Software of the Month Club 1996 February

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FIXED ASSET PRO by HAMMERSOFT (tm) A full featured fixed asset depreciation system. WELCOME Thank you for taking the time to examine Fixed Asset Pro Version 1.4. We are very excited about this program and we hope you will be also. HammerSoft (tm) is dedicated to adding more features, enhancing, and improving Fixed Asset Pro to make it the best program on the market. We appreciate your cheerful encouragement and assistance. Who can use Fixed Asset Pro? This program will prove invaluable for small, medium and large businesses that must track equipment for income tax and financial purposes. The program also will be effective for Accountants and Bookkeepers that have many different clients that must track equipment records. Fixed asset management can be a complex task considering all the information that you must maintain for one asset and all the tax law complications you must address. Our team of tax and programming experts designed this program to cut that chore down to size. This software and accompanying documentation is subject to change and the current version supersedes any previous version. To provide the correct tax law application to your assets, you must keep this software current. Copyright (c) 1992 - 1994 HammerSoft (tm), all rights reserved. _______ ____|__ | (R) --| | |------------------- | ____|__ | Association of | | |_| Shareware |__| o | Professionals -----| | |--------------------- |___|___| MEMBER ACKNOWLEDGEMENTS First Impression by Lincoln Beach Software IRS Publication 534 - no copyright is claimed on income tax excerpts Yoshizaki, Haruyasu LHA.EXE Data Compression Software TRADEMARKS All registered trademarks owned by their respective companies. Turbo Pascal is a registered trademark of Borland International. Object Professional is a trademark of TurboPower Software. MS-DOS is a trademark of Microsoft Corporation. IBM PC, XT, AT, PS/2 are registered trademarks of International Business Machines Corporation. DEFINITION OF SHAREWARE Shareware distribution gives users a chance to try software before buying it. If you try a Shareware program and continue using it, you are expected to register. Individual programs differ on details -- some request registration while others require it, some specify a maximum trial period. With registration, you get anything from the simple right to continue using the software to an updated program with printed manual. Copyright laws apply to both Shareware and commercial software, and the copyright holder retains all rights, with a few specific exceptions as stated below. Shareware authors are accomplished programmers, like commercial authors, and the programs are of comparable quality. (In both cases, there are good programs and bad ones!) The main difference is in the method of distribution. The author specifically grants the right to copy and distribute the software, either to all and sundry or to a specific group. For example, some authors require written permission before a commercial disk vendor may copy their Shareware. Shareware is a distribution method, not a type of software. You should find software that suits your needs and pocketbook, whether it's commercial or Shareware. The Shareware system makes fitting your needs easier, because you can try before you buy. And because the overhead is low, prices are low also. Shareware has the ultimate money-back guarantee -- if you don't use the produce, you don't pay for it. DISCLAIMER - AGREEMENT USERS OF FIXED ASSET PRO MUST ACCEPT THIS DISCLAIMER OF WARRANTY: FIXED ASSET PRO IS SUPPLIED AS IS. THE AUTHOR DISCLAIMS ALL WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR ANY PURPOSE. THE AUTHOR ASSUMES NO LIABILITY FOR DAMAGE, DIRECT OR CONSEQUENTIAL, WHICH MAY RESULT FROM THE USE OF FIXED ASSET PRO." Fixed Asset Pro is a "Shareware program" and is provided at no charge to the user for evaluation. Feel free to share it with your friends, but please do not give it away altered or as part of another system. The essence of "user-supported" software is to provide personal computer users with quality software without high prices, and yet to provide incentive for programmers to continue to develop new products. If you find this program useful and find that you are using Fixed Asset Pro and continue to use Fixed Asset Pro after a reasonable trial period, you must make a registration payment of $79.95 to HammerSoft (tm). The $79.95 registration fee will license one copy for use on any one computer at any one time. You must treat this software just like a book. An example is that this software may be used by any number of people and may be freely moved from one computer location to another, so long as there is no possibility of it being used at one location while it's being used at another. Just as a book cannot be read by two different persons at the same time. Commercial users of Fixed Asset Pro must register and pay for their copies of Fixed Asset Pro within 30 days of first use or their license is withdrawn. Site-License arrangements may be made by contacting HammerSoft (tm). Anyone distributing Fixed Asset Pro for any kind of remuneration must first contact HammerSoft (tm) at the address below for authorization. This authorization will be automatically granted to distributors recognized by the (ASP) as adhering to its guidelines for Shareware distributors, and such distributors may begin offering Fixed Asset Pro immediately (However HammerSoft (tm) must still be advised so that the distributor can be kept up-to-date with the latest version of Fixed Asset Pro). This is copyrighted software. You are not obtaining title to the software or any copyright rights. You may not sub license, rent lease, convey, modify, translate, convert to another programming language, decompile, or disassemble the software for any purpose. You are encouraged to pass a copy of Fixed Asset Pro along to your friends for evaluation. Please encourage them to register their copy if they find that they can use it. All registered users will receive a copy of the latest version of the Fixed Asset Pro system. "This program is produced by a member of the Association of Shareware Professionals (ASP). ASP wants to make sure that the Shareware principle works for you. If you are unable to resolve a Shareware-related problem with an ASP member by contacting the member directly, ASP may be able to help. The ASP Ombudsman can help you resolve a dispute or problem with an ASP member, but does not provide technical support for members' products. Please write to the ASP Ombudsman at 545 Grover Road, Muskegon, MI 49442 or send a CompuServe message via CompuServe Mail to ASP Ombudsman 70007,3536." This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the author is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. HammerSoft P.O. Box 205 Kansas, OH 44841-0205 TABLE OF CONTENTS Page No. Chapter 1 GETTING STARTED System Requirements........................... 1 Installation.................................. 1 Registration Entitlements..................... 2 HammerSoft (tm) Support Policy................ 2 Chapter 2 TUTOR AND QUICK START Fixed Asset Pro Tutor......................... 3 Quick Start Reference Guide................... 7 Entering Historical Data Option............... 8 Chapter 3 HOW TO USE HELP......................... 9 Chapter 4 USING FILE MAINTENANCE Open New File................................. 10 Close File.................................... 10 Delete File................................... 10 Reindex....................................... 10 Change Directory.............................. 11 DOS Shell..................................... 11 Quit.......................................... 11 Chapter 5 DEPRECIATION BOOKS Income Tax Books.............................. 12 AMT Books..................................... 12 Financial Books............................... 12 State Books................................... 13 Other Books................................... 13 Chapter 6 ENTERING DATA Setting Up FApro After Installation........... 14 Entering Client Information................... 15 Entering Asset Information.................... 17 Asset Data Entry Screen Fields................ 19 Chapter 7 PERFORMING CALCULATIONS Calculating Current Deductions................ 28 Open Calculation Years........................ 28 Chapter 8 PRINTING REPORTS Summary Report................................ 29 Posting Report................................ 29 Tax Report.................................... 29 Annual Acquisitions and Dispositions Report... 30 Annual AMT Report............................. 30 Lifetime Projection........................... 30 Fixed Asset Card.............................. 30 Print Options................................. 30 Chapter 9 TAX RULES AND CONSIDERATIONS............ 32 APPENDIX A - Cursor Movements...................... 39 APPENDIX B - An Effective Tax Date Summary......... 41 INDEX Chapter 1 GETTING STARTED SYSTEM REQUIREMENTS IBM PC, PC/XT, PC/AT, PS/2 or compatible 480K Free RAM MS-DOS, or PC-DOS 3.0 or greater One hard drive with a minimum of 2MB free disk space. Color or Monochrome monitor Dot matrix or HP LaserJet compatible printer INSTALLATION To conserve space, the Fixed Asset Pro disk(s) contain compressed versions of Fixed Asset Pro program files. Fixed Asset Pro requires a hard disk with at least 2 MB of free disk space for installation. The Fixed Asset Pro program will use approximately 1.5 MB of disk space after it is installed. Fixed Asset Pro installation is simple as 1 2 3. 1) Insert disk 1 into the correct drive for the disk(s) (5-1/4 or 3-1/2). 2) If you put the disk in A: then at the DOS prompt type A:Install If you put the disk in B: then at the DOS prompt type B:Install Press <Enter>. 3) Follow the on screen prompts while Install steps you through the installation. When the Install program is finished, you can start Fixed Asset Pro by typing: FApro <Enter>. If you need black and white mode type: FApro M <Enter> To print the manual type: copy manual.doc prn: The manual is a total of 50 pages in length. The first time you run Fixed Asset Pro you must name a data subdirectory. We recommend that you keep your data in a subdirectory other than the FApro subdirectory. The default is "Prodata". For those who like to do their own installations, the files are self extracting. You may copy the two files (FApro114.Exe, FApro214.Exe) to a subdirectory on your hard drive using the DOS Copy command. The recommended subdirectory name is "FApro". Once you have copied the two files into your subdirectory run FApro114.Exe and FApro214.Exe to extract all the files. After both programs have finished you should delete the two files (FApro114.Exe, FApro214.Exe) from your subdirectory. Fixed Asset Pro requires that the FILES= statement in your Config.Sys file be set to 30 or greater. 