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Efile Extension

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Efile Extension

Efile extension 7. Efile extension   Depreciation, Depletion, and Amortization Table of Contents What's New for 2013 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Overview of DepreciationWhat Property Can Be Depreciated? What Property Cannot Be Depreciated? When Does Depreciation Begin and End? Can You Use MACRS To Depreciate Your Property? What Is the Basis of Your Depreciable Property? How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions? Section 179 Expense DeductionWhat Property Qualifies? What Property Does Not Qualify? How Much Can You Deduct? How Do You Elect the Deduction? When Must You Recapture the Deduction? Claiming the Special Depreciation AllowanceWhat is Qualified Property? How Can You Elect Not To Claim the Allowance? When Must You Recapture an Allowance Figuring Depreciation Under MACRSWhich Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS? What Is the Placed-in-Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies? Which Convention Applies? Which Depreciation Method Applies? How Is the Depreciation Deduction Figured? How Do You Use General Asset Accounts? When Do You Recapture MACRS Depreciation? Additional Rules for Listed PropertyWhat Is Listed Property? What Is the Business-Use Requirement? Do the Passenger Automobile Limits Apply? Depletion Who Can Claim Depletion? Figuring Depletion AmortizationBusiness Start-Up Costs Reforestation Costs Section 197 Intangibles What's New for 2013 Increased section 179 expense deduction dollar limits. Efile extension  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. Efile extension This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Efile extension See Dollar Limits under Section 179 Expense Deduction , later. Efile extension Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. Efile extension . Efile extension  You may be able to take a 50% special depreciation allowance for certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Efile extension See Claiming the Special Depreciation Allowance , later. Efile extension Expiration of the 3- year recovery period for certain race horses. Efile extension  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. Efile extension Introduction If you buy or make improvements to farm property such as machinery, equipment, livestock, or a structure with a useful life of more than a year, you generally cannot deduct its entire cost in one year. Efile extension Instead, you must spread the cost over the time you use the property and deduct part of it each year. Efile extension For most types of property, this is called depreciation. Efile extension This chapter gives information on depreciation methods that generally apply to property placed in service after 1986. Efile extension For information on depreciating pre-1987 property, see Publication 534, Depreciating Property Placed in Service Before 1987. Efile extension Topics - This chapter discusses: Overview of depreciation Section 179 expense deduction Special depreciation allowance Modified Accelerated Cost Recovery System (MACRS) Listed property Basic information on cost depletion (including timber depletion) and percentage depletion Amortization of the costs of going into business, reforestation costs, the costs of pollution control facilities, and the costs of section 197 intangibles Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) T (Timber), Forest Activities Schedule 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Efile extension It is important to keep good records for property you depreciate. Efile extension Do not file these records with your return. Efile extension Instead, you should keep them as part of the permanent records of the depreciated property. Efile extension They will help you verify the accuracy of the depreciation of assets placed in service in the current and previous tax years. Efile extension For general information on recordkeeping, see Publication 583, Starting a Business and Keeping Records. Efile extension For specific information on keeping records for section 179 property and listed property, see Publication 946, How To Depreciate Property. Efile extension Overview of Depreciation This overview discusses basic information on the following. Efile extension What property can be depreciated. Efile extension What property cannot be depreciated. Efile extension When depreciation begins and ends. Efile extension Whether MACRS can be used to figure depreciation. Efile extension What is the basis of your depreciable property. Efile extension How to treat repairs and improvements. Efile extension When you must file Form 4562. Efile extension How you can correct depreciation claimed incorrectly. Efile extension What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, equipment, vehicles, certain livestock, and furniture. Efile extension You can also depreciate certain intangible property, such as copyrights, patents, and computer software. Efile extension To be depreciable, the property must meet all the following requirements. Efile extension It must be property you own. Efile extension It must be used in your business or income-producing activity. Efile extension It must have a determinable useful life. Efile extension It must have a useful life that extends substantially beyond the year you place it in service. Efile extension Property You Own To claim depreciation, you usually must be the owner of the property. Efile extension You are considered as owning property even if it is subject to a debt. Efile extension Leased property. Efile extension   You can depreciate leased property only if you retain the incidents of ownership in the property. Efile extension This means you bear the burden of exhaustion of the capital investment in the property. Efile extension Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. Efile extension You can, however, depreciate any capital improvements you make to the leased property. Efile extension See Additions and Improvements under Which Recovery Period Applies in chapter 4 of Publication 946. Efile extension   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. Efile extension However, you cannot depreciate the cost of the property if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased. Efile extension Life tenant. Efile extension   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. Efile extension See Certain term interests in property , later, for an exception. Efile extension Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. Efile extension If you use property to produce income (investment use), the income must be taxable. Efile extension You cannot depreciate property that you use solely for personal activities. Efile extension However, if you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the percentage of business or investment use. Efile extension Example 1. Efile extension   If you use your car for farm business, you can deduct depreciation based on its percentage of use in farming. Efile extension If you also use it for investment purposes, you can depreciate