Depreciation short year.

[Ranger]

I know a short year is used if a business starts mid-year, but how about if a partnership dissolves on February 28. I cannot find a reference that indicates otherwise but it seems a short year would be in order.

Thank you for any guidance.

[jainen]

>>I cannot find a reference<<

See Pub 541. "If a partnership is terminated before the end of what would otherwise be its tax year, Form 1065 must be filed for the short period, which is the period from the beginning of the tax year through the date of termination. The return is due the 15th day of the fourth month following the date of termination."

[Ranger]

Thank you for your reply Jainen and sorry my question wasn’t clear. My uncertainty was how to treat depreciation for the short year. It only makes sense that the short year rule applies for depreciation.

[jainen]

>>how to treat depreciation for the short year<<

You will have to do calculations by hand if your software does not include the feature. For MACRS real estate with mid-month convention, depreciation is exactly the same. For half-year or mid-quarter convention, you must count days or months to get the mid-point.

Pub 946 tells you how. Unfortunately it's not as well-written as some other guides. "For a short tax year not beginning on the first day of a month and not ending on the last day of a month, the tax year consists of the number of days in the tax year. You determine the midpoint of the tax year by dividing the number of days in the tax year by 2. For the half-year convention, you treat property as placed in service or disposed of on either the first day or the midpoint of a month. If the result of dividing the number of days in the tax year by 2 is not the first day or the midpoint of a month, you treat the property as placed in service or disposed of on the nearest preceding first day or midpoint of a month."