Listed Property

In taxation, listed property refers to assets such as automobiles, computers, and cellular phones that are subject to a 50% business use test. Depreciation methods for these assets vary based on their usage for business purposes.
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Detailed Definition

Listed property refers to specific types of property that are typically used for both personal and business purposes and are subject to special depreciation rules. According to the IRS, listed property includes:

  • Automobiles
  • Computers and peripheral equipment
  • Cellular phones
  • Any other property used as a means of transportation.

For listed property to qualify for favorable depreciation methods such as the Modified Accelerated Cost Recovery System (MACRS), it must be used more than 50% of the time for business purposes. If used less than 50% of the time for business, the asset must be depreciated using the Straight-Line Method.

Passenger automobiles, including trucks and vans, have additional limitations on the depreciation deductions allowed under tax law.

Examples

  1. Business Use of a Car: A consultant uses their personal car for meeting clients and driving to office sites. If the car is used 60% of the time for business, it can qualify for accelerated depreciation methods.
  2. Business Use of a Computer: A freelancer uses a laptop both for personal entertainment and for completing freelance work. If the laptop is used 70% of the time for business purposes, the freelancer can use the statutory percentage method for depreciation.
  3. Business Use of a Cell Phone: A sales executive uses a company-provided smartphone primarily for business tasks such as coordinating meetings and emails. If the cell phone is used 80% of the time for business, it can be depreciated more favorably.

Frequently Asked Questions (FAQs)

Q1: What happens if listed property is used less than 50% for business? A1: If listed property is used less than 50% of the time for business, it must be depreciated using the Straight-Line Method.

Q2: Are there any special rules for passenger automobiles? A2: Yes, passenger automobiles have additional recovery limitations imposed upon depreciation deductions.

Q3: What is the Modified Accelerated Cost Recovery System (MACRS)? A3: MACRS is a method of depreciation in which the cost of an asset is deducted over time under a specific schedule defined by tax regulations.

Q4: Can computer peripherals be considered listed property? A4: Yes, computers and their peripheral equipment are considered listed property.

Q5: Do I need to keep records to verify business use of listed property? A5: Yes, proper documentation and records of business use are required to verify the percentage and qualify for the appropriate depreciation method.

  • Depreciation: The allocation of the cost of a tangible asset over its useful life.
  • Modified Accelerated Cost Recovery System (MACRS): A method of accelerated tax depreciation recognized by the IRS.
  • Straight-Line Method: A method of depreciating an asset by an equal amount each year over its useful life.
  • Business Asset: An asset used in the conduct of business or commercial activities.

Online References

Suggested Books for Further Studies

  • “Depreciation: Concepts and Methods” by Bowtah Safaa
  • “The Complete Guide to Depreciation of Fixed Assets” by Matthew P. Patanie
  • “U.S. Master Tax Guide” by CCH Tax Law Editors

Fundamentals of Listed Property: Taxation Basics Quiz

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