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Double Declining Depreciation Calculation - ATX


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I don't know if I'm really that tired, or dumb, but for the life of me, I cannot figure out how ATX is calculating their depreciation for my client's vehicles.  Help!

In the below detail, the 2015 Ford Focus.  My calculation is:

$19,712-17,688= $2,024/5 = 404.80 * 2 = $809.60  ... They get $1,206.  What am I missing?

My calculation works for the 2016 Ford Focus, but the other two I'm off again.  

image.thumb.png.a0281b473fd432c479adca139112460e.png

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I ran it in Drake cause I'm too tired to do it in a spreadsheet right now. However, your calculation is correct. I can't answer why ATX is different. Did you do this as a listed vehicle with limitations under 6K lbs? Just a thought. I tried that in Drake and it returned a different value than ATX. Take a break and come back later and double check your entries. If they are correct, I would be calling ATX and overriding if you can. 

 

 

image.thumb.png.692d36fd0b74bf19dc6f74ecdd54b571.png

Edited by Terry D
Correct typo(s)
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On 2/29/2020 at 9:23 PM, Terry D said:

Did you do this as a listed vehicle with limitations under 6K lbs? Just a thought. I tried that in Drake and it returned a different value than ATX. Take a break and come back later and double check your entries. If they are correct, I would be calling ATX and overriding if you can. 

 

I figured out it has something to do with the midquarter convention, but I still can't get the number to be exact.  When I use the MQ DDB tables, I get closest to what ATX is calculating.  Still not exact though.  

The other two I referenced earlier as being off as well, were spot on when I used the tables, so it's gotta be something with special about that Ford Focus.  Anyways, thanks for your input Terry D!  I'm close enough to keep trudging along. 

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Just now, GGRNY said:

I figured out it has something to do with the midquarter convention, but I still can't get the number to be exact.  When I use the MQ DDB tables, I get closest to what ATX is calculating.  Still not exact though.  

The other two I referenced earlier as being off as well, were spot on when I used the tables, so it's gotta be something with special about that Ford Focus.  Anyways, thanks for your input Terry D!  I'm close enough to keep trudging along. 

Happy to know ATX is "correct".  At least you were able to figure out the issue.  

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It can't be because of mid-quarter at all, not the way it appears to be entered. Also, mid-quarter wouldn't make that much of a difference considering the Ford Focus was put in service on 7/1/15.

I can manually calculate the exact amount of depreciation for each of the prior years that comprise the accumulated amount for the 2015 asset:

  • 2015: 8,000 bonus +2,343. Total depreciation 1st year = 10343.
  • 2016: 3,748 2nd year expense.  Total accum deprec at 12/31/16 = 14,091.
  • 2017: 2,248 3rd year expense.  Total accum deprec at 12/31/17 = 16,339.
  • 2018: 1,349 4th year expense.  Total accum deprec at 12/31/18 = 17,688.

I think the cause is an interplay with the special allowance and don't know why ATX is coming up with $1,206 either.  I plugged in all the assets with the exact conventions AND with the special allowance in the proper spot, and Drake comes up with all of the exact depreciation expense for all but the 2015 asset.  Drake is slightly higher and shows a depreciation percentage of 11.52% from the depreciation table being used. 

Edit post to include this part (in blue):  The 2018 expense of $1,349 is calc'd as (19712 - a/d 16339) / 5 * 2 = 1,349.  This is exactly the same as the SL rate applied to the adjusted basis. SL in fourth year, the 2018 tax year, (for a five-year asset) is at a rate of 40% of the remaining adjusted basis, that rate calc'd by dividing 1 / 2.5.

It appears that Drake is calculating 2019, the fifth year, as being switched to SL because it is higher than HY-DDB. Fifth year SL depreciation of a 5-year asset is at 66.6667% of remaining adjusted basis, that rate calc'd by dividing 1 / 1.5.  It still doesn't explain ATX figures though.

FWIW, this explanation was taken from an example of a 5-yr asset using MACRS w/ switch to SL as shown in Pub 946.

Drake calcs from a practice return:

Depreciation.thumb.jpg.4de73eb3932b12c2c4706f872c2c30f1.jpg

Edited by jklcpa
added the part in blue, then added bold & a/d ea yr
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43 minutes ago, jklcpa said:

Edit post to include this part (in blue):  The 2018 expense of $1,349 is calc'd as (19712 - a/d 16339) / 5 * 2 = 1,349. 

Thanks for taking the time to figure this all out.  The mid-quarter gets me closer, but I never considered the switch to SL!  Thanks for that tip!.  Gotta question, in the pic, it looks like prior year depreciation is $17688, so where are you getting the a/d of $16,339 from?

