample: Additional

First-Year Depreciation

Maple Company acquires a 5-year class asset on March 20, 2009, for $20,000. Maple’s cost recovery deduction for 2009 is computed as follows:

50% additional first-year

depreciation ($20,000 X .50) $10,000

MACRS cost recovery

[($20,000 - $10,000) X .20 (Table 8–1)] 2,000

Total cost recovery $12,000

Maple Company acquires a 5-year class asset on March 20, 2009, for $20,000. Maple’s cost recovery deduction for 2009 is computed as follows:

50% additional first-year

depreciation ($20,000 X .50) $10,000

MACRS cost recovery

[($20,000 - $10,000) X .20 (Table 8–1)] 2,000

Total cost recovery $12,000


Mid-Quarter ConventionMid-Quarter Convention

• Applies when more than 40% of personalty is placed in service during last quarter of year

• Assets treated as if placed into service (or disposed of) in the middle of the quarter in which they were actually placed in service (or disposed of)

• Applies when more than 40% of personalty is placed in service during last quarter of year

• Assets treated as if placed into service (or disposed of) in the middle of the quarter in which they were actually placed in service (or disposed of)


Example: Mid-Quarter Convention

Example: Mid-Quarter Convention

• Business with 12/31 year end purchased and placed in service the following used 5-year class assets:

Asset 1: on 3/28 for $50,000, andAsset 2: on 12/28 for $100,000

• More than 40% placed in service in last quarter; therefore, mid-quarter convention used:

Asset 1: $50,000 × .20 × 200% × 10.5/12 = $17,500Asset 2: $100,000 × .20 × 200% × 1.5/12 = $5,000

• Table 8-2 provides the relevant percentages to be used when applying the mid-quarter convention

• Business with 12/31 year end purchased and placed in service the following used 5-year class assets:

Asset 1: on 3/28 for $50,000, andAsset 2: on 12/28 for $100,000

• More than 40% placed in service in last quarter; therefore, mid-quarter convention used:

Asset 1: $50,000 × .20 × 200% × 10.5/12 = $17,500Asset 2: $100,000 × .20 × 200% × 1.5/12 = $5,000

• Table 8-2 provides the relevant percentages to be used when applying the mid-quarter convention


MACRS-Realty (slide 1 of 2)


• MACRS characteristics: MACRS Realty Residential Rental Nonresid. RealtyStatutory lives: 27.5 yrs 31.5 yrs or 39 yrsMethod: Straight-lineConvention: Mid-month

• Residential rental real estate – Includes property where 80% or more of gross rental

revenues are from nontransient dwelling units – e.g., Apartment building

• MACRS characteristics: MACRS Realty Residential Rental Nonresid. RealtyStatutory lives: 27.5 yrs 31.5 yrs or 39 yrsMethod: Straight-lineConvention: Mid-month

• Residential rental real estate – Includes property where 80% or more of gross rental

revenues are from nontransient dwelling units – e.g., Apartment building




• Mid-month Convention– Property placed in service at any time during a

month is treated as if it was placed in service in the middle of the month

– Example: Business building placed in service April 25 is treated as placed in service April 15

• Mid-month Convention– Property placed in service at any time during a

month is treated as if it was placed in service in the middle of the month

– Example: Business building placed in service April 25 is treated as placed in service April 15


Optional Straight-line ElectionOptional Straight-line Election

• May elect straight-line rather than accelerated depreciation on personalty placed in service during year– Use the class life of the asset for the recovery

period– Use half-year or mid-quarter convention as

applicable– Election is made annually by class of property

• May elect straight-line rather than accelerated depreciation on personalty placed in service during year– Use the class life of the asset for the recovery

period– Use half-year or mid-quarter convention as

applicable– Election is made annually by class of property


Farm Property (slide 1 of 2)Farm Property (slide 1 of 2)

• Generally, for farm assets use:– MACRS 150% declining-balance method for

personalty• MACRS straight-line method is required for any tree or vine

bearing fruits or nuts

– Straightline method over the normal periods (27.5 years and 39 years) for real property

– If the election is made to not have the uniform capitalization rules apply, alternative depreciation system (ADS) straight-line method must be used

