Modified Half-Year Convention

Under this convention, assets placed in service during the first half of the year are considered to have been placed in service on the first day of the year. Therefore, they receive a full year's depreciation in the acquisition year. Assets placed in service during the second half of the year are considered to have been placed in service on the first day of the following year. Therefore, they receive no depreciation in the acquisition year but receive a full year's depreciation in the subsequent year.

Applying the modified half-year convention in the disposal year is slightly more complicated because the disposal-year allowance depends on the acquisition year allowance. The following table summarizes the relationships:

If Asset Was Placed in Service in the:	And Disposed of in the:	Amount of Depreciation Allowed in the Disposal Year
1st half of year	1st half of year	No depreciation
1st half of year	2nd half of year	50% of full year depreciation
2nd half of year	1st half of year	50% of full year depreciation
2nd half of year	2nd half of year*	Full year of depreciation

* To earn the full year of depreciation, the disposal must have been in a year after the acquisition year.

If you are adopting the modified half-year for a vintage account, you should adopt it for all additions and all extraordinary retirements.