1 REGISTRATION ENTITLEMENTS Registration entitles you to: Registered Users' Version without commercials Printed User Manual Free Technical Support Notification of updates and new features Site License is available HAMMERSOFT (tm) Support Policy Our Preferred Method: Fax Technical Support (419) 986-6007 Fax your comments or questions with examples and print outs including all necessary information Include your name, address, phone and fax numbers Available 24 hours Telephone (Voice) Technical Support (419) 986-6007 Free voice technical support limited to 30 minutes 10:00 am to 2:00 pm Eastern time Monday - Friday CompuServe: Send your comments or questions to: ID 71540,3266 Mail Support: Send your comments or questions to: HammerSoft PO Box 205 Kansas, OH 44841-0205 2 Chapter 2 TUTOR AND QUICK START FIXED ASSET PRO TUTOR A brief tutorial on using the program This chapter will quickly explain how to set up the program, enter client information and enter asset data. The tutorial will show you how to use the help screens to answer questions plus point out the basics of using the program in a very short period of time. When you see items inside square brackets these are words to type in the fields indicated. Such as: In Description type [Our Computer]. When items are in angle brackets it represents a key. Such as: Press <Enter> to accept. Starting with the main menu that shows File Book Data Entry Calculate Reports Lesson 1 - Learn to set up your Company's information Type <D> for Data Entry Type <S> or Press <Enter> for Setup Type your Company's Name and Press <Enter> or <Down Arrow> In ADDRESS LINE 1 type in your Company's first line of address and Press <Enter> or <Down Arrow> In ADDRESS LINE 2 type in your Company's second line of address and Press <Enter> or <Down Arrow> In CITY, STATE ZIP type in the information and move to the next field. Type <N> if you do not have a color monitor Select a Printer close to yours by moving the highlight with the arrow keys and Press <Enter> Select a Printer Port by moving the highlight with the arrow keys and Press <Enter> Press <F10> to save Lesson 2 - Learn to open a file for yourself or a client Type <F> for the File Menu Press <Enter> or type <O> for Open/New Type in a file name such as [New] Press <Enter> Type <Y> to create a new file file name is now in the bottom right corner of menu Type <D> for Data Entry Type <C> for Client Type in your client's name and address or leave blank if the program will be used for your Company only. In Ending Fiscal Month Press <Enter> if you use calendar year In First Year FApro will calculate Press <F1> for help Press <Esc> to exit help Press <F10> to accept the current year as the first year. 3 Lesson 3 - Learn to enter asset information into the program First Asset Type <D> or Press <Enter> for Data Entry Press <A> for Asset Type <A> for Add In Asset ID type [001] Press <Enter> In Group type [Office] Press <Enter> In Location type [Main St.] Press <Enter> In Description type [Computer] Press <Enter> In Service Date type [011090] Press <Enter> Press <Enter> to accept N for New Press <F2> for Method look up table Press <Enter> to accept 200DB Press <F2> for the Class look up table Press <down arrow> once to move to 05M Press <Enter> to accept class Press <Enter> to accept 5 years In Prior Ded type [2080] Press <Enter> Press <Enter> 4 times to advance to Cost In Cost type [5000] Press <Enter> Press <Enter> to skip Land Value In Sec 179 type [1000] Press <Enter> Press <Enter> to skip Salvage Value Press <down arrow> once to move to Vendor In Vendor type [Big Computers Inc] Press the <down arrow> key to move to Convention In Convention Press <F2> Press <Enter> to accept Half Year AMT Type is already set to PP Press the <down arrow> to Tables In Tables Press <Enter> to accept N Press <F10> to save Second Asset Type <A> for Add In Asset ID Press <F4> to add 1 to the previous Asset ID number now 002 is the Asset ID number In Group Press <F4> to repeat Office as the group In Location Press <F2> to see Location List Press <Enter> to repeat Main St. In Description type [Office Building] Press <Enter> In Service Date type [100182] Press <Enter> Press <Enter> for New In Method Press <F2> Use the Down Arrow to Highlight 15R and Press <Enter> In Class Press <F2> Press the down arrow 3 times to 15A in ACRS Press <Enter> Press <Enter> to accept 15 years In Prior Ded type [10650] Press <Enter> Press <Enter> 4 times to advance to Cost In Cost type [15000] Press <Enter> Press <Enter> to skip Land Value 4 Press down arrow 4 times to AMT Type In AMT Type Press <F2> Arrow down to move to RP and Press <Enter> Press <F10> to save Third Asset If Add is already highlighted Press <Enter> In Asset ID Press <F4> to add 1 to the previous asset ID number now 003 is the Asset ID number In Group type [Shop] Press <Enter> In Location Press <F4> to bring forward Main St. In Description type [Shop Building] Press <Enter> In Service Date type [063080] Press <Enter> Press <Enter> for New In Method Press <F2> Press <Page Down> 3 times and <Up Arrow> 2 times to highlight SL in Other Methods and Press <Enter> In Class Press <F2> To accept P81 - Pre 1981 Rules Press <Enter> In Life type [25] and Press <Enter> In Prior Ded Type [11500] and Press <Enter> Press <Enter> 4 times to move to Cost In Cost type [25000] and Press <Enter> Press <F10> to save Lesson 4 - Learn to explore the bottom menu Press <V> for View to see a summary on screen. Use the arrow keys along with <End> and <Home> keys to move across the screen. Press <ESC> to exit Use the <right> and <left> arrow keys to move the highlight on the bottom menu Press <F1> to see what each function performs Press <ESC> to exit help Lesson 5 - Learn to move about on the help screens Press <E> for Edit <Arrow down> to Method Press <F1> for help Press <TAB> for a related subject Press <TAB> again and Press <Enter>, to explain Farmers Press <F1> for the index, arrow to any subject Press <Enter> Press <ALT+F1> together to move back one level to Farmers Press <ALT+F1> together to move back one level to Method Press <ESC> to exit help Press <ESC> to exit the asset record Press <Q> to Quit 5 Lesson 6 - Learn to calculate and print reports Press <C> for Calculate Press <Enter> to accept full year Press <Y> to accept the current year as the first year to calculate Press <R> for Reports Type <S> for Summary Report Press <A> to sort on Asset ID Press <Enter> to Print Report to screen (default) Use Arrows, Page Up and Page Down, Home and End to move around on the report Press <ESC> to exit report Press <Enter> on Reports Menu Press for Projection Press <F2> for the look-up table Press <Enter>to accept Asset ID 001 Press <Enter> to look at the report on screen Press <down arrow> to view report Press <ESC> to exit Congratulations you have now accomplished the basics of Fixed Asset Pro. **** SAMPLE DATA FILES **** Fixed Asset Pro comes with a Sample Directory containing a file of assets named Fields, for you to browse and examine. The Fields is composed of eleven assets listed as examples from the 1993 IRS Publication 534 - Depreciation. From the Main Menu: Type <F> for the File Menu Type <O> or Press <Enter> for Open/New Press <Alt+D> Press <Enter> Press <Down Arrow> to highlight Fields Press <Enter> Press <Alt+F> Press <Enter> Press <D> for DataEntry Press <A> for Asset Move around as you desire using the methods learned in the previous lessons 6 QUICK START REFERENCE GUIDE How to get started with Fixed Asset Pro quickly. Step 1 - Program Setup to be performed once only On Main Menu choose Data Entry On Data Entry Menu choose Setup Complete with the owner's name, address, monitor and printer choices Step 2 - Open A File On Main Menu choose File On File Menu choose Open/New Type in your file name Step 3 - Enter Your Company or Client Information On Main Menu choose Data Entry On Data Entry Menu choose Client Leave Name and Address blank if the Owner is the user or type your Client's Name and Address You MUST Complete Ending Fiscal Month You MUST Complete First Year FApro will Calculate (see definitions in the manual text) Step 4 - Enter Asset Information On Main Menu choose Data Entry On Data Entry Menu choose Asset On the bottom Menu line choose Add Choose a method to enter historical data, see next topic As you can see the Tax Book is active when you start data entry. This is the correct book in which to begin data entry. Switch to any other set of books after tax data is complete for an asset. 7 ENTERING HISTORICAL DATA OPTION You must choose between two methods of entering asset's back data. Method 1 Enter all your assets with up to date accumulated depreciation totals. Example: to begin calculating depreciation in 1994. Enter accumulated depreciation as prior deduction in tax book Set the correct convention in the convention field To use AMT Book select an AMT Type in the tax book. Change to each book desired and edit the asset to change any methods and lives Enter the correct prior deduction for each book Start calculations with the first year to calculate Or Method 2 Enter the back years data and allow the program to calculate the depreciation and convention for each year. Years Before MACRS (1987) Enter all assets in any order in the Tax Book using tax rules To use AMT Book select an AMT Type in the tax book. Change to each book desired and edit the asset to change or enter any methods and lives Calculate each year sequentially Print each year's report after that year's calculation for all desired books Years After MACRS (1987) Due to convention locking you may work in up to two years at a time. Enter 1987 assets Edit any other books for methods and lives Calculate 1987 Print 1987 reports from each book desired Enter 1988 assets Edit any other books for methods and lives Calculate 1988 Print 1988 reports from each book desired Enter 1989 assets - now 1987 conventions will be locked Edit any other books for methods and lives Calculate 1989 Print 1989 reports from each book desired Continue on with later years Note: It is very important that you organize your accumulated depreciation totals for each asset in each book before you start data entry. You will need to enter these amounts at this time. These fields will lock after you exit data entry. 