Oregon Tax Consultants Practice Exam

What are MACRS Assets?

1. Usually intangible assets placed in service post-1990

2. Buildings and other tangible assets placed in service after 1986 that are used in a trade or business

3. All assets acquired through a government program

4. Short-term assets that depreciate quickly

The correct answer is: Buildings and other tangible assets placed in service after 1986 that are used in a trade or business

MACRS, or Modified Accelerated Cost Recovery System, refers to the system of depreciation used in the United States tax code to allocate the cost basis of tangible property over its useful life. The correct answer highlights buildings and other tangible assets that were placed in service after 1986 and are used in a trade or business. These assets are categorized under specific recovery periods, such as 27.5 years for residential rental properties and 39 years for non-residential properties. This system allows businesses to recover the cost of a capital asset more rapidly than the straight-line method, reflecting the accelerated wear and tear that some assets experience over time. Intangible assets, government-acquired assets, and short-term assets do not align with the MACRS framework, as these categories have different treatment under the tax code. Overall, the focus on tangible assets used in a trade or business placed in service after 1986 is crucial in understanding MACRS and its implications for depreciation and tax strategies.