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Depreciation in Year of Disposal

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    Depreciation in Year of Disposal

    According to Pub 946, you can only take 1/2 of the depreciation in the year an asset is disposed. What happens if the year of disposal is also the final year of depreciation; i.e. an asset with a 5 year recovery period was purchased in 1999 and sold in 2004. Proseries calculates the full amount of depreciation in the final year, not half of that amount. I am confused.

    Off the top of my head... isn't the last year of MACRS depreciation only half of a years depreciation. Therefore Proseries and Pub 946 are in agreement.



      I believe the final year is basically straight-line depreciation. Therefore, the depreciation is taken.
      I would put a favorite quote in here, but it would get me banned from the board.


        year of sale

        If property subject to the half-year convention is sold, the half-year convention also applies in the year of the sale. Thus, half a year’s depreciation is claimed in the year of disposition.
        If the midquarter convention applied to property in the year placed in service, the property is treaded as disposed of at the midpoint of the quarter in which the disposition occurred.

        Then you would use % of Full Year Depr. in Disposition Year.
        First Quarter % is 12.5%
        Second Quarter % is 37.5%
        Third Quarter % is 62.5%
        Fourth Quarter % is 87.5%

        I use Lacerte software and it is calculating the depreciation correctly in the year of sale.