Federal Individual Taxation Assignment
Added on 2021-04-24
1 Pages335 Words15 Views
FEDERAL INDIVIDUAL TAXATIONTo complete this task of filing Form 1040 Schedule E on behalf of my clients Brian and SheilaWilliams, I have used the following definitions and followed the system prescribed under them.Since Brian and Sheila Williams are not in the business of renting personal property, they are notrequired to file Form-1040 Schedule C or C-EZ.Depreciation Depreciation is an annual deduction which my clients can use for recovering the costs, over acertain number of years, related to their investment properties. Depreciation started when myclients first used the properties for producing income. It shall end when they either take theseproperties out of service, or have recovered all their depreciable costs, or stop using theseproperties for producing income. As per the law, a taxpayer can depreciate Tangible Propertyowned by them and include building, vehicle, machinery, furniture and equipment. An exceptionis that the taxpayer cannot depreciate land.Modified Accelerated Cost Recovery System Under the current tax code, the Modified Accelerated Cost Recovery System (MACRS) is usedfor determining an asset’s depreciation. All assets are classified into classes under MACRS andthese define the number of years during which the asset's cost can be recovered. A predeterminedschedule determines the percentage of each asset's costs under each MACRS class which can bedepreciated each year. My clients own Residential Real Estate properties and these can bedepreciated using the Straight Line Method with Useful Life Expectancy of 27.5 years. Fixturesand Equipment are allowed Useful Life Expectancy of 7 Years.Section 179 Property Since my clients are not in the trade of renting properties for trade or business, the propertiesacquired by them are not covered under Section 179. Section 179 property does not include anyproperty held for investment (section 212 property).
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