8 Chapter 3 HOW TO USE HELP Context Sensitive Help Fixed Asset Pro has context sensitive help screens that define and explain the area of the program in which you are now working. Press <F1> at any point in the program and the help screen will explain that area in the program. Move to related areas easily by using the <Tab> key to move to the next highlighted text and press <Enter>. The highlighted text is a cross reference that defines or explains a topic related to the first help screen viewed. The Help Keys Use the following keys on the help screens: <Page Up> - move forward one screen of text <Page Down> - move backward one screen of text <Ctrl+Page Up> - move to the first line of the help screen <Ctrl+Page Down> - move to the last line of the help screen <Tab key> - move to the next highlighted cross reference <Shift+Tab> - move to the previous highlighted cross reference <Alt+F1> - move backwards through the cross reference levels one level at a time <F1> - displays an index of help topics Use the arrow keys to select a topic and press <Enter>. <ESC> - exit 9 Chapter 4 USING THE FILE MAINTENANCE MENU From the Main Menu select <F> for File. OPENING A FILE Select <O>pen/New. This option will allow you to open an existing file or create a new file. Select this option to open a dialog box. The active file name will appear in the window if one is open. Type the name of the file you wish to open, or type the name of a new file you wish to start. A File Name is any legal DOS file name without an extension. A file name can only be eight characters long. Use <Tab> to obtain the file pick list and arrow down to highlight the desired file and press <Enter>. Use <Tab> to access HELP on the dialog screen for instructions on how to use a dialog box. The name of the open file appears on the bottom right corner of the main menu. CLOSING A FILE Select <C>lose. This option will close the active file. In the dialog box Press <Y> for yes to close a file. Press <N> to keep the file open. DELETING A FILE Select <D>elete. This option will delete the selected file. A dialog box will appear. Type in the name of the file you wish to delete, or select a file to delete from the Files Pick List. Press <Enter> when ready. REINDEXING THE CURRENT FILE Select <R>eindex. Reindexing steps through every asset in the active file and rebuilds the computer's index files. This assures you of the correct sort order and improves performance. Perform reindexing periodically to improve performance during sorts, searches and report building. If for any reason your assets are out of the selected sort order, you should reindex. 10 CHANGING THE DEFAULT DATA SUBDIRECTORY Select C<h>ange Dir. This option will allow you to change the data subdirectory. Type in the name of the subdirectory desired. Select TREE to display your subdirectories in a graphic tree format. Highlight your subdirectory and press <Enter> to select the subdirectory. Your choice of subdirectory now becomes the default subdirectory and will be active the next time you start up the program. RUNNING EXTERNAL DOS COMMANDS Select Dos <S>hell. This option allows you to perform most DOS functions. Use DOS SHELL to run other programs if they will fit within the memory available. WARNING: Some programs you cannot run from the DOS SHELL are programs that delete open files such as the DOS function chkdsk or any disk defragmenter. The screen displayed in the upper left hand corner shows whether the program has swapped to expanded memory and the number of bytes that have been swapped. Free ram remaining will appear on the third line. Type EXIT to return to Fixed Asset Pro. ENDING A FApro SESSION Select <Q>uit. This option exits from Fixed Asset Pro. Pressing <F3> while on the main menu also will exit the program. ABOUT Select <A>bout. This handy screen shows your current version number and HammerSoft's address and phone number in case you should need to contact us. 11 Chapter 5 DEPRECIATION BOOKS TYPES OF DEPRECIATION BOOKS From the Main menu select ook. This option displays your choice of different depreciation books you can maintain. There are five different depreciation books available. Add assets in the tax book, so most fields will automatically transfer to each of the other set of books. INCOME TAX BOOK Select <T>ax. This option is for Federal Tax depreciation records. The Tax Book is the default active book each time you start the program. Enter your asset information here first and the data will duplicate as needed in the other books. You should review all default methods and lives the program has set in the other books for accuracy and change any that are not correct. AMT BOOK Select <A>mt. This option is for Federal Alternative Minimum Tax depreciation records. Default methods and lives are set for all assets when you enter the correct AMT type in the tax book. You should review all defaults for accuracy and change any that are not correct. Refer to the current issue of IRS Publication 534 for the correct class life for your type of property to use in AMT book. The AMT type is automatically set for assets placed in service after 1986 . The life or period of personal property assets vary considerably, the default life is set to 12 years. Edit all lives that are different according to IRS Publication 534. FINANCIAL BOOK Select <F>inancial. This option is for Corporate Earnings and Profit depreciation records. The applicable straight line method and life is set when you enter the tax information. You should review all defaults for accuracy and change any that are not correct. 12 STATE BOOK Select <S>tate. This option is your resident state depreciation records. Edit each asset to select a method and life in this set of books. If you do not desire to use this set of books, then do not set the methods or lives. When no method or life is set, the program will not calculate this set of books resulting in faster calculations. OTHER BOOK Select <O>ther. This option is for any other depreciation records you may desire. Edit each asset to select a method and life in this set of books. If you do not desire to use this set of books, then do not set the methods or lives. When no method or life is set, the program will not calculate this set of books resulting in faster calculations. 13 Chapter 6 ENTERING DATA SETTING UP FApro AFTER INSTALLATION From the <D>ataEntry pulldown menu select <S>etup. Complete this option first to set up the Company that owns Fixed Asset Pro. Type all the company information on the designated lines. Type <Y> for yes if you wish color on a color monitor. Type <N> for no if you desire black and white on your color monitor. Switch to black and white if your screen is not clear on a LCD monitor. A printer pick list will appear for selecting your printer. Select your printer or the closest one to your printer. If none are close to your printer, select Generic Epson printer. Press <F10> to exit and save. NAME This field is for the owner of the program. This name appears on top of the reports. ADDRESS 1 Type in the address of the owner of the program. ADDRESS 2 Type in the post office box of the owner of the program. CITY, STATE ZIP Type in the city, state and zip of the owner of the program. COLOR MONITOR Type <Y> for yes if you wish color on a color monitor. Type <N> for no if you desire black and white on your color monitor. Switch to black and white if your screen is not clear on a LCD monitor. PORT TYPE Select by using the arrow keys or use the mouse to choose one of the printer ports connected. The default is LPT1 and is the most commonly used port. PRINTER TYPE A printer pick list will appear for selecting your printer. Select your printer or the closest one to your printer. If none are close to your printer, select Generic Epson printer. 14 **** ENTERING CLIENT INFORMATION **** From the <D>ataEntry pulldown menu select <C>lient. THE FISCAL YEAR AND THE FIRST YEAR CALCULATED MUST BE COMPLETED This option allows you to enter information on different clients if you keep records for more than one company. If using this program for the owner only, leave the client name blank. Enter information on each client that you open. Enter the client's name and address. For each client or for one company enter the ending fiscal month. Ending fiscal month is the last month of your accounting and tax year. If you are on a calendar year, the default of 12 is correct. Enter the first year you will calculate with Fixed Asset Pro (for other than calendar years see the definition of First Calc Year). Set your accumulated depreciation amounts to include all years before the first year calculated. COMPANY NAME Complete the name and address section with your Client's information. If you are using this program for the owner only, do not complete the name and address. Always complete the Ending Fiscal Month and First Calculation Year. COMPANY ADDRESS 1 Enter the first address line of your client here. Leave blank if using for a single company. Always complete the Ending Fiscal Month and First Calculation Year. COMPANY ADDRESS 2 Enter the second address line of your client here. Leave blank if using for a single company. Always complete the Ending Fiscal Month and First Calculation Year. CITY, STATE ZIP Enter the city, state and zip of your client here. Leave blank if using for a single company. Always complete the Ending Fiscal Month and First Calculation Year. ENDING FISCAL MONTH This is the ending fiscal month of your accounting and tax year. If you are on the calendar year, accept the default of 12. ALWAYS complete this data field for each file. 15 FIRST CALC YEAR Enter the first year you will use Fixed Asset Pro to calculate depreciation. Set all your accumulated depreciation amounts to include all years before the first year of calculation. ALWAYS complete this data field for each file. What is the first calc year if I use a fiscal year ? The first calc year is the tax year. The tax year is the year in which a fiscal year begins. These examples demonstrate how tax years relate to fiscal years. ENDING FISCAL MONTH TAX YEAR FISCAL YEAR 06 1992 7/1/92-6/30/93 11 1993 12/1/93-11/30/94 SET DEFAULTS IN STATE & OTHER BOOK ? If you use State and Other Books the program will set default methods and lives in the records to save time. The method and life in the State Book is set the same as the Tax Book and the method and life in the Other Book is set the same as the Financial Book. USE SEC 179 IN STATE BOOK ? You can choose to use Code Sec 179 tax rules in the State Book. APPLY 5 YEAR PERIOD TO STATE BOOK SEC 179 ? You can choose to apply Corporate Earnings and Profits rules for Code Sec 179 to the State Book. Both questions, Use Sec 179 in State Book and Apply 5 Year Period to State Book Sec 179 must be answered YES to receive the 5 Year Period deductions for Code Sec 179. USE SEC 179 IN OTHER BOOK ? You can choose to use Code Sec 179 tax rules in the Other Book. APPLY 5 YEAR PERIOD TO OTHER BOOK SEC 179 ? You can choose to apply Corporate Earnings and Profits rules for Code Sec 179 to the Other Book. Both questions, Use Sec 179 in Other Book and Apply 5 Year Period to Other Book Sec 179 must be answered YES to receive the 5 Year Period deductions for Code Sec 179. APPLY AUTO LIMITS TO STATE BOOK ? You can choose to apply Luxury Automobile Limits using tax rules in State Book. Answer Yes to apply limits. 