You Make the Call - Oct. 12, 2023

Question: Haroldo, a U.S. citizen, runs a Schedule E residential rental business located entirely in Paraguay. While reviewing his past tax returns, you notice that the business assets have been depreciated using a variety of methods under modified accelerated cost recovery system, general depreciation system (MACRS GDS). Is this correct?

Answer: No. For any tangible business property used predominantly outside the United States during the tax year, the use of the alternative depreciation system (ADS) is required by §168(g)(1)(A). Under ADS, the recovery period for the residential rental property is 30 years.