ExpertMedium1 markMultiple Choice
CPA · Question 67 · Area 5: Property Transactions
A business purchased ,000 of office furniture (7-year property) on Feb 1 and ,000 of machinery (5-year property) on Dec 1. No other assets were purchased. Which MACRS convention must be used?
A business purchased ,000 of office furniture (7-year property) on Feb 1 and ,000 of machinery (5-year property) on Dec 1. No other assets were purchased. Which MACRS convention must be used?
Answer options:
A.
Half-Year Convention
B.
Mid-Quarter Convention
C.
Mid-Month Convention
D.
Full-Month Convention
How to approach this question
Check the 40% Rule: If >40% of personal property is bought in Q4, use Mid-Quarter for EVERYTHING. Otherwise, Half-Year.
Full Answer
B.Mid-Quarter Convention✓ Correct
Mid-Quarter Convention
Since more than 40% of the total basis of personal property was placed in service during the last quarter of the year (,000 / ,000 = 80%), the mid-quarter convention must be used for all assets.
Common mistakes
Assuming Half-Year convention is the default without checking the Q4 test.
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