16 APPLY AUTO LIMITS TO OTHER BOOK ? You can choose to apply Luxury Automobile Limits using tax rules in Other Book. Answer Yes to apply limits. **** ENTERING ASSET INFORMATION **** From the <D>ataEntry pulldown menu select <A>sset. This option allows entry of all the information on each asset to be depreciated. Along the bottom is a menu line of actions. To select an action press the highlighted letter or move the highlight bar to the desired action and Press <Enter>. The Bottom Menu has all of the following options: ADD RECORD This option gives you a blank record to complete. The cursor is placed in the first field (Asset ID) of the record. See the commands available on the bottom of the screen. When a command is highlighted, press <F1> to get context sensitive help to see what task each command performs. <Tab> key, arrow keys and <Enter> will move you forward in the fields. <Shift+Tab> keys together and arrow keys will move you backwards through the fields. Press <F10> to save and exit. <Esc> key will exit without saving. <F2> will present a look up table available for certain fields. Add all assets in the tax book. If you are currently in any other book the program will change to the tax book and tell you that it has changed to tax book. Enter all your assets original methods and lives using tax rules. EDIT RECORD Edit mode allows you to change a saved record. Use the arrow keys, <Tab>, <Shift+Tab> and <Enter> to move around on the screen. Change any field. Press <F10> to save your changes. <Esc> will exit without saving. You may need to recalculate for this year if you have edited any assets after calculating deductions. Editing a record will not change default methods or lives in other books. DELETE RECORD This option will allow you to delete a record. Press <D> for delete. A dialog screen will appear to confirm your deletion. Select <Y> for yes to delete the record. Press <Enter> also will delete the asset. Select <N> for no and this will cancel the action. 17 FIND RECORD The find option will allow you six different ways to search for a record. Enter any information you have on the asset. A search by asset ID is the fastest way to find a record. You can enter info in more than one field. You can use part of a word to perform a search. Press <F10> to search. NEXT RECORD This option will move you forward one record at a time from the record you start on through the end of the file. A beep will sound when you have reached the end or bottom of the file. PREVIOUS RECORD This option will move you backward one record at a time from the record you start on through to the beginning of the file. A beep will sound when you have reached the beginning or top of the file. TOP RECORD This option will take you to the first record of the file. BOTTOM RECORD This option will take you to the last record of the file. VIEWING ASSETS This option will display certain fields in a spreadsheet type format. <Home> - takes you to the far left of the screen which is asset ID <Arrow> keys - use the up and down arrow keys to highlight an asset <End> - takes you to the far right of the screen which is basis <Enter> - highlight the record you desire and press <Enter> this will access the record <Scroll> - use the mouse with the side scroll bar to move quickly <Esc> - escape will leave the view record option SORT ORDER This option will allow you to select how your asset will be sorted. Remember numerical Asset ID's will only be in correct ascending sort order if you use leading zeros. Sort options are: Asset ID Group, Class, Date Date 18 QUIT DATAENTRY This option will quit the data entry of assets and return you to the main menu. Press the letter <Q> to quit or use the arrow to move the highlight bar to Quit and press enter. **** ASSET DATAENTRY SCREEN FIELDS **** From the Bottom Menu Press <A> for add. ASSET ID This field is a ten character alphanumeric field for numbering of your assets. The program will not allow duplication of asset ID numbers. For automatic numbering press <F4> to add 1 to the last entered Asset ID number. This can be used to make data entry easier. To sort numbers accurately, use leading zeros to make the program sort in ascending order. GROUP This field is a ten character alphanumeric field that allows you to group assets in categories that you name. Upon entering your group name a table will be developed. Press <F2> to find group names used before in a look up list. Press <F4> to copy the last asset's group name into this record. GROUP LOOKUP TABLE The program keeps a list of all the different GROUPS that are entered into the program. Use the up and down arrow keys and press <Enter> to select the correct Group. LOCATION This field is a twenty character alphanumeric field that allows you to group assets by location. Upon entering your location names a table will be developed so in the future any location name used before can be found in a look up list by pressing <F2> Look Up. Press <F4> to copy the last asset's location name into this record. LOCATION LOOKUP TABLE The program keeps a list of all the different LOCATIONS entered into the program. Use the up and down arrow keys and press <Enter> to make your selection. DESCRIPTION This field is a twenty character alphanumeric field that allows a description of the asset. 19 SERVICE DATE This field represents the date the asset is placed into service to begin its depreciation. Type two digits for the month and day. If you type the last two digits of the year the program will fill in the first two digits of the year. Press <F4> to copy the last asset's service date into this field. CONDITION This field represents the condition of the asset upon its placement into service. Type <N> for new or for used. METHOD This field determines the depreciation method used. When adding an asset select the method to use for income tax purposes. Press <F2> for the look up table to give you the code for each method. The look up table is arranged from the latest methods available to earlier methods used. Press <F4> to copy the last asset's method forward to this asset. Note to Farmers: Property placed in service after 1988 in a farming business cannot use 200% declining balance method. Instead the farmer can use the 150% declining balance method or elect a straight line method. If a farmer elects not to apply the uniform capitalization rules to any plant or animals produced in a farming business, then he must use the alternate MACRS method (ADS). The ADS applies to all property placed in service in any tax year for which the election is in effect. METHOD LOOKUP TABLE This look up table shows all methods available for Fixed Asset Pro. The methods are arranged from MACRS to Pre 1981 depreciation methods. The method labeled NONE will allow manual entry of any amount as the current depreciation deduction. CLASS This field represents the tax depreciation class to which the asset belongs. Press <F2> for the look up table to give you the code for each class. The look up table is arranged from the latest classes available to earlier classes used. Press <F4> to copy the last asset's class forward to this asset. The class field is only used for income tax classification and calculations. Insert the correct class for income tax purposes only. The class does not change for each Book. 20 CLASS LOOKUP TABLE This look up table is to place the asset in the correct class for tax purposes. The classes are arranged from MACRS to Pre 1981 classes. LIFE This field is the total period in years (or life) to depreciate the asset. Press <F1> for the help screen to show an excerpt of the current 1991 IRS Table of Class Lives and Recovery Periods of the most frequently used assets. SWITCH YEAR This field appears when you elect to switch to the straight line method from one of the Pre 1981 Rules declining balance methods. The Switch Year tells Fixed Asset Pro the number of the year you want to change to straight line depreciation. Example: For a ten year asset type [6] to change to straight line depreciation in the sixth year. PRIOR DEDUCTION This field is all accumulated depreciation taken before the first year the program is used to calculate. Fixed Asset Pro will add to the prior deduction after you use the program to calculate. Enter a prior deduction amount for each book that you wish to maintain. If no prior deduction is entered in the tax book, the prior deduction field will lock in all the books. Prior Deduction will become accumulated depreciation and will lock when an asset is entered with a date placed in service before the first year calculated. Prior deduction will remain unlocked, while you are working in the two open calculation years. REMEMBER ACCURACY IS THE KEY TO CORRECT COMPUTATIONS. In DataEntry under Client: Step 1 Set the year ending fiscal month of your accounting year. Step 2 Set the first year the program is to calculate. In DataEntry under Asset: Step 3 Sum your accumulated depreciation for all years before the year assigned