IRS Publication 946 — How To Depreciate Property
This is the passage the answer relied on, shown in the document's own words. The highlighted text is the exact excerpt quoted — extracted verbatim by the citation system, so it cannot be fabricated.
Open official source at page 10 ↗
“If the software meets the tests above, it may also qualify for the section 179 deduction and the special depreciation allowance, discussed later in chapters 2 and 3. If you can depreciate the cost of computer software, use the straight line method over a useful life of 36 months.”
about qualified business use of listed property, see What Is the Business-Use Requirement? in chapter 5. Office in the home. If you use part of your home as an office, you may be able to deduct depreciation on that part based on its business use. For information about depreciating your home office, see Pub. 587. Inventory. You cannot depreciate inventory because it is not held for use in your business. Inventory is any property you hold primarily for sale to customers in the ordinary course of your business.
If you are a rent-to-own dealer, you may be able to treat certain property held in your business as depreciable property rather than as inventory. See Rent-to-own dealer under Which Property Class Applies Under GDS? in chapter 4.
In some cases, it is not clear whether property is held for sale (inventory) or for use in your business. If it is unclear, examine carefully all the facts in the operation of the particular business. The following example shows how a careful examination of the facts in two similar situations results in different conclusions. Example. Maple Corporation is in the business of leasing cars. At the end of their useful lives, when the cars are no longer profitable to lease, Maple sells them. Maple does not have a showroom, used car lot, or individuals to sell the cars. Instead, it sells them through wholesalers or by similar arrangements in which a dealer’s profit is not intended or considered. Maple can depreciate the leased cars because the cars are not held primarily for sale to customers in the ordinary course of business, but are leased.
If Maple buys cars at wholesale prices, leases them for a short time, and then sells them at retail prices or in sales in which a dealer’s profit is intended, the cars are treated as inventory and are not depreciable property. In this situation, the cars are held primarily for sale to customers in the ordinary course of business.
Containers. Generally, containers for the products you sell are part of inventory and you cannot depreciate them. However, you can depreciate containers used to ship your products if they have a life longer than 1 year and meet the following requirements.
• They qualify as property used in your business.
• Title to the containers does not pass to the buyer. To determine if these requirements are met, consider the following questions.
• Does your sales contract, sales invoice, or other type of order acknowledgment indicate whether you have retained title?
• Does your invoice treat the containers as separate items?
• Do any of your records state your basis in the containers?
What Property Can Be Depreciated? › Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes.
Excerpt shown from a longer document — use the official source button above to read the complete publication.