ADS Short-Year Calculation

Under the ADS straight-line MACRS method, the amount of depreciation computed for a full year is prorated over the number of months in the short-year period. The system prorates the amount of depreciation computed for a full year by multiplying the amount by the short-year fraction.

For personal property using this method, the half-year rule applies to the disposition year, which requires that you use one-half of the depreciation calculated for the full short-year period. For real property, the midmonth convention applies.

If you place the property in service or dispose of it during a short tax year and the midquarter convention applies, the system computes the deduction as if you had placed the property in service or disposed of it in the middle of the quarter. See the MACRS formula method for details regarding the use of the midquarter convention.