Why would a taxpayer ever elect to use the Alternative Depreciation System (ADS) rather than the MACRS?
What will be an ideal response?
The ADS results in lower depreciation charges than MACRS. Therefore, if the taxpayer anticipates losses over the next few years, or if the taxpayer has a net operating loss (NOL) carryover, lower deductions would be preferred. This saves higher depreciation deductions for future years when they may have greater benefit.
Also, MACRS deductions can trigger the alternative minimum tax (AMT) liability. Using ADS rather than MACRS will help alleviate the AMT potential.
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