When is the mid-quarter convention required for personal property?

When more than 40% of the depreciable basis of property placed in service during the year (excluding real property and section 179 amounts) is placed in service in the last three months

When any property is placed in service in the fourth quarter

When more than 50% is placed in service in the last quarter

Which asset is NOT depreciable?

A delivery van used in a business

What depreciation method does GDS use for 5- and 7-year property unless the taxpayer elects otherwise?

200% declining balance, switching to straight line when that yields a larger deduction

150% declining balance over the recovery period, switching to straight line when that yields a larger deduction

MACRS depreciation

Q: What is the MACRS life of a rental house?

27.5 years, straight line, mid-month convention; the land portion is not depreciable.

Q: How do I fix missed depreciation?

After two or more years of an impermissible method, file Form 3115 and take a section 481(a) catch-up adjustment.

MACRS assigns each asset a recovery period (5-year for cars and computers, 7-year for furniture and most equipment, 27.5 years for residential rental, 39 years for nonresidential real property) and a method and convention; land is never depreciable.

Updated 2026-09-23 · 3 sources · By the EnrolledAgentKit team

Exam part

Part 2

Businesses

IRS domain

Business Tax Preparation

37 of 85 scored Qs

Tax year tested

2025

2026-27 SEE

Practice questions

10 free below

The rules the exam tests

Figures for tax year 2025, the year the 2026-27 SEE tests. Verify against the cited primary source.
Rule	What it says (2025)	Source
5-year property	Autos, light trucks, computers, office machinery	Pub 946
7-year property	Office furniture and fixtures; property with no class life	Pub 946
15-year property	Land improvements; qualified improvement property	IRC 168(e)
Real property	27.5 years residential rental; 39 years nonresidential; straight line, mid-month	IRC 168(c)
Methods	200% DB (3-10 year), 150% DB (15-20 year), SL (real property)	IRC 168(b)
Half-year convention	Default for personal property; year-1 rate 20% (5-yr), 14.29% (7-yr)	Pub 946 tables
Mid-quarter convention	>40% of the year's personal property basis placed in service in Q4	IRC 168(d)(3)
Listed property <=50% business use	ADS straight line; no 179 or bonus	IRC 280F(b)
Missed depreciation	Basis still reduced (allowed or allowable); fix with Form 3115	IRC 1016(a)(2)

Worked example

Facts: A business buys $20,000 of 7-year equipment in May 2025, elects out of bonus and does not use section 179. It placed no other property in service.

Year 1: half-year convention, 7-year 200% DB table rate 14.29% = $2,858. Year 2: 24.49% = $4,898. If instead 45% of the year’s equipment basis had gone into service in October-December, the mid-quarter convention would apply.

Exam traps

Mid-quarter test excludes real property and section 179 amounts.
Depreciation starts when property is placed in service, not purchased.
No depreciation for property placed in service and disposed of in the same year.
QIP is 15-year and bonus-eligible; residential building improvements are not QIP.