Real Property

Generally, the adjusted basis of real property is recovered over a period of 19 years for real property that is placed in service after May 8, 1985, but before 1987. For real property that is placed in service after March 15, 1984, but before May 9, 1985, the unadjusted basis is recovered over a period of 18 years. A 15-year recovery period applies to real property that is placed in service after 1980 but before March 16, 1984, and to low-income housing.

The recovery percentages for such property other than low-income housing is similar to the use of the 175 percent declining balance method with a later-year switch to the straight line method.

You can use these conventions with the ACRS depreciation method:

Convention	Description
Full-month	Can be used for real property that you place in service before March 16, 1984, and for low-income housing. With the full-month convention, the system handles real property that you place in service at any time during a particular month as being placed in service on the first day of that month. This method allows a full month's cost recovery for the month that you placed the property in service. If you dispose of the property anytime during a particular month, but before the end of a recovery period, you are not allowed cost recovery for the month that you disposed of the property.
Mid-month	Can be used for real property that you place in service after March 15, 1984. With the mid-month convention, the system handles real property that you place in service anytime during a particular month as being placed in service at the middle of that month. This method allows a one-half month's cost recovery for the month that you placed the property in service. If you dispose of the property during a month but before the end of a recovery period, you are allowed cost recovery for one-half of the month that you disposed of the property.
Mid-year	With the regular method of ACRS standard depreciation, the mid-year convention is mandatory and built into the applicable tables. You are not allowed any deduction for the year that you dispose of an asset.