Federal Tax

Depreciation: General Concepts; Non-ACRS Rules (Portfolio 530)

  • Depreciation: General Concepts; Non-ACRS Rules introduces the reader to basic concepts of depreciation.


Bloomberg Tax Portfolio, Depreciation: General Concepts; Non-ACRS Rules, No. 530, should be used as an adjunct to Tax Management Portfolio No. 531, Depreciation: MACRS and ACRS, under which depreciation deductions for most tangible property placed in service after 1980 are determined.

This Portfolio discusses basic depreciation issues such as what type of property is depreciable, who may take the depreciation deduction, and how to compute the basis of an asset. The Portfolio describes depreciation methods and accounting procedures applied to item and group accounts. The Portfolio also explains the methods and principal rules for computing depreciation on property placed in service before 1981, or otherwise not governed by the ACRS. The latter discussion includes the determination of useful life and salvage value. Finally, the Portfolio analyzes the special election under §169 to amortize the basis of certain pollution control facilities.

Table of Contents

I. Introduction

A. Overview

B. How to Use This Portfolio

II. What Is Depreciation

Introductory Material

A. Cost Accounting Function

B. Recovery of Investment

C. Provision for Replacement

III. Property Subject to Depreciation

A. In General

B. Property Used in Trade or Business or Held for the Production of Income

IV. Who Can Take Depreciation

A. Owner of Economic Interest

B. Lessors and Lessees

C. Trusts and Estates: Owners of Life Estates and Other Beneficiaries

D. Foreign Corporation and Nonresident Aliens

V. Determining Depreciable Basis

Introductory Material

A. Cost Basis

B. Basis Equal to Fair Market Value

C. Substituted or Carryover Basis

D. Allocation of Purchase Price

E. Adjustments to Basis

VI. Accounting Procedures

Introductory Material

A. Asset Accounts

B. Depreciation Period

VII. Retirements

A. In General

B. Normal and Abnormal Retirements

C. Recognition of Gain or Loss on Retirement

VIII. Property Excluded from ACRS

A. Introduction

B. Unit-of-Production or Other Methods Not Expressed in Years

IX. Pre-ACRS Depreciation

Introductory Material

A. Determination of Useful Life — Reg. §1.167(a)-1

B. Administrative Guidelines for Determining Useful Life

C. Salvage Value

D. Accounting Procedures

E. Accounting for Retirements

F. Depreciation Methods

G. Averaging Useful Lives in Order to Determine Rate — Open-End Accounts and Closed Accounts

X. Election and Changes of Method of Depreciation

A. Election of Method

B. Change of Method

XI. Amortization of Pollution Control Facilities (§169)

A. Introduction — Planning Considerations

B. Election to Amortize Pollution Control Facilities

C. Facilities that Qualify for Five-Year or Seven-Year Amortization

D. Calculating the Amortization Deduction

E. Special Considerations

F. Certification Procedure

Annette Smith
Partner and Leader - Federal Tax Services
PricewaterhouseCoopers LLP
Richard Farley
Richard Farley
PricewaterhouseCoopers LLP
Sara Logan
Sara Logan
PricewaterhouseCoopers LLP