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Mid-Quarter Convention 40 Percent Test Calculator (Section 168(d))

What do these figures come to once the work is shown?

Fourth quarter share of depreciable basis placed in service and whether the mid-quarter convention applies to the year.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Last-quarter share of basis
36.67%
Over 40 percent means the mid-quarter convention
Total basis tested
$300,000
Basis needed in the last quarter to trigger it
$120,000
More than this amount triggers mid-quarter
Drawn to one scale
Total basis tested$300,000
Basis needed in the last quarter to trigger it$120,000
Margin to the 40% line$10,000
All results
MeasureResult
Last-quarter share of basis
Mid-quarter applies when it is over 40%
36.67%
ConventionHalf-year convention
Total basis tested$300,000
Basis needed in the last quarter to trigger it
More than this amount triggers mid-quarter
$120,000
Margin to the 40% line
Negative means over the line
$10,000
How this was worked out
Work shownrecomputed as you type
Share = basis placed in service in the last 3 months / basis placed in service in the year
If the share is over 40%, the mid-quarter convention applies to all property placed in service that year

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Share = basis placed in service in the last 3 months / basis placed in service in the year
  • If the share is over 40%, the mid-quarter convention applies to all property placed in service that year

How it works

Under section 168(d)(3), the mid-quarter convention applies for the year if the aggregate bases of property placed in service in the last three months exceed 40 percent of the aggregate bases of all such property placed in service during the year. Otherwise the half-year convention applies. The test counts only property depreciated under section 168 and excludes nonresidential real property, residential rental property and railroad grading or tunnel bore.

Property placed in service and disposed of in the same year is also excluded. The statute says aggregate bases, and Treas. Reg. 1.168(d)-1(b)(4) measures depreciable basis after the reduction for any section 179 expensing, so enter the basis of each quarter net of section 179. The tool does not apply that reduction for you. It uses calendar quarters of a 12 month year and does not handle short years.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Why does this matter?

Mid-quarter treats each asset as placed in service at the midpoint of its quarter, which can cut first-year depreciation on assets bought late in the year.

Does real property count?

No. Nonresidential real property and residential rental property are left out of the test.

Does the convention apply to all assets?

Yes, once triggered it applies to all property subject to the test that year.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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