as the first year the program is to calculate. Enter this sum in the Prior Deduction field when adding the asset. Each book will have a different prior deduction so edit all books to set the prior deduction. ACCUMULATED DEPRECIATION Accumulated Depreciation is the total of the prior deduction entered during the program set up plus depreciation deductions calculated by Fixed Asset Pro. 21 BUSINESS USE PERCENTAGE This field is available for entry of the percentage of business usage of an asset. This field plus the production use percentage field cannot total more than 100%. Qualified business use is any use in your trade or business. PRODUCTION USE PERCENTAGE This field is available for entry of the percentage of production of income or investment usage allowable for the asset. The use of listed property in the production of income is not a qualified business use. This field plus the Business use percentage field cannot total more than 100%. DISPOSAL DATE This field is a date field used to record the date of disposal of the asset. Type two digits for the month and day. If you type the last two digits of the year the program will fill in the first two digits of the year. When an asset is disposed in the current year, it will be printed in the Annual Activity Report as a disposition. The year following disposal the asset will not appear on any reports. SALES PRICE This field is available to enter the sales price obtained on disposal of the asset. The sales price of the asset will print on the Annual Disposition Report. COST This field allows entry of the cost or basis of the asset. Different costs for an asset are allowed in different books. The tax cost entered in the tax book when adding an asset will default to all the other books. If the cost of an asset is different for another book then: 1. Select the desired Book 2. Select Edit 3. Insert cost for the asset for the selected Book 4. Insert any prior depreciation LAND VALUE This field is for land value of real property assets. Land value will be subtracted from the basis and will not be depreciated. FIRST YEAR ADDITIONAL DEPRECIATION First Year Additional Depreciation is the optional deduction allowed in years before 1981. Allowed only for personal property with a useful of at least six years the additional deduction may not exceed 20% of the cost. The program will automatically limit 22 first year additional depreciation to 20% of the cost, adjusted by the business and investment use percentages. SECTION 179 This field is for the amount of Code Section 179 or "Expensing" you elect for this asset. Expensing applies to property acquired by purchase for use in the active conduct of a trade or business and placed in service after 1981. The program applies various limits and will show a warning when you exceed a limit. A limit applies to this field for the total of Section 179 deduction that can be taken for any given year. Also an investment limit applies which reduces the total expensing allowed if the total cost of property placed into service exceeds $200,000.00 in one year. You cannot expense an amount greater than the cash difference paid for qualifying assets. You cannot expense an amount greater than the total taxable income from the active conduct of all trades or businesses. If your expensing is reduced because of the taxable income limit you need to manually adjust this field for the reduction, if you decide not to carryover the unallowable deduction. In figuring Corporate Earning and Profits, any Code Sec. 179 expense elected in computing taxable income is considered deducted ratably over a 5-year period beginning with the tax year the cost is expensed (Code Sec. 312 (k)(3)(B)). In Financial Book the amount entered in the Section 179 field is subtracted from the basis of the asset. This amount is added to the current deductions total in 1/5 amounts for the five years beginning with the year placed in service. By subtracting the Sec. 179 expense from the basis, you will receive both a current deduction of 1/5 the expense as allowed and also the depreciation for the balance of the basis that is not expensed. This 5-year period treatment is available for the State and Other Book if selected in Client Setup. SALVAGE VALUE This field allows entry of the salvage value. Salvage value is the estimated value of property at the end of its useful life. The salvage value is subtracted from basis for computing Pre 1981 Rules straight line and sum of the years digits methods. Pre 1981 Rules declining balance method will not depreciate below salvage value. All other methods ignore salvage value. ITC OPTION This field provides a Lookup table for the investment tax credit options that are available according to the service date of the asset. Press <F2> to use the options available. If you select option <O> to manually adjust the basis and the year 23 placed in service is 1983-1985 then on the bottom right hand corner of the Asset Entry screen will appear a box to enter the amount you wish to adjust (subtract from) the basis. ITC LOOKUP TABLE Select an option for the Investment Tax Credit. The options from the pick list will vary as to the tax laws in effect for the year placed in service. Use the up and down arrow keys and press <Enter> to select the ITC option. ITC TAKEN This field will be calculated for the amount of investment tax credit allowed according to the code you have entered under ITC option. If you have selected <O> from the pick list then you must manually enter the amount of investment tax credit taken. If the asset was placed into service in 1983 through 1985 then the adjusted basis field will appear. ITC was generally repealed after 1985, except for transition property. For tax years after the year the property was placed in service, if the business or investment use percentages increase you cannot take additional investment tax credit. If the total use percentages decrease, you must recapture the difference. By changing the use percentages, the ITC Taken amount will change. Always refer to the year the asset was placed in service, for the correct amount of ITC Taken. ITC Taken is limited by business use percentage. ITC limits apply to automobiles placed in service after 6/18/84 that are also adjusted for business use percentage. SECTION 179 VENDOR This field is twenty character alphanumeric that allows entry of the name of the vendor from whom you purchase the asset. This information is required to be maintained for any asset that you make an expense election under Code Section 179. LISTED PROPERTY Listed property is the following properties placed in service after June 18, 1984: Automobiles Other property used for transportation Property used for entertainment, recreation or amusement Computers and related peripheral equipment Also Cellular telephone place in service after 1989 24 This field requires a code made available on a look up table. Press <F2> to open the look up screen and select the correct code. <N> not applicable or not listed property <A> automobile <O> other listed property (including vehicles over 6,000 lbs.) LISTED PROPERTY LOOKUP TABLE Select an option for listed property. Select <N> if the property is not listed property. Select <A> if the property is an automobile. Select <O> for other listed property. Use the up and down arrow keys and press <Enter> to select the listed property option. CONVENTION This field will automatically calculate for assets placed in service after 1986, if the program is allowed to calculate for the year the asset is placed in service. Manually set the convention for any assets if the program does not calculate for the year the asset is placed in service. Press <F2> to open the look up screen and select the correct code for the convention. [HY] half year convention. [MQ] mid quarter convention. [MM] mid-month convention for real property. Under MACRS the HY and MQ conventions will lock when you advance past the second calculation year. When advancing into a new year, a message will appear asking if you desire to lock the second oldest year. Answer yes if: 1. you are finished with any changes to the assets 2. you have calculated for that year 3. you have made all the print outs for that year ACRS conventions are reflected in the table percentages. Pre 1981 assets are pro-rated by the number of months in use. CONVENTION LOOKUP TABLE For MACRS property the convention will automatically be set by the program, when the program is allowed to calculate for the year this property is placed into service. Set the convention manually, when the program does not calculate for the year this asset is placed into service. Use the up and down arrow keys and press <Enter> to select the convention. 25 BASIS The program will calculate this field, from your entries in the previous fields. This is basis available to be depreciated. AMT TYPE This field requires a code from the AMT Type look up table. Press <F2> to open the look up screen and select the correct code. Select the correct AMT Type code when adding an asset and the program will set default methods and lives in the AMT books. The life or period of personal property assets vary significantly, the default is 12 years. Edit and change all lives that are different according to IRS Publication 534. ALTERNATIVE MINIMUM TAX LOOKUP TABLE Select the required Alternative Minimum Tax Category. By completing this field the AMT Book will be completed with default methods and lives. The life or period of personal property assets vary significantly, the default is set to 12 years. Edit all lives that are different according to IRS Publication 534. Remember AMT is computed on accelerated depreciation only. ADJUSTED BASIS This field appears only when you select <O> in the ITC option field and the asset was placed into service in 1983 through 1985. Enter here the basis adjustment amount or the amount you wish to subtract from the depreciable basis. TABLES In this field enter <Y> for yes if you wish to use IRS MACRS percentage tables. Enter <N> for the program to use MACRS formulas for the calculations. This field applies to MACRS calculations only. If you use the percentages from the tables to figure the depreciation deduction for an item, you must continue to use the tables for the entire recovery life of the property. You cannot continue to use the tables if there is an adjustment to basis for reasons other than: Depreciation allowed or allowable Addition, reduction or improvement to the property Short tax year TIP: Automobiles placed in service in the current year will yield a higher deduction in the later years if you choose calculations over tables. See Passenger Automobiles in the Tax Rules and Considerations Chapter. 