Depreciation following short tax year

[oceanlovin'ea]

I asked about depreciation in a short tax year at the end of last season and found out that there was a table in the Tax Book for short year depreciation. At that time I was trying to figure out depreciation for the second year for accounting purposes.

Now I am doing the tax return for this business for 2006 which was the second year fo the business. When I did the return last year, I used straight line depreciation and figured it for 4 months. (Business started June 1, 2005 so 7 months in business. Mid point of the tax year is 3.5 months which means there was 4 months of depreciation. At least that is how I read the instructions.

My question now is am I stuck with using straight line depreciation? Any chance I can use this table for short tax years depreciaton?

I think I know the answer but just want to make sure and to see if there is an easier way to do this.

Linda F

[oceanlovin'ea]

Moving up

I'm just trying to move this question back up to the top so maybe someone can help me with an answer.

Thanks

Linda F

[gkaiseril]

Yes, unless you can get permission from the IRS to change the method. See page 13 of IRS Pub 946.

[Luis Mopeo]

I asked about depreciation in a short tax year at the end of last season and found out that there was a table in the Tax Book for short year depreciation. At that time I was trying to figure out depreciation for the second year for accounting purposes.

Now I am doing the tax return for this business for 2006 which was the second year fo the business. When I did the return last year, I used straight line depreciation and figured it for 4 months. (Business started June 1, 2005 so 7 months in business. Mid point of the tax year is 3.5 months which means there was 4 months of depreciation. At least that is how I read the instructions.

My question now is am I stuck with using straight line depreciation? Any chance I can use this table for short tax years depreciaton?

I think I know the answer but just want to make sure and to see if there is an easier way to do this.

Linda F

You are stuck, unfortunately. But it's not because of the accounting method. It's not considered an accounting method until you've used the method for two consecutive years. The problem is that the straight-line method is an election, and once made, it is irrevocable. See TTB p. 9-20.

It's sorta not fair, because if you had messed it up and used an incorrect method of accounting, you'd be able to fix it on an amended return. Since it was not an incorrect method, the election is binding.