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Bonus and Special Depreciation

Posted on Jan 29, 2011 at 12:29 AM 528 Views

Hello,

I am just wondering if anyone has availed of the current tax cuts extension (Bush Tax cuts) that potentially allows business to deduct bonus depreciation (50% and 100%) and section 179 expensing on the same asset?

I have tried to configure a multi-level method, creating two lines, one for bonus and one for section 179 (same year-2010, but different period - just to make each unique). However, bonus depreciation should be calculated off APC less section 179 expensing (NBV).

After creating a depreciation key using the new multi-level method, I noticed that after creating an asset, the depreciation calculation for special depreciation only uses the first line of the multi-level method (section 179 expensing) totally ignoring the second line (bonus depreciation).

I've tried to play around different ways of configuring multi-level method but kept getting the same results.

If you have idea on how to handle this, please let me know.

Thank you.

Nancy

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    author's profile photo Ajay Maheshwari
    Ajay Maheshwari
    Posted on Jan 29, 2011 at 02:52 AM
    1

    Hi Nancy

    In India we have a similar requirement for charging 20% special dep in the 1st year of acquisition, in addition to the normal rate of depreciation,say,5%

    The Multi Level method in such case looks like this

    Multi Level Method _Acq Year YearsPeriod_Base Val _Percent

    Z1 _9999 _1 001 _20% (Spl Dep)

    M1 9999999 001 _ 5% (Normal Dep)

    With this setting, it calculates both the depreciations

    You can also charge Special Depreciation manually from ABSO using tr types 720/721

    BR,Ajay M

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  • author's profile photo Former Member
    Former Member
    Posted on Jan 31, 2011 at 07:18 PM
    0

    Thank you Ajay. It looks like you were referring to two multi-level methods; one for normal depreciation and one for special depreciation. I was looking for configuration help on special depreciation only.

    Just to illustrate, sample asset should be calculated below on FEDERAL book on its first year of acquisition:

    Orig APC - $1000.00

    Special depr - ( 50.00) APC x Sp. Depr of 5% ( 1000 x 5%)

    Bonus depr - ( 475.00) NBV x Bonus Depr of 50% (1000 - 50 = 950 x 50%)

    NBV before normal depr - 475.00 (1000 - 50 - 475)

    Normal depr - ( 95.00) HY depr on NBV (475 x 20%)

    NBV at end of first year - 380.00

    I've tried to create one multi-level method that has both special and bonus depreciation configuration (two-line item) but it looks like the second line is being ignored when creating an asset, literally getting special depreciation calculation only ($50) and none for bonus ($475). That said, normal depreciation is now based on $950 instead of $475 as shown above.

    Looking forward to your suggestions. Thank you.

    Nancy

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    • Ajay Maheshwari
      Feb 01, 2011 at 03:53 AM

      Hi Nancy

      1. You will have to have 3 Multi Level methods in a Single Dep Key i.e. One each for Spl Dep, Bonus and Ord Dep

      2. Base Value for Spl dep to be 01 and for others to be 24

      3. When you create Dep Key in AFAMA

      a. Select your Dep Key

      b. Click on "Assignemnt of Calc Methods"....

      You should see 3 entries in your dep key i.e. for 3 multi level methods.. If you dont see 3, then

      c. Press Back and

      d. Click on New entries and assign the other multi level methods

      BR,Ajay M

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