26 CURRENT DEDUCTION Select NONE as the method. This field will appear during calculate and allow manual entry of the desired current years depreciation deduction for each book that NONE is the method. The method NONE must be selected for each book you wish to make active. NONE will not default to other books during the add routine. 27 Chapter 7 PERFORMING CALCULATIONS CALCULATING CURRENT DEDUCTIONS From the <C>alculate pulldown menu select <F>ull Year. This option calculates depreciation for a full 12 month year. A dialog box will show the year entered for the first year of calculation or the last year actually calculated. Enter the next year to calculate. Calculate each year in order, do not omit any years. This will keep the accumulated depreciation totals correct. The program will allow you to calculate one year before and one year after the last year calculated. Press <Enter> or push <O> for OK to calculate. Press <N> to cancel calculations. If the method NONE is selected for an asset, a screen will appear asking for the manual entry of current depreciation deduction for each asset in each book that NONE is the method. The dialog box will show the Asset ID, description of the asset, the year of calculation, the book name in the lower left corner and the file name in the lower right corner. If the totals are not correct, the Function Key F9 will rebuild totals for you. Certain unforeseen circumstances such as a power failure or an unplanned exit can corrupt totals. When entering a large number of assets in a file use F9 occasionally to prevent errors. Use F5 to see a summary screen of asset totals. OPEN CALCULATION YEARS To allow for entering assets and changing data in one year at closing and beginning a new year with new assets, FApro will keep two years open at one time. This is convenient to work on one year's tax return, while running projections for the next year with new assets added to old assets. Once you advance to the third year the conventions are locked in the oldest of the three years, allowing only two years to remain open. After conventions are locked, they are not changed by adding or deleting assets in later years. Before locking conventions, a message will appear asking if you desire to lock a specific year. Answer yes if you are finished with changes to assets, you have calculated for the year and made print outs for the year. 28 Chapter 8 PRINTING REPORTS PRINTING REPORTS From the Main menu select <R>eports. This menu option allows you to print six different reports. Upon selecting a report to print you will access a print dialog box that will allow you to sort in different ways, send the information to the printer, the screen or a file, select the year of a report, or change to a different printer. Help on how to use the dialog box is available. Press <Tab> to move to the help bar. Press <Enter> at any time on this menu to accept the screen and advance to the report. The * shows indexed sort options. The indexed options are the fastest to print since the program has this sort order in memory. SUMMARY REPORT Select <S>ummary. This report prints a summary of most of the details of the data entry screen. You may sort in seven different orders as selected on the dialog box. The report is printed for one of the two active years. Print the report to the screen or to the printer. POSTING REPORT Select P<o>sting. IMPORTANT..CAUTION...depreciation deductions for the year of calculation will change in the last quarter when mid quarter convention is required. Make a year end adjusting entry to your financial statements to reconcile for any differences. This report divides the current annual deduction for each asset by twelve for monthly posting in your general ledger. The first year an asset is placed in service the annual deduction will be divided by the number of whole months used in the year. The 15th of the month rule is used for Other Methods (SL, DB, SYD). When an asset is disposed of the report will show zero for the deduction after a date is entered in Disposal Date. TAX REPORT Select <T>ax. This report is a Depreciation Summary Expense Report. Totals are by Class within the sort order you specify. 29 ANNUAL ACTIVITY REPORT Select <A>nnual Activity. This report is an Annual Activity Report with current year acquisitions and dispositions listed. ANNUAL AMT REPORT Select Annual A<M>T. This report is an Alternative Minimum Tax Depreciation Report. It will show depreciation adjustments by total and depreciation preference items individually. The totals are separated to be used on IRS Form 6251 when the AMT type codes are set properly and the lives are set to the proper class life. LIFETIME PROJECTION REPORT Select rojection. This report is a Lifetime Projection Report on one asset. Choose an asset by entering the asset's ID. The projection will compare the asset's tax method to straight line method. An Alternative Minimum Tax depreciation projection is shown if the AMT Type is set. FIXED ASSET CARD Select <F>ixed Asset Card. This report will print all the data on an asset for the active book. Choose All to see the entire file. Specify by asset ID to see one asset. Select All and send to the printer, to print your assets three to a sheet of paper. **** PRINT OPTIONS **** The following are user selectable options on the Print Options Dialog Box. This screen displays each time a report is selected. SORT ORDER Use the arrow keys to select a sort order preference or press the highlighted letter or click on it with a mouse. The assets will be arranged in ascending order. 30 ASSET ID This option appears for the Projection or Fixed Asset Card reports. Type the asset ID of the asset you desire to print a Projection or a Fixed Asset Card. ASSET ID LOOKUP TABLE This is a list of the ASSET IDs entered in this file. Press <F2> to view Asset ID's. Use the up and down arrow keys and then press <Enter> to make your selection. SEND REPORT TO Use the arrow keys, the mouse or press <Alt> + and the highlighted letter together to select the destination of your report. When you choose to send the report to a file, the File Name field will appear. Tab to file name and type in a name for the report. If no name is entered, the report will be automatically be labeled Report.TXT. When you send the report to the printer, you may change the port and default printer if desired. REPORT FILE NAME The file name is any legal DOS file name without an extension. A file name can only be eight characters long. Type in the name of the file or use the pick list to select a file. If you do not designate a report name, the program will automatically name it REPORT.TXT. REPORT YEAR Select with arrow keys, use the mouse or press the <Alt> + the highlighted 1 or 2 together, to select one of the two years available for reports. PORT Select by using the arrow keys, the mouse or press <Alt> + the highlighted letter together to choose one of the printer ports connected. The default is LPT 1 and the most commonly used port. PRINTER PICK LIST The default printer is highlighted. For this report, you may choose any other printer desired. 31 Chapter 9 INCOME TAX RULES AND CONSIDERATIONS This chapter is a brief summary of definitions and rules contained in IRS Publication 534-Depreciation. Consult this publication along with other more detailed tax information services when a question arises. Amortization Amortization is similar to depreciation. It allows cost or basis recovery for certain property proportionately (straight line) over a stated number of years or months. Some costs that can be amortized are costs of starting a business, reforestation and pollution control facilities, construction period interest and taxes, costs of acquiring a lease, trademarks and trade names. Alternative minimum tax If you use accelerated depreciation for real property, or personal property placed in service after 1986 or personal property that is leased to others placed in service before 1987 you may be liable for the alternative minimum tax. Accelerated depreciation is any method, including MACRS and ACRS, that allows recovery at a faster rate in the earlier years than the straight line method. Tangible Property Placed In Service After 1986 For AMT purposes, you must use the alternate modified accelerated cost recovery system (alternate MACRS) to depreciate tangible property placed in service after 1986 (or after July 1986 if you elected to use MACRS). Depreciation using alternate MACRS is generally figured using the ADSSL method over a specified recovery period. Refer to the current issue of IRS Publication 534 for the correct class life for your type of property to use for AMT book. However, to figure AMT depreciation on personal property (other than property depreciated for regular tax purposes under the SL method), you must use the 150% DB method over the alternate MACRS recovery period. Accelerated Real Property Placed In Service Before 1987 For AMT purposes, the depreciation or amortization you took for regular tax purposes on real property placed in service before 1987, minus the depreciation you would have been allowed under the SL method is a tax preference item. Accelerated Leased Personal Property Placed in Service Before 1987 For AMT purposes, the depreciation or amortization you took during the tax year on personal property leased to others, minus the depreciation that would have been allowed using the SL method, is a tax preference item. 32 Partial business use If you use property for both business and nonbusiness use, you can deduct depreciation only for the part used in your business. Nonbusiness use is not deductible. Partial investment use If you hold property for both production of income and nonbusiness use, you can deduct depreciation only for the part held for the production of income. Nonbusiness use is not deductible. Land Land can never be depreciated. This generally includes the cost of clearing, grading, planting, and landscaping because these expenses are all part of the land cost. However, you can depreciate certain land preparation costs if