The IRS has issued Notice 2001-70 on Disaster Relief From Application Of Mid-Quarter Convention in Tax Code Depreciation Rules. In this notice, the IRS relieves taxpayers from using the mid-quarter convention for computing depreciation expenses.
Recognizing that since the September 11, 2001 terrorist attacks many taxpayers may have encountered difficulty completing acquisitions and placing in service of property in accordance with plans made earlier in the year, the IRS has decided to soften the rules regarding the mid-quarter convention.
Under the mid-quarter convention, all property placed in service during any quarter of a taxable year is treated as placed in service on the mid-point of such quarter. The half-year convention permits all property acquired at any time during the taxable year to be treated as if placed in service on the mid-point of the taxable year.
Taxpayers whose third quarter includes September 11, 2001 may elect to apply the half-year convention to all property placed in service during the taxpayer's 2001 taxable year. This rule does not include property described in IRC section 168(d)(2), which includes nonresidential real property, residential rental property, and any railroad grading or tunnel bore.
To make this election, taxpayers should write "Election Pursuant to Notice 2001-70" across the top of their Form 4562, Depreciation and Amortization, for the taxable year that includes September 11, 2001.
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