• Generally, for farm assets use:– MACRS 150% declining-balance method for

personalty• MACRS straight-line method is required for any tree or vine

bearing fruits or nuts

– Straightline method over the normal periods (27.5 years and 39 years) for real property

– If the election is made to not have the uniform capitalization rules apply, alternative depreciation system (ADS) straight-line method must be used


Farm Property (slide 2 of 2)Farm Property (slide 2 of 2)

• Under the Emergency Economic Stabilization Act of 2008– New machinery or equipment placed in

service in a farming business in 2009 has a recovery period of 5 years under MACRS• Does not include a grain bin, cotton ginning

asset, fence, or land improvement

• Under the Emergency Economic Stabilization Act of 2008– New machinery or equipment placed in

service in a farming business in 2009 has a recovery period of 5 years under MACRS• Does not include a grain bin, cotton ginning

asset, fence, or land improvement


Leasehold Improvement Property (slide 1 of 3)


• If lessor is owner of leasehold improvement property, depreciation is calculated as follows:– Real Property – Use straight-line method over 27.5 or

39 year statutory recovery periods– Tangible personal property – Use the shorter MACRS

lives and accelerated methods

• When these improvements are disposed of or abandoned by the lessor due to lease termination– Property is treated as disposed of by the lessor– A loss can be taken for the unrecovered basis

• If lessor is owner of leasehold improvement property, depreciation is calculated as follows:– Real Property – Use straight-line method over 27.5 or

39 year statutory recovery periods– Tangible personal property – Use the shorter MACRS

lives and accelerated methods

• When these improvements are disposed of or abandoned by the lessor due to lease termination– Property is treated as disposed of by the lessor– A loss can be taken for the unrecovered basis




• If lessee is owner of leasehold improvement property– Costs of leasehold improvements are recovered in

accordance with the general cost recovery rules• Cost recovery period is determined without regard to the lease

term

– Any unrecovered basis in the leasehold improvement property not retained by the lessee is deducted in the year the lease is terminated

• If lessee is owner of leasehold improvement property– Costs of leasehold improvements are recovered in

accordance with the general cost recovery rules• Cost recovery period is determined without regard to the lease

term

– Any unrecovered basis in the leasehold improvement property not retained by the lessee is deducted in the year the lease is terminated




• Under the Emergency Economic Stabilization Act of 2008, qualified leasehold improvement property placed in service before 01/01/10 is allowed 15-year recovery period– Includes any improvement to an interior portion of

nonresidential real property if:• The improvement is § 1250 property• The lease is not between related persons• Interior portion of building is to be occupied exclusively by

the lessee or any sublessee of that interior portion• Improvement is placed in service > 3 years after date building

was first placed in service by any person

• Under the Emergency Economic Stabilization Act of 2008, qualified leasehold improvement property placed in service before 01/01/10 is allowed 15-year recovery period– Includes any improvement to an interior portion of

nonresidential real property if:• The improvement is § 1250 property• The lease is not between related persons• Interior portion of building is to be occupied exclusively by

the lessee or any sublessee of that interior portion• Improvement is placed in service > 3 years after date building

was first placed in service by any person


Election to Expense Assets -Section 179 (slide 1 of 5)


• General rules– Can elect to immediately expense up to

$250,000 (for 2009) of business tangible personalty placed in service during the year

– Cannot use § 179 for realty or production of income property

• General rules– Can elect to immediately expense up to

$250,000 (for 2009) of business tangible personalty placed in service during the year

– Cannot use § 179 for realty or production of income property




• Section 179 general rules– Amount expensed reduces depreciable basis– Any elected § 179 expense is taken before the

50% additional first-year depreciation is computed

– The base for calculating the standard MACRS deduction is net of the § 179 expense and the 50% additional first-year depreciation

• Section 179 general rules– Amount expensed reduces depreciable basis– Any elected § 179 expense is taken before the

50% additional first-year depreciation is computed

– The base for calculating the standard MACRS deduction is net of the § 179 expense and the 50% additional first-year depreciation




• Annual limitations:– Expense limitation ($250,000 for 2009) is

reduced by amount of § 179 property placed in service during year that exceeds $800,000