they are so closely associated with a depreciable asset that it is possible to determine a life for the preparation costs along with the life of the asset with which it is associated. Listed property There are special rules that limit the depreciation and section 179 deductions you can claim on passenger automobiles, other transportation vehicles, home computers, and certain other property placed in service after June 18, 1984. In addition, special rules apply if the property is not used more than 50% in a qualified business use during the year. Section 179 Deduction "Expensing" Expensing applies to property acquired by purchase for use in an active conduct of a trade or business and placed in service after 1981. You can elect to treat all or part of the cost of certain qualifying property as an expense rather than a capital expenditure. This means you can deduct all or part of the cost in one year rather than taking depreciation deductions spread over several years. You must decide for each item of qualifying property whether to deduct, subject to the yearly limit, or capitalize and depreciate its cost. If you make the election for a section 179 deduction, you can deduct a limited amount of the cost of qualifying property in the first year you place the property in service. Placed in service - property is considered placed in service in the tax year it is first ready and available for its specified use, whether in a trade or business, the production of income, a tax exempt activity, or a personal activity. Qualifying property - is depreciable property that is section 1245 property and that is bought for use in the active conduct of your trade or business. You cannot elect to deduct the cost of property held merely for the production of income. 33 Nor can you take depreciation to the extent that you elect to deduct the cost of the property. The decision whether property is section 1245 property is made in the first year the property is placed in service. Deduction limit - the total cost you can elect for a tax year cannot exceed $10,000 currently. The limit applies to each taxpayer. A married couple is considered one taxpayer. This limit can be reduced by certain other provisions. Investment limit - for each dollar of cost of section 1245 property placed in service in excess of $200,000 in a tax year, the $10,000 maximum is reduced by one dollar. Taxable income limit - the total cost that can be deducted in each year is limited to the taxable income from the active conduct of any trade or business during the tax year. This limit is not applied within the program, Fixed Asset Pro. Passenger automobiles - are limited to the first year depreciation allowed for autos. Partnerships and S Corporations - the limits apply to the separate entity and also to each taxpayer. Records - you must maintain records that permit specific identification of each piece of section 179 property and show how and from whom the property was acquired and when it was placed in service. Recapture - if you deduct the cost of property placed in service after 1986 and the property is not used more than 50% in a trade or business for any tax year before the end of the property's recovery period, you must include in income the benefit derived. Modified Accelerated Cost Recovery System (MACRS) MACRS applies to all tangible property placed in service after 1986. MACRS provides two systems for depreciating property. The main system is referred to as the General Depreciation System (GDS) and applies to most property. The second system is referred to as the Alternative Depreciation System (ADS). Unless ADS is specifically required by law or you elect it, GDS is generally used to figure you depreciation deduction. Real property acquired before 1987 that is changed from personal use to a business or income producing use after 1986 must be depreciated under MACRS Straight line election - instead of using the declining balance methods, you can elect to use the SL method over the GDS (regular MACRS) recovery period. The election to use the SL method for one item in a property class applies to all property placed in service in the tax year of the election. 150% Election over ADS - Instead of using the 200% or 150% declining balance methods over the GDS(regular MACRS) recovery period, you can elect to use the 150% declining balance method over the ADS (alternate MACRS) recovery period. The election to use the 150% declining balance method for one item in a property class applies to all property in that class placed in service in the tax year of the election. 34 Farm Restrictions Property placed in service after 1988 in a farming business is depreciated using the 150% declining balance method instead of the 200% declining balance method. If you elect not to apply the uniform capitalization rules to any product in a farming business you must use the ADS (alternate MACRS) MACRS 5 Methods Summary Table GDS Method Life 200DB - 200%DB over GDS recovery life 150DB - 150%DB over GDS recovery life GDSSL - SL over GDS recovery life (must elect) ADSDB - 150%DB over ADS recovery life (must elect) ADS (Alternate MACRS) ADSSL - SL over ADS recovery life You can elect to use ADS for property that qualifies for GDS. The GDS recovery periods are generally shorter than ADS recovery periods. ADS Required ADS (alternate MACRS) method of computing depreciation is required for: tangible property used during the tax year predominantly outside of the United States tax-exempt use property property financed by an obligation the interest of which is tax exempt listed property not used predominately in business farmers electing not to apply uniform capitalization The election of the ADS (alternate MACRS) method for one item in a property class applies to all property in that class placed in service in the tax year of the election. However, the election applies on a property by property basis for nonresidential real and residential rental property. Once you elect to use the ADS (alternate MACRS) method for an item of property, you cannot switch to any other method for that property. Mandatory use of the SL method for listed property does not have a binding effect on other depreciable property in that class. Tables for MACRS If you use the percentages from the tables to figure the depreciation deduction for an item of property, you must continue to use the tables to figure the deductions for this property the entire recovery period of the property. You cannot continue to use the tables if there are any adjustments to the basis of the property for reasons other than: 35 (1) Depreciation allowed or allowable, or (2) An addition or improvement to that property depreciated as a separate item of property Passenger Automobiles For passenger automobiles placed in service after June 18, 1984, the total of the section 179 deduction and depreciation deduction is limited. The limit is indexed each year for inflation and released by the IRS late fall of the year. TIP..Apply the section 179 deduction to non-auto assets when the depreciation deduction for autos reach the maximum allowed without the section 179 deduction. If you choose to use the standard mileage rate in the first year of business use, you are considered to have made an election not to use depreciation, since the standard mileage rate allows for depreciation. You also cannot claim section 179 deduction. If you change to the actual cost method in a later year, but before your car is considered fully depreciated, you have to estimate the useful life of the car and use SL depreciation. TIP..Depreciation deductions will be increased during the unrecovered basis years for an auto if calculations are used versus using the tables. If you have not yet used the tables for this automobile, then consider using calculations. Listed Property with Partial Business Use If listed property is placed in service after June 18, 1984 is not used predominantly (more than 50%) in a qualified business use during the year, the section 179 deduction on the property is not allowed and the property must be depreciated using the SL method. The mandatory use of the SL method for listed property is not an election of the SL method for other property in the same class as the listed property. Qualified Business Use A qualified business use is any use in your trade or business. This does not include use of property held merely for the production of income (investment use). Qualified business use does not include certain uses by a 5% owner or related persons. Investment Use The use of listed property in the production of income is not a qualified business use. Whether the use of the SL method is required for listed property is determined by reference to the qualified business use rather than be reference to business/investment use. 36 Predominate Use Test Listed property is predominantly used in a qualified business use for any tax year if the business use is more than 50% of the total use of the property. The percentage of investment use of listed property is not part of the percentage of qualified business use for purposes of the more than 50% test. However, the combined total of business and investment use is taken into account to figure the depreciation deduction. Accelerated Cost Recovery System (ACRS) ACRS is used for most tangible depreciable assets placed in service after 1980 and before 1987. You must continue to figure your depreciation under ACRS for assets placed in service after 1980 and before 1987. You must use MACRS for assets placed in service after 1986. ACRS allows you to recover the unadjusted basis of recovery property over a recovery period. Your property's recovery period is determined by its recovery class. The recovery class of your property is 3-year, 5-year, 10-year, 15-year, 18-year, or 19- year. A recovery percentage for each year of the recovery period is prescribed for figuring your ACRS deduction. You cannot use ACRS for property you placed in service before 1981 or after 1986. Nor can ACRS be used for intangible depreciable property. Alternate ACRS Method At your election you could have used a method for recovering the unadjusted basis of your recovery property that used a recovery percentage based on a modified straight line method. This alternative ACRS method generally used percentages other than those from the tables. If you elected the alternate ACRS method, you