What Method Can You Use To Depreciate Your Property?

Terms you may need to know (see Glossary):

Adjusted basis Basis Convention Exchange Fiduciary Grantor Intangible property Nonresidential real property Placed in service Related persons Residential rental property Salvage value Section 1245 property Section 1250 property Standard mileage rate Straight line method Unit-of-production method Useful life

You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most property. MACRS is discussed in chapter 4.

You cannot use MACRS to depreciate the following property.

• Property you placed in service before 1987.

• Certain property owned or used in 1986.

• Intangible property.

• Films, videotapes, and recordings.

• Certain corporate or partnership property acquired in a nontaxable transfer.

• Property you elected to exclude from MACRS.

The following discussions describe the property listed above and explain what depreciation method should be used.