Changing Critical Depreciation Fields - Tax Book

Question

Due to the CARES Act, qualified improvement property that previously was 39 year and bonus ineligible is now able to use 15 year and 100% bonus. I have some QIP property from 2018 that I would need to change critical depreciation fields to update. How can I do this while maintaining the original 2018 ending balance? Essentially for 2019 I need the reports to reflect the catch-up depreciation values from the 2018 bonus that was missing and is now eligible, but I do NOT want to change depreciation that was recorded in 2018. 
 
 Context: I already ran 2019 depreciation for this company in Feb, before CARES was passed, with the following specs. Now I need to change this QIP to MA100/15 year/100% bonus: 
 Placed in service 07/01/2018 
 Aquisition value: 75,632.17 
 Depreciation Method: MF100 
 Estimated Life 39 years 
 Prior thru date 12/2018 
 Current thru date: 12/2019 
 Depreciation this run: 1,939.29 
 Current Accum: 2,828.13 
 
 How can I update such that my "prior accum depr" for this asset in 2019 still matches the "current accum depr" I originally calculated in 2018?

Bob Mc · Answer

Hello, taxacct, 
 What you are asking is not possible to do! 
 QIP assets did not qualify for the bonus in 2018. And if you depreciated such assets over GDS, you calculated depreciation at roughly 2 1/2 percent of the basis for that year (which is 1/39). Now, in order to comply with the "fix" that was passed into law with the CARES Act, if you decide to take the bonus in 2018, it will significantly impact your accumulated depreciation for the year because you are going to write off the entire cost of the QIP assets and that amount will be counted as depreciation. 
 Even if you decide not to take the bonus, you will still need to change the estimated life to 15 (if depreciating over GDS) in order to comply with the law. Again, this will significantly impact the accumulated depreciation recorded for the year though not as much as taking the bonus. Instead of calculating depreciation at 2 1/2 percent for the year, you will record roughly 6 2/3 percent of the basis (which is 1/15). 
 Either option will force new accumulated depreciation figures. 
 Perhaps, you are seeking to keep the accumulated depreciation figures that are currently showing on your records in order to avoid filing an amended tax return or IRS Form 3115, Application for Change in Accounting Method. But, taxacct, you may not be able to avoid it. Therefore, you really need to discuss the matter with qualified tax counsel.

KimBible · Answer

Hello, 
 Bob Mc is correct in that there are no good options when it comes to implementing the TCJA and CARES Act for bonus depreciation. 
 In Sage Fixed Asset system, bonus is considered taken in full in the year the asset is placed in service. There is no way to change the depreciation method from a bonus method to a non-bonus method or visa-versa without changing the beginning depreciation. 
 The CARES Act is a little better in that you only have one year of depreciation to deal with. You can fully depreciate the QIP assets in 2019 and maintain the correct beginning accumulation, but the reports will show the accelerated deprecation as normal depreciation and not as Bonus. Or you can change the depreciation method to bonus and do a manual calculation for your 481(a) adjustment (if that's what you choose to do). 
 We have several Electing Real Property Business entities and implementing the TCJA in respect was a nightmare. CARES has been much easier to deal with but by no means ideal.

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