Page:United States Statutes at Large Volume 100 Part 3.djvu/314

 100 STAT. 2122

PUBLIC LAW 99-514—OCT. 22, 1986

"SEC. 168. ACCELERATED COST RECOVERY SYSTEM.

"(a) GENERAL RULE.—Except as otherwise provided in this section, the depreciation deduction provided by section 167(a) for any tangible property shall be determined by using— "(1) the applicable depreciation method, "(2) the applicable recovery period, and "(3) the applicable convention. "(b) APPLICABLE DEPRECIATION METHOD.—For purposes of this section— "(1) IN GENERAL.—Except as provided in paragraphs (2) and (3), the applicable depreciation method is— "(A) the 200 percent declining balance method, "(B) switching to the straight line method for the 1st taxable year for which using the straight line method with respect to the adjusted basis as of the beginning of such year will yield a larger allowance. "(2) 15-YEAR AND 20-YEAR PROPERTY.—In the case of 15-year and 20-year property, paragraph (1) shall be applied by substituting '150 percent' for '200 percent'. "(3) PROPERTY TO WHICH STRAIGHT U N E METHOD APPLIES.—The

applicable depreciation method shall be the straight line method in the case of the following property: "(A) Nonresidential real property. "(B) Residential rental property. "(C) Property with respect to which the taxpayer elects under paragraph (5) to have the provisions of this paragraph apply. "(4) SALVAGE VALUE TREATED AS ZERO.—Salvage value shall be treated as zero. "(5) ELECTION.—An election under paragraph (3)(C) may be made with respect to 1 or more classes of property for any taxable year and once made with respect to any class shall apply to all property in such class placed in service during such taxable year. Such an election, once made, shall be irrevocable. "(c) APPLICABLE RECOVERY PERIOD.—For purposes of this section, the applicable recovery period shall be determined in accordance with the following table: "In the case of: 3-year property 5-year property 7-year property 10-year property 15-year property 20-year property Residential rental property Nonresidential real property

The applicable recovery period is: 3 years 5 years 7 years 10 years 15 years 20 years 27.5 years 31.5 years.

"(d) APPLICABLE CONVENTION.—For purposes of this section— "(1) IN GENERAL.—Except as otherwise provided in this subsection, the applicable convention is the half-year convention. "(2) REAL PROPERTY.—In the case of— "(A) nonresidential real property, and "(B) residential rental property, "K.the applicable convention is the mid-month convention. "(3) SPECIAL RULE WHERE SUBSTANTIAL PROPERTY PLACED IN SERVICE DURING LAST 3 MONTHS OF TAXABLE YEAR.—

