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William L

Depreciation for AMT and State

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Hello all.

I am adding assets to a new company, I want to make sure I have the conventions right. For the 5 and 7 year equipment, this is what I have:

 

Tax             MA 200           MACRS 200% DB with 168/179 bonus    

 

AMT          MA 150           MACRS 150% DB with 168/179 bonus    

 

STATE         MF 150           MACRS 150% DB without bonus

 

My big question is for state (with all the bonus removed), is MF150 the correct convention rather than MF200? There was another post and answer that pointed to page 329 in the 2009 Master Depreciation Guide, which was helpful, but cannot locate it at the time of this post. Since the assets are all PIS in 2016, 50% is the appropriate sec 168/179 percent, right (not for state, but for Tax and AMT)?

 

One more question: for the switch from MACRS to SL, does FAS have this baked in to the MA200 (or MA150 etc) convention, or would I have to manually switch the conventions to SL myself at the optimal time?

 

Thank you in advance, I have found this forum absolutely essential.

 

-William

    

  • 0
    SUGGESTED
    Hello William L,

    A lot has changed in the Tax code since 2009 - probably the most important is that the 168 allowance was not enforced in 2009 and the old MF200 in Tax and MF150 in AMT were back as the defaults.

    When the 168 special depreciation is active, there is not am adjustment between Tax and AMT (See page 7 4562 Instructions)even if you opt-out of taking the 168 allowance. In your example Tax and AMT both should be MA200 for assets Placed into service after 1/1/2010 - 12/31/2019.

    As for the State book, I really cannot say since it depends on your State. MF200 is what I normally see out there but there is always variations.
  • 0
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    For the addition - I am not sure what you mean by MACRS to SL.

    There is a way to either apply or remove the 168 allowance (See: How to apply 168 allowance?) but if you are attempting to change it from the MF or MA 200/150 to MF or MA 100, AD or SL, that would need to be done on an Asset-by-asset basis.

  • 0
    Thanks for the quick reply. I looked at the updated Manual, this was on the same page (section 170):

    "The bonus depreciation allowance is also claimed in full for AMT purposes (no AMT adjustment required). For property placed in service after 2015, regular depreciation and AMT depreciation deductions on property which qualifies for bonus depreciation are computed the same way even if an election out of bonus depreciation is made (no AMT adjustment required). For property placed in service before 2016, no AMT adjustment is required on property for which a bonus deduction was claimed or should have been claimed. If an election out was made, the regular rules for determining whether an AMT adjustment is required apply. See the preceding discussion."

    So I think I see what you are saying. So my AMT would be the same MA 200 as tax.


    For the 200DB/SL thing, I was referring to this section on the 4626 instructions page 3:
    How Is Depreciation Refigured for the AMT?
    Property placed in service after 1998. Use the same convention and recovery period used for the regular tax. Use the straight line method for section 1250 property. For property other than section 1250 property, use the 150% declining balance method, switching to the straight line method the first tax year it gives a larger deduction.
  • 0
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    Hello William,

    Yes, AMT and Tax would be the same.

    As for the Section 1250 Property - Correct me if I am wrong, and since I am not an accountant, I could be, but aren't those usually Property Type R? If so, then the depreciation method would be MF or MA 100 (MACRS SL) or AD if elected. Those are the straight line Tax methods in the program.

    Are you trying to say you have a bunch of these Section 1250 Properties entering incorrectly? In that case, yes, those changes would need to be made asset by asset.

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