Video: Types of Property Per the IRS

In this lesson, Nick Palazzolo, CPA, breaks down the classification of assets as prescribed by the IRS, focusing particularly on the five and seven year classes, which are the most relevant for the exam. He clarifies that while not all asset classes need to be memorized, understanding the depreciation schedules for these key categories is crucial. Nick provides a practical example with Tiger Tech Inc. to demonstrate how to determine the depreciable base for assets like laptops and delivery trucks, making the complex topic of asset classification and depreciation more approachable. He also injects a bit of humor to keep the atmosphere light and engaging, ensuring that the essential principles of makers and the use of IRS-provided tables are both understood and memorable.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Now we're getting into types of property per the IRS. So the IRS is outlining different classes of assets that have different useful lives. Now, you may disagree with this, but hey, this is just what the IRS says. And this is the rules that you have to follow. This is for using makers. So the IRS provides everything, the tables, the classes, the amount of years that you should appreciate it over. The main ones you want to see here are the five and seven year class. These are going to be really the more heavily tested. You're not going to really have to worry about 10 year class boat and water transportation or mostly any of these other ones. I would say be familiar with the 15 year class dealing with building and land improvements. We'll see a few others as well. But for now, main focus is the five and seven year class for sure. Be familiar a little bit with your three racehorses. Very important in the exam. That's a total joke. Don't don't worry about that at all. I don't know. Maybe take care of your racehorse. Maybe less a little bit longer. I'm just trying to have some fun here. All right. These classes help to determine the depreciation schedule for various types of assets, as we'll see. I've got the depreciation tables later on. We've got them in our resources. Just get familiar with them. You obviously do not have to memorize them. They are aggressively impactful. There's a lot going on with those. You'll have those as exhibits if you need them on the exam. But knowing how to use them, that is a whole nother story. All right, let's see an example for a depreciable base. This is pretty bare bones.

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Property Tax: Acquisition and Disposition of Assets

Module: 5 Concepts, 55 Videos

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Introduction to Basis and Holding Period of Assets

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Examples of Calculating Tax Basis