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Special MACRS Rules

There are some special MACRS rules taxpayers should be aware of. For example, some types of property are excluded from the system. Discover details from the Internal Revenue Code below.

MACRS Can’t Be Used for the Following Property:

  1. Intangible property.
  2. Automobiles, where the taxpayer deducts expenses using the standard mileage rate.,
  3. Most personal property if:
    1. either the taxpayer or a party related to the taxpayer (according to Code Section 267(b)) owned or used the property prior to 1987, or
    2. the same person who used the property in 1986 also uses it after the taxpayer acquires it,,
    3. it is leased to a person (or someone related to that person) who owned or used the property in 1986, or
    4. the property was acquired in a transaction in which:
      1. the user of the property didn’t change, and
      2. the property wasn’t MACRS property in the hands of the person from whom it was acquired because of (b) or (c)
  4. Real property (other than non-residential real and residential rentals) if:
    1. either the taxpayer or someone related to the taxpayer owned the property prior to 1987, or
    2. the taxpayer leases the property back to the person who owned it in 1986, or
    3. the taxpayer acquires the property in a transaction where gain or loss isn’t recognized with respect to property the taxpayer or a relative owned in 1986 (MACRS doesn’t apply to the “carryover” basis).

MACRS applies only to that portion of the basis in the acquired property that represents cash paid or unlike property given up. It doesn’t apply to the substituted portion of the basis.

5. Any motion picture film, video tape or sound recording.

If the rules described above allow for a bigger deduction under ACRS than is available under MACRS, then MACRS must be used.

Who Are Related Parties? For this purpose, related parties are the taxpayer and:

  1. Spouse, children, parents, sisters and brothers (including half-brothers and sisters), grandparents.
  2. A corporation or partnership in which the taxpayer owns more than 10% of the stock or capital.

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