🚗 Depreciation of Listed Property — CPA Exam REG | Federal Income Tax Course

Why It Matters

Understanding listed‑property depreciation prevents costly errors and maximizes allowable deductions, a critical skill for CPA candidates and professionals managing mixed‑use assets.

Key Takeaways

• Listed property includes personal‑business mixed tangible assets like cameras.
• Use straight‑line depreciation when business use is ≤50 %.
• Over 50 % business use permits MACRS with luxury auto limits.
• Decline below 50 % triggers depreciation recapture as ordinary income.
• SUVs over 6,000 lb avoid luxury caps but have Section 179 limits.

Summary

The video explains taxation of listed property for the CPA REG exam, defining listed property as tangible assets used partly for personal and business purposes, such as cameras, cell phones, and passenger automobiles weighing less than 6,000 lb.

It outlines the depreciation rules: if business use is 50 % or less, only the straight‑line method is allowed—no Section 179, bonus depreciation, or MACRS. When business use exceeds 50 %, MACRS may be used but is constrained by luxury auto limits, and the usage percentage is measured by miles, hours, or output, not by income.

Professor Farhhat illustrates the concepts with examples: Maria’s $10,000 camera used 40 % for business is depreciated using straight‑line at a 10 % rate; Adam’s $65,000 car at 80 % business use is limited by the $12,200 first‑year luxury auto cap; SUVs over 6,000 lb avoid those caps and qualify for Section 179 deductions up to $31,300.

These rules shape tax planning strategies—taxpayers must monitor usage percentages, apply the correct depreciation method, and recapture excess depreciation as ordinary income if usage falls below the 50 % threshold, directly affecting cash flow and compliance.

Original Description

This lecture explains the depreciation of listed property, focusing on the stringent business-use requirements and MACRS limitations applied to mixed-use assets like passenger vehicles. Understanding how to calculate depreciation when business use falls below the 50% threshold is critical for tax professionals to prevent depreciation recapture and ensure accurate tax deductions. Mastering these specific tax limitations will directly enhance your performance in a Federal Income Tax Course and fully prepare you for property taxation questions on the CPA Exam REG.

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