Get Notice 2000-4 - Exchange Of Macrs Property For Macrs Property. Exchange Of Macrs Property For Macrs

There are two methods prescribed by the IRS that can be used to determine tax depreciation for like-kind property. The first method separates the replacement property into two components for depreciation: the basis of the original or relinquished property; and the additional or excess basis from the exchange.

Thus, MACRS is the depreciation system used for real and personal property associated with commercial or residential real estate, and MACRS assigns a specific asset class that dictates the depreciable life of that asset.

Municipal waste water treatment plant, restaurant property, natural gas distribution line, land improvements, such as shrubbery, fences, sidewalks, etc. Farm buildings, certain municipal sewers, etc. Water utility property, certain municipal sewers, etc.

Depreciation After a 1031 Exchange Two schedule depreciation, which is the adjusted cost basis for the property sold divided by 24.5 years (first schedule) and the remaining cost basis of the replacement property divided by 27.5 years (second schedule).

For example, if an asset that costs $1,500 is depreciated at 20% per year, the deduction is $1,200 in the first year and $960 the second year, etc. ADS MACRS Depreciation applies a straight-line method to all assets, meaning that for an asset's useful life the same amount of money will be deducted each year.

The MACRS depreciation method allows for larger deductions in the early years of an asset's life, and lower deductions in later years. This contrasts significantly with straight-line depreciation, wherein you claim the same tax deduction each year, until the end of the asset's usable life.

On 1/5/00, the IRS issued Notice 2000-4. This notice for a proposed regulation offers guidance on depreciating MACRS property acquired in a like-kind exchange through either a trade or casualty/theft.