AMT Depreciation

[Snaggletooth]

Sometimes you hate to ask a question because you don't want your cohorts to know just how ignorant you are -- I'm finding myself in this familiar position once again. Maybe the Jainens and Sovas of the world will adorn me in the cooling waters of knowledge and make me whole once again!

At any rate, I've noticed where straight-line depreciation (attaching to of the #yrs life we select) has replaced the complex tables used for AMT depreciation. Effective date was 1999 for assets placed in service since, and I've been doing this ever since.

If you follow this to its logical end, then there would be NO difference in buildings or anything else required to be depreciated on a S/L method. This means 27.5 yr property, 40-yr. property, etc.

Is this true? I've been doing this, and want to know whether I'm correct. I hope so, because it seems more and more of my folks are having to pay Minimum Tax.

[Black Bart]

What time do you Tennessee

boys hit the hay? Doncha know all decent folks are asleep at this hour?

[Unregistered]

Not an answer

but since this is the method you usually use can you tell me if you use straight line depreciation do you need to attach an election statement to your return or by simply using straight line are you electing the straight line method?

[Unregistered]

Anyone?

If you use straight line depreciation do you need to attach an election statement to your return or by simply using straight line are you electing the straight line method?

[Bees Knees]

If you follow this to its logical end, then there would be NO difference in buildings or anything else required to be depreciated on a S/L method. This means 27.5 yr property, 40-yr. property, etc.

Is this true? I've been doing this, and want to know whether I'm correct. I hope so, because it seems more and more of my folks are having to pay Minimum Tax.

TTB, page 9-19, "When the AMT adjustment is not required. Do not compute an AMT adjustment for the following property:
-Residential rental property placed in service after 1998.
-Section 1250 property, including nonresidential real property with a class life of 27.5 years or more, placed in service after 1998 that is depreciated for regular tax purpses using the SL method...."

[Bees Knees]

If you use straight line depreciation do you need to attach an election statement to your return or by simply using straight line are you electing the straight line method?

No attachment is needed.

TTB, page 9-13, "Under ADS the SL method is always used, and the recovery period is longer for most assets. The election to use ADS is made when the method is used on a timely-filed return (including extensions) for the year in which the property was placed in service."

[Snaggletooth]

Thanks Bees Knees

for responding. No offense to the unregistered guy who said "this is not an answer" but it really wasn't and only twisted readers minds such that no one but you dared to respond.

As far as an "election?" From your response, the AMT election is automatic whether you want it or not, and there are no decisions to be made.

Back to my original question -- are lives the same? Apparently not, based on your response. For 7-year DD method, does this mean the life is 10 yrs SL? (It used to before 1999) Same question for other lives in the MACRS.

From everything I've learned, the only thing "immune" from the ADS is Section 179 stuff.
I won't use section 179 because it depletes the available depreciation from future years, when, in most cases, the depreciation is needed more. This topic may cause me to rethink. More and more of my people are having to deal with AMT every year seems like.

[Bees Knees]

TTB, page 9-19, "Property placed in service after 1998. Use the same convention and recovery period used for regular tax. For property other than Section 1250 property, use the 150DB method...."

Bottom line - For property placed in service after 1998, there is no longer any difference between the life of property for AMT purposes or for regular tax purposes. ADS class lives are not needed, unless you elect to go straight line. Obviously, if you elect to go straight line over the ADS class lives, there would be no AMT adjustment since ADS is a longer life than required for AMT, and a slower depreciation method (straight line) than what is allowed for AMT (150DB or straight line).

The only difference between AMT and regular tax depreciation (for property placed in service after 1998) is AMT still requires 150DB whereas regular tax allows 200DB. So if you elect 150DB over regular tax class lives for regular tax purposes, then there would be no AMT adjustment required.

Section 1250 property (real estate) won't ever have an AMT adjustment anymore (property placed in service after 1998) because the straight line method is always used for real estate and the class lives are now the same.

[Bees Knees]

Also keep in mind that AMT and ADS are two completely different animals. It use to be that AMT used ADS class lives. But not since 1998. So don't get confused. If you elect to go straight line, you must use the ADS life, even though that life is longer than is required for AMT.