Depreciation Consequences of Like-Kind Exchanges and Involuntary Conversions

The Government is providing definitive guidance for computing depreciation deductions under the section 168 Modified Accelerated Cost Recovery System (MACRS) when property is acquired in a like-kind exchange or as a result of an involuntary conversion, including automobiles, subject to the Section 2...

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Bibliographic Details
Published inThe Practical Accountant Vol. 37; no. 5; p. 48
Main Author Wolosky, Howard W
Format Trade Publication Article
LanguageEnglish
Published Boston SourceMedia dba Arizent 01.05.2004
Subjects
Accelerated cost recovery system
Automobiles
Conventions
Depreciation
Involuntary conversions
Like kind exchange
Modified accelerated cost recovery system
REG-106590-00
REG-138499-02
Regulation
Tax regulations
Taxpayers
TD 9115
United States > US
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Summary:The Government is providing definitive guidance for computing depreciation deductions under the section 168 Modified Accelerated Cost Recovery System (MACRS) when property is acquired in a like-kind exchange or as a result of an involuntary conversion, including automobiles, subject to the Section 280F depreciation limitations. The guidance was necessitated by the IRS having recently discovered inconsistent depreciation treatment with regard to the basis of replacement property. Some taxpayers were depreciating the replacement property using the same depreciation method, recovery period, and convention as the exchanged or involuntarily converted property while other taxpayers were depreciating the replacement property as if it were newly placed in service. In response, the IRS issued Notice 2000-4, which states replacement MACRS property placed in service alter Jan. 3, 2000, is depreciated over the remaining recovery period of, and using the same depreciation method and convention as, the relinquished MACRS property, and that any excess of the basis in the replacement property over the adjusted basis in the relinquished property is to be treated as newly purchased MACRS property.
ISSN:0032-6321