A taxpayer purchased a machine for business use on November 15 of the current year for $100,000. This was the only depreciable personal property placed in service during the year. The taxpayer does not elect Section 179 expensing or bonus depreciation. Which MACRS convention must be used?

Answer options:

Half-year convention

Mid-quarter convention

Mid-month convention

Full-month convention

How to approach this question

Check the 40% rule: If >40% of personal property is placed in service in Q4, use Mid-Quarter.

Full Answer

B.Mid-quarter convention✓ Correct

The mid-quarter convention applies to all personal property placed in service during the year if more than 40% of the total basis of such property is placed in service during the last three months of the tax year. Since 100% was placed in service in November (Q4), mid-quarter is required.

Common mistakes

Automatically assuming half-year convention.

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