 All right, so maker system. It's the GDS system and let's because that's that's the default unless we choose otherwise the property class is Seven years. We know that's the case because that we're using the GDS system instead of the ADS And that's what they force us to do We know the date placed in service because that's usually the date we bought it, but it might not be it might be a little bit after But usually it's the date we bought recovery period Seven is seven year. We know that because it's it's seven year property Which with a GDS system and the method is going to be 200% or double declining balance with a half-year convention We know that's the case because that's the default if we're using a GDS for seven-year property Unless we elect to do something other than that like a straight line method half-year convention is the default unless we purchase A bunch of stuff at the end of the year or something in which case they might force us to do a half Quarter convention or something like that or mid quarter or whatever they want to call it So the depreciation rate is the point one four one four two nine from the table So cost or other basis ten thousand dollars Business percent. It's a hundred percent business percent. So ten thousand dollars no one seventy nine deduction So still ten thousand dollars no special depreciation still ten thousand dollars Multiplying that times to one point one four two nine gives us the one thousand four twenty nine for year one Oh for for the depreciation. So this is multi. This is your makers depreciation deduction So there we have that okay So so if there are no adjustments to the basis of the property other than depreciation your depreciation deduction for each Subsequent during a subsequent voyage Columbus found what a year of the recovery period will be as follows So now we've got our table ten thousand dollar property and notice how easy it is So they just gave us these percents here now you might say well, how did they get these two percents? Well, you could do a double decline in kind of calculation with a mid-year convention and kind of figure it out But it's a little bit messy to do it that way These tables are quite easy and and note what you get here like if I add if I add all this up by the way depreciation over the one two three four five six seven Years we got the two four four nine plus the one seven four nine plus one two four nine plus the eight nine three plus The eight nine two plus the eight nine three plus four four six is the is the eight five seven one and then I'm gonna add plus The one four two nine, I believe there's the ten thousand right it adds up to the ten thousand So we've fully depreciated after that point now again The software would be quite useful to kind of try to match out it should come up pretty close to this It might be a little bit different if they're using a method other than the tables But it should be pretty close the problem with software though is that sometimes you don't have a projection software So you can't see the depreciation that's taken all the way out into the future So these tables are great for for projections to see what's gonna happen If I map this out into the future for making decisions like should I take the straight line method or the double declining? Projecting what my income will be in future periods. Okay example The following examples are provided to show you how to use the percentage tables and both examples assume the following You use the property only for business. So no personal use you use the calendar year as your tax year Okay, you use GDS for all the properties. So those are pretty common example pretty common conditions number one You bought a building and land for 120,000 and placed it in service on March 8th The sales contract showed that the building cost 100,000 and the land cost 20,000 So when you buy building and land you usually buy it together at one price And then you have to break out how much was building and how much was land because they have two different Depreciations land is not depreciated building is therefore we would like to lean towards stuff being on the building side Because we would like to expense it or depreciate it for for our taxes Although that's reversed for our normal book bookkeeping right because because everything's flipped on its head for taxes Okay, so it is non-residential real property the building non-adjusted basis is its original cost 100,000 You refer to the makers percentage table guide and appendix a and find that you should use table a 7 a March is the third month of your tax year So multiply the building's unadjusted basis 100,000 by the percentages for the third month in table a 7 a Your depreciation deduction for each of the of the three years is as follows So now we've got our building now notice why they had to basically say that this was a Third month because now we're the tables have to reflect the fact that we no longer are using a mid or or half year Convention because it's this property is the real estate which usually uses a mid month convention So now you've got to determine which month it's it's being purchased in so you can use the proper table So it can calculate the proper amounts So the first three years they're just multiplying by the amounts found in the table again This is quite useful to be projecting out into the future I would also plug it into the software and kind of double-check that that first number is is is accurate so I could see if I'm looking at the right table and if I'm looking and I see the first two years at Lee so I see if I have the right table and if I'm plugging into the software correctly We might do that in future presentations and that and then use the tables to help me project out further than that into the future Okay, example two During the year you bought a machine seven-year property for $4,000 Office furniture seven-year property for $1,000 and a computer five-year property for $5,000 You placed the machine in service in January the furniture in September and the computer in October You do not elect the 179 deduction So we're going to take that off the table focus on makers and none of the items is qualified property for purposes of claiming the special Depreciation allowance, so we'll take that off the table. Just looking at makers You place the property in service during the last three months of the year So you must first determine if you have to use the mid quarter convention So note these kinds of property the seven year and the five year usually have a half a half year Convention meaning we assume they were all bought in the middle of the year which makes it easy But people sometimes trying to cheat the system when they do that Meaning they buy everything at the end of the year so that they can get a six-month depreciation even though they bought everything in the last month of the year that's so that so the IRS then says well to stop that from happening if you buy everything in the end of the year We're not going to give you the mid year convention or the half year We're gonna you have to use the mid quarter convention so that you don't have to get as big a benefit So now we bought everything at the end of the year We got to figure if we have to do the mid quarter convention so the 5,000 basis of so All prior places said so the 5,000 basis of the computer Which you placed in service during the last three months the fourth quarter of your tax year is more than 40% of the total basis of all property $10,000 you placed in service during the year Therefore you must use the mid quarter convention instead of a half-year convention bummer bummer But whatever you refer to the makers percentage Table guide in appendix a to determine which table you should use under the mid quarter convention The machine is seven-year property placed in service in the first quarter So you use table a to the furniture is seven-year property placed in service and the third quarter So you use table a for finally because the computer is five-year property placed in service in the fourth quarter You use table 5a or a 5 knowing what table to use for each property you figure the depreciation So one of the major points here is that you can if you use the tables You would have to use a different table if you if you had to switch from a half-year convention To a mid quarter convention because you bought more than 40% of the assets in You know the fourth quarter of the year So here we have the year the property the machine the furniture and the computer for year and one and two the basis Multiplied by the percentages and the tables gives us the deduction and once again If you plug this into the software the software would hopefully be able to kind of Make the calculation as to whether if you do the data input properly it should be a half-year convention or a mid quarter convention and then you can double check that to the results that you are getting from from your tables and then again possibly you might use the tables to Project out further than two years to the life of the property You know, you know going forward now that you have some confirmation that you have the right tables So we might do some practice problems with software in future presentations