If you deduct only part of the cost of qualifying property as a section 179 deduction, you can generally depreciate the cost you do not deduct. Even if the requirements explained earlier under What Property Qualifies? Are met, you cannot elect the section 179 deduction for the following property. Certain property does not qualify for the section 179 deduction. You placed both machines in service in the same year you bought them.
If your property is being depreciated under ACRS, you must continue to use rules for depreciation that applied when you placed the property in service. If your property qualified for depreciable assets MACRS, you must depreciate it under MACRS. For these recapture rules, you treat the section 179 deduction and 50% of the investment credit that reduced your basis as depreciation.
Useful Items
Recapture of allowance for qualified Recovery Assistance property. Qualified reuse and recycling property does not include any of the following. To figure the amount to recapture, take the following steps. Property is not considered acquired by purchase in the following situations. If you file a Form 3115 and change from one permissible method to another permissible method, the section 481(a) adjustment is zero.
If you dispose of 15-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. For a disposition at any time during a particular month before the end of the recovery period, no deduction is allowed for the month of disposition. This applies whether you use the regular ACRS method or elected the alternate ACRS method. For the tax year in which you placed 15-, 18-, or 19-year real property in service or in the tax year you dispose of it, you compute the ACRS deduction for the number of months that the property is in service during that tax year. You compute the number of months using either a full-month or mid-month convention. This is true regardless of the number of months in the tax year and the recovery period and method used.
How Depreciation Works
James bought a truck last year that had to be modified to lift materials to second-story levels. The installation of the lifting equipment was completed and James accepted delivery of the modified truck on January 10 of this year. The truck was placed in service on January 10, the date it was ready and available to perform the function for which it was bought. If you hold the remainder interest, you must generally increase your basis in that interest by the depreciation not allowed to the term interest holder. However, do not increase your basis for depreciation not allowed for periods during which either of the following situations applies. For a description of related persons, see Related Persons, later.