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J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line by Barbara Weltman

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Modified Accelerated Cost Recovery System

Modified Accelerated Cost Recovery System (MACRS) is a depreciation system that went into effect for tangible property placed in service after 1986. It is composed of 2 systems: a basic system, called the General Depreciation System (GDS), and an alternate system, called the Alternative Depreciation System (ADS). The difference between the 2 systems is the recovery period over which you claim depreciation and the method for calculating depreciation. You use the basic system unless the alternative system is required or you make a special election to use the alternative system. You cannot use either system for certain property: intangible property (patents, copyrights, etc.), motion picture films or videotapes, sound recordings, and property you elect to exclude from MACRS so that you can use a depreciation method based on some other measuring rod than a term of years (these other methods are not discussed in this book).

Basic System

You can use the basic system (GDS) to depreciate any tangible property unless you are required to use the alternative system, elect to use the alternate system, or are required to use some other depreciation method. To calculate your depreciation deduction, you need to know:

  • The property's basis. If you purchase property, basis is your cost. If you acquire property in some other way (get it by gift, inheritance, or in a tax-free exchange), basis is figured in another way. For example, if your corporation acquires ...

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