Depreciation, Section 179, Assets and Dispositions
This topic covers depreciation, amortization, startup and organizational costs, section 179, bonus depreciation, depletion, correcting errors, basis of assets, business asset dispositions, like-kind exchange, converted property, repair regulations, capitalization elections, and depreciation recapture.
How to study for EA Part 2
Build every answer around entity classification, filing obligation, owner basis, income and deduction character, payroll duties, accounting records, and specialized taxpayer rules.
Core concepts
Concept 1
Depreciation, Section 179, Assets and Dispositions questions test whether an enrolled agent candidate can apply business tax rules to entity, return, owner, and recordkeeping facts.
Exam cue: Identify the entity, tax year, owner role, form, accounting method, record source, and whether the issue is income, deduction, credit, basis, payroll, or advice.
Concept 2
The best answer usually identifies the business form, tax year, filing obligation, income or deduction character, owner-level consequence, and penalty exposure before calculating.
Exam cue: Check basis, distributions, depreciation, employment tax deposits, QBI limits, method changes, due dates, penalties, and information reporting.
Concept 3
Eliminate answers that ignore entity classification, basis, payroll deposits, accounting method, book-tax reconciliation, or specialized taxpayer filing requirements.
Exam cue: Tie the result to the correct business return, schedule, K-1, payroll form, book-tax reconciliation, owner basis, or specialized taxpayer return.
Risk pitfalls and guardrails
Solving as if every business were a sole proprietorship instead of respecting entity classification and owner-level rules.
Guardrail: Use a 15-second safety pause before finalizing your action.
Calculating a deduction or credit without checking basis, at-risk limits, passive limits, depreciation elections, or payroll compliance.
Guardrail: Use a 15-second safety pause before finalizing your action.
Missing specialized taxpayers such as trusts, estates, exempt organizations, retirement plans, farmers, and rental real estate.
Guardrail: Use a 15-second safety pause before finalizing your action.
Memory anchors
Depreciation
Depreciation recovers the cost of business property over the property's recovery period.
Section 179
Section 179 allows eligible businesses to expense qualifying property subject to limits.
Bonus Depreciation
Bonus depreciation accelerates deductions for qualifying property under current statutory percentages.
Amortization
Amortization recovers intangible, startup, and organizational costs under applicable rules.
Depletion
Depletion recovers cost or statutory value from natural resource property.
Repair Capitalization
Repair regulations determine whether an expenditure is currently deductible or capitalized.
Business Asset Basis
Basis in a business asset measures unrecovered investment for depreciation, gain, or loss.
Depreciation Recapture
Depreciation recapture can recharacterize gain as ordinary income on disposition.
Like-Kind Exchange
Like-kind exchange treatment can defer gain for qualifying real property exchanges.
Converted Property
Property converted to business use requires basis and depreciation analysis from the conversion date.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
Which property is generally depreciable?
A taxpayer purchases land and an office building for one price. What must occur before computing depreciation?
Answer all questions to submit.
Next step personalized recommendations
Continue learning
Move forward only after this module is stable.
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