1 minute ago, jklcpa said:

Even though your depreciation schedule shows 100% business use, are there entries elsewhere in the input for mileage or usage that may be affecting the final calculation for the 2015 vehicle?

 

No, not that I've found.

And the picture of the Drake printout was a big help, THANK YOU.  Seeing the RATE column let's me see that DRAKE is using the HY DDB convention for 5-year property table.  Now, I gotta see if ATX will give me that same column information on mine and see if I can backtrack to which table it might be using.  Wish me luck! 

 

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5 minutes ago, GGRNY said:

where are you getting the a/d of $16,339 from?

That is the accum deprec through 2017 that is used to calc the adjusted basis at 12/31/17 because the adjusted basis at that date is used to calc the 2018 expense.

Sorry if that was confusing. When I saw that the 2018 and 2019 expense amounts were the same, I figured it might be a switch to SL and thought I'd explain how the 2018 calc was arrived at.  Sorry if that was confusing. Just relating it to the example from Pub 946.

That still doesn't explain what's going on with ATX and which is correct, and why.

Edited by jklcpa
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1 minute ago, jklcpa said:

That is the accum deprec through 2017 that is used to calc the adjusted basis at 12/31/17 because the adjusted basis at that date is used to calc the 2018 expense.

Did you mean 2018 accum depre to calculate 2019 expense?

Hmm .. If so, then isn't the 2018 accum depre is $17,688 as shown in the column labeled Prior Depreciation?

 

And for the record, ATX doesn't seem to have that same rate column. 🥺

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25 minutes ago, GGRNY said:

Did you mean 2018 accum depre to calculate 2019 expense?

Hmm .. If so, then isn't the 2018 accum depre is $17,688 as shown in the column labeled Prior Depreciation?

 

And for the record, ATX doesn't seem to have that same rate column. 🥺

No, I really meant the 2018 expense that is the fourth year being depreciated.  I was showing the 2018 calculation using Macrs DDB-HY and that it is exact EQUAL to the SL calc for that fourth year.

Then for 2019, that would be the fifth year of expense, the SL rate is higher than the MACRS.

I was trying to prove out all the numbers used to date for that vehicle since that one's calculation is problematic.

I inserted the year end accum deprec each year in my post above, and I tried to clarify the fourth and fifth years' descriptions with bold formatting for clarity.

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2 minutes ago, jklcpa said:

No, I really meant the 2018 expense that is the fourth year being depreciated.  I was showing the 2018 calculation using Macrs DDB-HY and that it is exact EQUAL to the SL calc for that fourth year.

Then for 2019, that would be the fifth year of expense, the SL rate is higher than the MACRS.

I was trying to prove out all the numbers used to date for that vehicle since that one's calculation is problematic.

I inserted the year end accum deprec each year in my post above, and I tried to clarify the fourth and fifth years' descriptions with bold formatting for clarity.

I see where you were going now!  Well thank you for clarifying.  Well, I'd now agree with Drake on it's methodology.  ATX though 🤔

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See table below. Fourth and fifth year percentages are the same, straight from the table and the reason Drake is calc'g 2019 as $1,349.  Your expense for that vehicle is below the luxury auto limitls for 2015, so that isn't the problem, and it's not a switch to SL at all either.  Still doesn't explain ATX and why the limitation. There must be some input or something limiting this particular auto and its expense.   

20200302_165034.png.6936582903717f477023a83b2c53aa64.png

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1 hour ago, jklcpa said:

See table below. Fourth and fifth year percentages are the same, straight from the table and the reason Drake is calc'g 2019 as $1,349.  Your expense for that vehicle is below the luxury auto limitls for 2015, so that isn't the problem, and it's not a switch to SL at all either.  Still doesn't explain ATX and why the limitation. There must be some input or something limiting this particular auto and its expense.   

I agree, it's gotta be an input item, but I've poured though the details, and just can't find it!  Well, thanks for so much in depth analysis.  I really, really appreciate it.  This whole thing made me do an impromptu refresher course on DDB, HY/MQ Conventions, and the sorts. 

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5 minutes ago, GGRNY said:

I agree, it's gotta be an input item, but I've poured though the details, and just can't find it!  Well, thanks for so much in depth analysis.  I really, really appreciate it.  This whole thing made me do an impromptu refresher course on DDB, HY/MQ Conventions, and the sorts. 

 

GGRNY...I had to contact ATX Chat Support about 40 minutes ago.  It was an immediate connection and I did not wait at all.  Maybe it's worth trying to discuss this with them?

https://support.cch.com/atxchat/

 

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