13 Quanti Co a calendaryear taxpayer purchased small tools f

13. Quanti Co., a calendar-year taxpayer, purchased small tools for $5,000 on December 21,
20X14, representing the company’s only purchase of tangible personal property that took place
during 20X14. On its 20X14 tax return, how many months of MACRS depreciation may Quanti
Co. claim on the tools?
One-and-a-half months
Six months
None
One month

Solution

Ans: One-and-a-half month

Explanation:

MACRS involves applying the half-year convention under which assets are amortized for ½ year in the year of acquisition and in the year of disposal. When an entity acquires at least 40% of its depreciable and amortizable assets in the final 3 months of the year, the mid-quarter convention is applied under which depreciation is calculated only for ½ of the last quarter of the year, or 1 ½ months