• Example: In 2009, taxpayer placed in service $815,000 of § 179 property. – The § 179 expense limit is reduced to $235,000

[$250,000 – ($815,000 – $800,000)]

• Annual limitations:– Expense limitation ($250,000 for 2009) is

reduced by amount of § 179 property placed in service during year that exceeds $800,000

• Example: In 2009, taxpayer placed in service $815,000 of § 179 property. – The § 179 expense limit is reduced to $235,000

[$250,000 – ($815,000 – $800,000)]




• Annual limitations:– Election to expense cannot exceed taxable

income (before § 179) of taxpayer’s trades or businesses

• Any amount expensed under § 179 over taxable income limitation may be carried over to subsequent year(s)

• Amount carried over still reduces basis currently

• Annual limitations:– Election to expense cannot exceed taxable

income (before § 179) of taxpayer’s trades or businesses

• Any amount expensed under § 179 over taxable income limitation may be carried over to subsequent year(s)

• Amount carried over still reduces basis currently




Example: Taxpayer buys 5-year property for $275,000 on August 15, 2009 and elects immediate expensing of the maximum amount. The total deduction for the year is calculated as follows:

§ 179 expense $250,000

50% additional first-year depreciation

[($275,000 - $250,000) X .50] 12,500

Standard MACRS calculation

[($275,000 - $250,000 - $12,500) X .20] 2,500

Total cost recovery allowed in 2009 $265,000

Example: Taxpayer buys 5-year property for $275,000 on August 15, 2009 and elects immediate expensing of the maximum amount. The total deduction for the year is calculated as follows:

§ 179 expense $250,000

50% additional first-year depreciation

[($275,000 - $250,000) X .50] 12,500

Standard MACRS calculation

[($275,000 - $250,000 - $12,500) X .20] 2,500

Total cost recovery allowed in 2009 $265,000


Listed Property (slide 1 of 4)Listed Property (slide 1 of 4)

• There can be substantial limits on cost recovery of assets considered listed property

• Listed property includes the following:– Passenger automobile– Other property used as a means of transportation– Property used for entertainment, recreation, or

amusement– Computer or peripheral equipment– Cellular telephone

• There can be substantial limits on cost recovery of assets considered listed property

• Listed property includes the following:– Passenger automobile– Other property used as a means of transportation– Property used for entertainment, recreation, or

amusement– Computer or peripheral equipment– Cellular telephone



• To be considered as predominantly used for business, business use must exceed 50%

• Use of asset for production of income is not considered in this 50% test

• However, both business and production of income use percentages are used to compute cost recovery

• To be considered as predominantly used for business, business use must exceed 50%

• Use of asset for production of income is not considered in this 50% test

• However, both business and production of income use percentages are used to compute cost recovery



• To be considered as predominantly used for business (cont’d)

• If 50% test is met, then allowed to use statutory percentage method of cost recovery with some limitations

• To be considered as predominantly used for business (cont’d)

• If 50% test is met, then allowed to use statutory percentage method of cost recovery with some limitations



• If asset is not used predominantly for business i.e., business use does not exceed 50%– Must use straight-line method– If business use falls to 50% or lower after year

property is placed in service, must recapture excess cost recovery

• If asset is not used predominantly for business i.e., business use does not exceed 50%– Must use straight-line method– If business use falls to 50% or lower after year

property is placed in service, must recapture excess cost recovery


Passenger Auto Cost Recovery Limits (slide 1 of 7)


For autos placed in service in 2008, cost recovery limits are:

Year Recovery Limitation

1 $2,960

2 4,800

3 2,850Succeeding years until the cost is recovered 1,775

• If passenger automobile qualifies for 50% additional first-year depreciation (i.e., new property), the 2009 recovery limitation is increased by $8,000– The initial-year cost recovery limitation increases from $2,960 to

$10,960 ($2,960 + $8,000)

For autos placed in service in 2008, cost recovery limits are:

Year Recovery Limitation

1 $2,960

2 4,800

3 2,850Succeeding years until the cost is recovered 1,775

• If passenger automobile qualifies for 50% additional first-year depreciation (i.e., new property), the 2009 recovery limitation is increased by $8,000– The initial-year cost recovery limitation increases from $2,960 to

