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Cost recovery

REG Chapter 11 · Area III · Blueprint III.B

Owen's Bakery Inc. spent heavily in 2026: ovens, display cases, a delivery van, a car, a building and a second bakery's goodwill. How much can it deduct this year? Cost recovery answers that, and OBBBA changed the answer a lot: 100% bonus depreciation is back permanently for property acquired after January 19, 2025, and Section 179 now allows $2,560,000 for 2026. The Blueprint asks you to compute MACRS depreciation with the right period and convention, decide when bonus or Section 179 applies, amortize intangibles, and review a depreciation schedule and its diagnostic flags.

In this chapter

1. What can be depreciated, and over how long
2. MACRS for personal property: the half-year convention
3. The mid-quarter convention
4. Real property: residential and nonresidential
5. Section 179 expensing
6. Bonus depreciation after OBBBA
7. Listed property and luxury automobiles
8. Amortization of intangibles
9. Reviewing the depreciation schedule

This chapter has 9 lessons, 50 practice MCQs with explanations and 20 simulations, plus flashcards and a recall sheet.

What this chapter covers

• MACRS recovery periods and conventions
• Section 179 and bonus depreciation after OBBBA
• listed property
• amortization of intangibles
• reviewing depreciation schedules

Chapter 10: Basis of assets · Chapter 12: Gross income: inclusions and exclusions