used the following schedule for other than 18 and 19 year real property and low-income housing to determine the recovery period. In the case of: You could elect recovery period: 3-year property 3, 5 or 12 years 5-year property 5, 12 or 25 years 10-year property 10, 12, or 35 years 15-year property 15, 35 or 45 years In the case of 3, 5 and 10-year property if you elected to use an alternative recovery period, you have to use the same period for all property in that class that you placed in service in that tax year and it applies throughout the recovery period you selected. A half year convention also will apply to Alternate ACRS Method. Depreciating Property Not Under MACRS If your property can be depreciated under MACRS, you must use MACRS. If your property is already being depreciated under ACRS or MACRS, you must continue to use the methods and rules for 37 depreciation applicable when you placed the property in service. Certain property because of special rules that exclude it from MACRS cannot use MACRS. If property is excluded, use one of two of the reasonable methods used before 1981. Reasonable Methods Two reasonable methods of depreciation used before 1981 are the straight line and the declining balance methods. If ACRS or MACRS does not apply, you can use one of these methods. These methods are not calculated the same as straight line or declining balance methods under MACRS. Changing Methods In some cases, you may change your method of depreciation for property depreciated under a reasonable method. You can change from the declining balance method to the SL method at any time during the useful life of your property without IRS consent, unless you have a written agreement with the IRS not to change. Depreciation in the Year of Purchase of Sale (Pre 1981 Rules) In determining depreciation in the year of acquisition, it was proper to treat an asset as having been held a full month if it was acquired on or before the 15th of the month, If it was acquired after the 15th, the month was not counted. Consistently, it was proper to count the disposition month only if the asset was disposed of after the 15th. 38 APPENDIX A - Cursor Movements The following is a description of special key assignments in the selected mode. VIEWING ASSETS IN TABLE FORMAT <Home> - takes you to the far left of the screen which is asset ID <Arrows> - use the up and down arrow keys to highlight an asset <End> - takes you to the far right of the screen which is basis <Enter> - highlight the record you desire and press enter this will quickly access the record Scroll - use the mouse with the side scroll bar to move quickly <Esc> - escape will leave the view record option VIEWING REPORTS ON SCREEN <Arrow> - move right, left and up and down <Page Up> <Page Down> - move a screen at a time <Home> - move to the far left of the report <End> - move to the far right of the report <Esc> - end viewing on the screen. To send selected portions of the report to the printer: Move the first line to be printed to the top of the screen. Press <F7> to mark. Move the last line to be printed to the top of the screen. Press <F8> to mark. Check to see if printer is online. Press <Ctrl>+<K> to print. MOVING ABOUT IN A DIALOG BOX To move to fields: Use the <tab key> to move forward from field to field <Shift+tab> to move backward from field to field Press the <Alt> key and the highlighted letter Use a mouse to click on the titles on the screen to move to that area. FIELD EDITING Cursor Movement <Arrow left or right> - one character left or right <Ctrl+left> or <Ctrl+right> - one word left or right <Home> - beginning of the field <Up or down arrow> - up or down one field <Tab> or <Shift+Tab> - forward or backward one field Insertion and Deletion 39 <Delete> - deletes one character at cursor <Backspace> - deletes character at left of cursor <Ctrl+Y> - clears entire field <Ctrl+End> - deletes from cursor to the end of field <Ctrl+Home> - deletes from beginning of field to cursor <Insert key> - turns insert mode on and off Other <Enter> - accept contents of field <Ctrl+R> - restore original contents of field <Esc> - abandon changes return to menu Function keys <F1> - Help <F2> - Lookup <F3> - Exit program <F4> - Copies field from previous record <F5> - Status of asset <F6> - not used <F7> - not used <F8> - not used <F9> - Rebuild totals <F10> - Save and Exit USING THE MOUSE Main Menu - Click once to select an option Menu Item - Click twice, once moves the highlight and the second click selects the item. Dialog Boxes - Click on titles on the screen to move to that item. Click on the file name to accept that file. Close - Click on the button in the upper left hand corner of the box. Escape - Right mouse button <Enter> - Left mouse button Help - Click both right and left button at same time. Resize screens - Place the cursor on the bottom right hand corner of the frame. Click the left mouse button and hold down, if a double arrow appears you can resize the box. Click, hold and move the left mouse button to resize. The help screen will remain this size until changed. Move screens - Click on the top frame of the box, if a double arrow appears you can move the box. Click and hold the left mouse button to move. The help screen will remain in the new position until changed. Scroll bar - A scroll bar appears on the right side or the bottom of the screen to move quickly forward or backward or right or left. Click and hold the left button on the elevator and drag to the area desired. Or click on an arrow to move one line or space at a time. Or click on any desired location on the scroll bar. 40 APPENDIX B - Summary of Depreciation Effective Dates Depreciation rules generally in effect: Pre 1981 rules and CLADR Before 1981 ACRS After 1980 and before 1987 First Year Additional Depreciation Repealed after 1980 Section 179 Expensing After 1992 limit of $17,500.00 After 1986 limit of $10,000.00 Allowed after 1981 limit of $5,000.00 MACRS After 1986 After 1988 Farmers cannot use 200% Declining Balance After 4/88 Tax years beginning after this date disregard property placed in service and disposed of in the same year for the 40% mid-quarter test Listed Property Rules in effect after 6/18/84 Cellular phone listed property after 1989 Investment Tax Credit - regular Before 1981 useful life of 3-5 years 1/3 cost @ 10% useful life of 5-7 years 2/3 cost @ 10% useful life of 7 + years total cost @ 10% After 1980 useful life of 3 years 60% cost @ 10% useful life of 4 + years total cost @ 10% After 1982 (elect to reduce basis by 50% of credit) useful life of 3 years 60% cost @ 10% useful life of 4 + years total cost @ 10% or (elect to reduce credit with no basis reduction) useful life of 3 years 40% cost @ 10% useful life of 4 + years 80% cost @ 10% After 6/18/84 autos were capped and recapture rules applied After 1985 generally repealed except for transition property autos were barred After 1990 ITC restructured for: rehabilitation credit energy credit (basis reduced by 1/2 of cost) reforestation credit (basis reduced by 1/2 of credit) 41 INDEX A <A>bout, 11 Accelerated depreciation, 32 Accumulated depreciation, 16, 21 ACRS, 37, 41 ADD RECORD, 17 Adding, 28 Additional Depreciation, 22 ADJUSTED BASIS, 26 ADS, 34, 35 Alternate ACRS, 37 Alternate MACRS, 34, 35 Alternative minimum tax, 32 ALTERNATIVE MINIMUM TAX LOOKUP TABLE, 26 Amortization, 32 AMT BOOK, 12 AMT TYPE, 26 Amusement, 24 Angle brackets, 3 ANNUAL ACTIVITY REPORT, 30 ANNUAL AMT REPORT, 30 ASSET ID, 19, 31 ASSET ID LOOKUP TABLE, 31 AUTO LIMITS, 16, 17 Automobiles, 24, 33, 36 B BASIS, 26 BOOKS, 12 Bottom menu, 5, 17 BOTTOM RECORD, 18 BUSINESS USE, 22, 33 C C<h>ange Dir, 11 Calculate, 6, 28 CALCULATED, 15 Cellular telephone, 24 Changing Methods, 38 Chkdsk, 11 CLASS, 20 Class Lives, 21 CLASS LOOKUP TABLE, 21 <C>lient, 15 <C>lose, 10 CLOSING A FILE, 10 Company information, 14 Computers, 24, 33 CONDITION, 20 Context Sensitive Help, 9 CONVENTION, 25, 28 CONVENTION LOOKUP TABLE, 25 Corporate Earnings, 12, 16, 23 COST, 22 CURRENT DEDUCTION, 27 Cursor Movements, 39 D Data subdirectory, 11 Default active book, 12 DEFAULTS, 16 <D>elete, 10 DELETE RECORD, 17 Deleting, 28 DELETING A FILE, 10 DESCRIPTION, 19 Destination, 31 Dialog box, 10, 29, 39 Disk defragmenter, 11 Disk space, 1 DISPOSAL DATE, 22 Dos <S>hell, 11 DOS COMMANDS, 11 E Earnings and Profit, 12 EDIT RECORD, 17 EDITING, 39 Effective Dates, 41 ENTERING ASSET INFORMATION, 17 Entertainment, 24 Expensing, 23, 33, 41 F Farm Restrictions, 35 FILE MAINTENANCE, 10 File Name, 10, 31 FINANCIAL BOOK, 12 FIND RECORD, 18 FIRST CALC YEAR, 16 FIRST YEAR ADDITIONAL, 22, 41 FISCAL MONTH, 15 FISCAL YEAR, 15 FIXED ASSET CARD, 30 Formulas, 26 Function keys, 40 G GDS, 34, 35 GROUP, 19 GROUP LOOKUP TABLE, 19 H Hard disk, 1 Help Keys, 9 Help screens, 5 I Index, 9, 10 INSTALLATION, 1 Investment Tax Credit, 41 Investment use, 33, 36 ITC LOOKUP TABLE, 24 ITC OPTION, 23 ITC TAKEN, 24 L LAND, 22, 33 Land preparation costs, 33 LIFE, 21 LISTED PROPERTY, 24, 33, 36, 41 LISTED PROPERTY LOOKUP TABLE, 25 LOCATION, 19 LOCATION LOOKUP TABLE, 19 LPT1, 14 M MACRS, 34, 41 Manual entry, 27 METHOD, 20 METHOD LOOKUP TABLE, 20 Mid quarter convention, 29 Monitor, 14 MOUSE, 40 N New, 20 NEXT RECORD, 18 NONE, 27 O OPEN CALCULATION YEARS, 28 <O>pen/New, 10 OPENING A FILE, 10 OTHER BOOK, 13 P Partial Business Use, 36 PORT, 14, 31 POSTING REPORT, 29 Pre 1981, 20, 23, 25, 38, 41 Predominantly, 36 Predominate Use Test, 37 PREVIOUS RECORD, 18 PRINT OPTIONS, 30 Print reports, 6 Printer, 14, 31 Printer pick list, 14 PRINTING REPORTS, 29 PRIOR DEDUCTION, 21 Production of income, 22, 33, 36 PROJECTION REPORT, 30 Q Qualified Business Use, 36 <Q>uit, 11 QUIT DATAENTRY, 19 R Reasonable Methods, 38 Recovery Periods, 21 Recreation, 24 Registration, 2 <R>eindex, 10 REPORT YEAR, 31 REPORT.TXT, 31 S SALES PRICE, 22 SALVAGE VALUE, 23 SEC 179, 16 SECTION 179, 23, 33, 41 SECTION 179 VENDOR, 24 SERVICE DATE, 20 <S>etup, 14 SORT ORDER, 18, 30 Square brackets, 3 Standard mileage rate, 36 STATE BOOK, 13 Straight line election, 34 SUBDIRECTORY, 11 SUMMARY REPORT, 29 Support, 2 SWITCH YEAR, 21 T <Tab> key, 9 TABLES, 26 Tables for MACRS, 35 TAX BOOK, 12 TAX REPORT, 29 Tax year, 15 TOP RECORD, 18 Transition, 41 Transition property, 24 Transportation, 24 Transportation vehicles, 33 TREE, 11 Tutorial, 3 U Uniform capitalization, 35 Used, 20 V VIEWING ASSETS, 18, 39 VIEWING REPORTS, 39