$10,960 ($2,960 + $8,000)




• Limits are for 100% business use– Must reduce limits by percentage of personal

use

• Limit in the first year includes any amount the taxpayer elects to expense under § 179

• Limits are for 100% business use– Must reduce limits by percentage of personal

use

• Limit in the first year includes any amount the taxpayer elects to expense under § 179




Example: Taxpayer acquired an auto in 2009 for $30,000 and used it 80% for business

2009 cost recovery allowance: {[($30,000 X 50%) + ($15,000 X 20%)] X 80%} $14,400

But deduction is limited to $10,960× Business use % .80Cost recovery allowance $8,768

Example: Taxpayer acquired an auto in 2009 for $30,000 and used it 80% for business

2009 cost recovery allowance: {[($30,000 X 50%) + ($15,000 X 20%)] X 80%} $14,400

But deduction is limited to $10,960× Business use % .80Cost recovery allowance $8,768




• Limit on § 179 deduction – For certain vehicles not subject to the statutory

dollar limits imposed on passenger automobiles the § 179 deduction is limited to $25,000

• The limit applies to sport utility vehicles with an unloaded GVW rating of more than 6,000 pounds and not more than 14,000 pounds

• Limit on § 179 deduction – For certain vehicles not subject to the statutory

dollar limits imposed on passenger automobiles the § 179 deduction is limited to $25,000

• The limit applies to sport utility vehicles with an unloaded GVW rating of more than 6,000 pounds and not more than 14,000 pounds




• Listed property that fails the >50% business usage test in year property is placed in service must be recovered using the straight-line method– Such property does not qualify for the 50% additional

first-year depreciation• If the >50% business usage test is failed in a year

after the property is placed in service, straight-line method must be used for remainder of property’s life– Cost recovery of passenger auto under straight-line

listed property rule still subject to annual limits

• Listed property that fails the >50% business usage test in year property is placed in service must be recovered using the straight-line method– Such property does not qualify for the 50% additional

first-year depreciation• If the >50% business usage test is failed in a year

after the property is placed in service, straight-line method must be used for remainder of property’s life– Cost recovery of passenger auto under straight-line

listed property rule still subject to annual limits




• Change from predominantly business use– If the business use percentage falls to 50% or lower

after the year the property is placed in service, the property is subject to cost recovery recapture

– The amount recaptured as ordinary income is the excess cost recovery

• Excess cost recovery is the excess of the cost recovery deductions taken in prior years using the statutory percentage method over the amount that would have been allowed if the straight-line method had been used

• Change from predominantly business use– If the business use percentage falls to 50% or lower

after the year the property is placed in service, the property is subject to cost recovery recapture

– The amount recaptured as ordinary income is the excess cost recovery

• Excess cost recovery is the excess of the cost recovery deductions taken in prior years using the statutory percentage method over the amount that would have been allowed if the straight-line method had been used




• Leased autos subject to “inclusion amount” rule– Using IRS tables, taxpayer has gross income

equal to each lease year’s inclusion amount– Purpose is to prevent avoidance of cost

recovery dollar limits applicable to purchased autos by leasing autos

• Leased autos subject to “inclusion amount” rule– Using IRS tables, taxpayer has gross income

equal to each lease year’s inclusion amount– Purpose is to prevent avoidance of cost

recovery dollar limits applicable to purchased autos by leasing autos


Alternative Depreciation System (ADS) (slide 1 of 2)


• ADS is an alternative depreciation system that is used in calculating depreciation for:– Alternative minimum tax (AMT)– Assets used predominantly outside the U.S.– Property owned by the taxpayer and leased to

tax exempt entities– Earnings and profits

• ADS is an alternative depreciation system that is used in calculating depreciation for:– Alternative minimum tax (AMT)– Assets used predominantly outside the U.S.– Property owned by the taxpayer and leased to

tax exempt entities– Earnings and profits




• Generally, use straight-line recovery without regard to salvage value– For AMT, 150% declining balance is allowed

for personalty– Half-year, mid-quarter, and mid-month

conventions still apply

• Generally, use straight-line recovery without regard to salvage value– For AMT, 150% declining balance is allowed

for personalty– Half-year, mid-quarter, and mid-month

conventions still apply


Amortization (slide 1 of 2)Amortization (slide 1 of 2)

• Can claim amortization deduction on § 197 intangibles– Use straight-line recovery over 15 years (180

months) beginning in month intangible is acquired

• Section 197 intangibles include acquired goodwill, going-concern value, trademarks, trade names, etc.

• Can claim amortization deduction on § 197 intangibles– Use straight-line recovery over 15 years (180

months) beginning in month intangible is acquired

• Section 197 intangibles include acquired goodwill, going-concern value, trademarks, trade names, etc.


Amortization (slide 2 of 2)Amortization (slide 2 of 2)

• Startup expenditures are also partially amortizable under § 195– Treatment is available only by election

• Allows the taxpayer to deduct the lesser of:– The amount of startup expenditures, or – $5,000, reduced by the amount startup expenditures

exceed $50,000– Any amounts not deducted may be amortized ratably

over 180-months beginning in month trade or business begins

• Startup expenditures are also partially amortizable under § 195– Treatment is available only by election

• Allows the taxpayer to deduct the lesser of:– The amount of startup expenditures, or – $5,000, reduced by the amount startup expenditures

exceed $50,000– Any amounts not deducted may be amortized ratably

over 180-months beginning in month trade or business begins


Depletion (slide 1 of 4)


• Two methods of natural resource depletion– Cost: determined by using the adjusted basis of

the resource and allocating over the recoverable units

– Percentage: determined using percentage provided in Code and multiplying by gross income from resource sales

• Two methods of natural resource depletion– Cost: determined by using the adjusted basis of

the resource and allocating over the recoverable units

– Percentage: determined using percentage provided in Code and multiplying by gross income from resource sales




• Cost depletion– Depletion is computed on a per unit basis– Per unit amount is determined by dividing the

basis of the resource by the estimated recoverable units of resource

• Number of units sold in year × per unit depletion = depletion for year

– Total depletion can not exceed total cost of the property

• Cost depletion– Depletion is computed on a per unit basis– Per unit amount is determined by dividing the

basis of the resource by the estimated recoverable units of resource

• Number of units sold in year × per unit depletion = depletion for year

– Total depletion can not exceed total cost of the property




• Percentage depletion– Depletion is computed by using the statutory

percentage rate for the type of resource– Rate is applied to the gross income from the

property

• Percentage depletion– Depletion is computed by using the statutory

percentage rate for the type of resource– Rate is applied to the gross income from the

property




• Percentage depletion– Percentage depletion cannot exceed 50% of the

taxable income (before depletion) from the property

– Percentage depletion reduces basis in property– However, total percentage depletion may

exceed the total cost of the property• Example: Property with zero basis but still

generating income

• Percentage depletion– Percentage depletion cannot exceed 50% of the

taxable income (before depletion) from the property

– Percentage depletion reduces basis in property– However, total percentage depletion may

exceed the total cost of the property• Example: Property with zero basis but still

generating income


Intangible Drilling Costs (IDC)

Intangible Drilling Costs (IDC)

• Intangible drilling costs include – Costs for making the property ready for drilling– Costs of drilling the hole

• Treatment of IDC– Expense in the year incurred, or– Capitalize and write off through depletion

• It is generally advantageous to write off IDC immediately

• Intangible drilling costs include – Costs for making the property ready for drilling– Costs of drilling the hole

• Treatment of IDC– Expense in the year incurred, or– Capitalize and write off through depletion

• It is generally advantageous to write off IDC immediately


If you have any comments or suggestions concerning this PowerPoint Presentation for South-Western Federal Taxation, please contact:

Dr. Donald R. Trippeer, CPA [email protected]

SUNY Oneonta

If you have any comments or suggestions concerning this PowerPoint Presentation for South-Western Federal Taxation, please contact:

Dr. Donald R. Trippeer, CPA [email protected]

SUNY Oneonta

comprehensive volume c8-1 chapter 8 depreciation, cost recovery, amortization, and depletion...

Documents