it based on its percentage of investment use. Efile extension Example 2. Efile extension   If you use part of your home for business, you may be able to deduct depreciation on that part based on its business use. Efile extension For more information, see Business Use of Your Home in chapter 4. Efile extension Inventory. Efile extension   You can never depreciate inventory because it is not held for use in your business. Efile extension Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. Efile extension Livestock. Efile extension   Livestock purchased for draft, breeding, or dairy purposes can be depreciated only if they are not kept in an inventory account. Efile extension Livestock you raise usually has no depreciable basis because the costs of raising them are deducted and not added to their basis. Efile extension However, see Immature livestock under When Does Depreciation Begin and End , later, for a special rule. Efile extension Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. Efile extension This means it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Efile extension Irrigation systems and water wells. Efile extension   Irrigation systems and wells used in a trade or business can be depreciated if their useful life can be determined. Efile extension You can depreciate irrigation systems and wells composed of masonry, concrete, tile, metal, or wood. Efile extension In addition, you can depreciate costs for moving dirt to construct irrigation systems and water wells composed of these materials. Efile extension However, land preparation costs for center pivot irrigation systems are not depreciable. Efile extension Dams, ponds, and terraces. Efile extension   In general, you cannot depreciate earthen dams, ponds, and terraces unless the structures have a determinable useful life. Efile extension What Property Cannot Be Depreciated? Certain property cannot be depreciated, even if the requirements explained earlier are met. Efile extension This includes the following. Efile extension Land. Efile extension You can never depreciate the cost of land because land does not wear out, become obsolete, or get used up. Efile extension The cost of land generally includes the cost of clearing, grading, planting, and landscaping. Efile extension Although you cannot depreciate land, you can depreciate certain costs incurred in preparing land for business use. Efile extension See chapter 1 of Publication 946. Efile extension Property placed in service and disposed of in the same year. Efile extension Determining when property is placed in service is explained later. Efile extension Equipment used to build capital improvements. Efile extension You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Efile extension Intangible property such as section 197 intangibles. Efile extension This property does not have a determinable useful life and generally cannot be depreciated. Efile extension However, see Amortization , later. Efile extension Special rules apply to computer software (discussed below). Efile extension Certain term interests (discussed below). Efile extension Computer software. Efile extension   Computer software is generally not a section 197 intangible even if acquired in connection with the acquisition of a business, if it meets all of the following tests. Efile extension It is readily available for purchase by the general public. Efile extension It is subject to a nonexclusive license. Efile extension It has not been substantially modified. Efile extension   If the software meets the tests above, it can be depreciated and may qualify for the section 179 expense deduction and the special depreciation allowance (if applicable), discussed later. Efile extension Certain term interests in property. Efile extension   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. Efile extension This rule does not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. Efile extension For more information, see chapter 1 of Publication 946. Efile extension When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. Efile extension You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. Efile extension Placed in Service Property is placed in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Efile extension Even if you are not using the property, it is in service when it is ready and available for its specific use. Efile extension Example. Efile extension You bought a planter for use in your farm business. Efile extension The planter was delivered in December 2012 after harvest was over. Efile extension You begin to depreciate the planter for 2012 because it was ready and available for its specific use in 2012, even though it will not be used until the spring of 2013. Efile extension If your planter comes unassembled in December 2012 and is put together in February 2013, it is not placed in service until 2013. Efile extension You begin to depreciate it in 2013. Efile extension If your planter was delivered and assembled in February 2013 but not used until April 2013, it is placed in service in February 2013, because this is when the planter was ready for its specified use. Efile extension You begin to depreciate it in 2013. Efile extension Fruit or nut trees and vines. Efile extension   If you acquire an orchard, grove, or vineyard before the trees or vines have reached the income-producing stage, and they have a preproductive period of more than 2 years, you must capitalize the preproductive-period costs under the uniform capitalization rules (unless you elect not to use these rules). Efile extension See chapter 6 for information about the uniform capitalization rules. Efile extension Your depreciation begins when the trees and vines reach the income-producing stage (that is, when they bear fruit, nuts, or grapes in quantities sufficient to commercially warrant harvesting). Efile extension Immature livestock. Efile extension   Depreciation for livestock begins when the livestock reaches the age of maturity. Efile extension If you bought immature livestock for drafting purposes, depreciation begins when they can be worked. Efile extension If you bought immature livestock for dairy purposes, depreciation begins when they can be milked. Efile extension If you bought immature livestock for breeding purposes, depreciation begins when they can be bred. Efile extension Your basis for depreciation is your initial cost for the immature livestock. Efile extension Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle. Efile extension For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. Efile extension Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. Efile extension This happens when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. Efile extension Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Efile extension You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Efile extension You sell or exchange the property. Efile extension You convert the property to personal use. Efile extension You abandon the property. Efile extension You transfer the property to a supplies or scrap account. Efile extension The property is destroyed. Efile extension For information on abandonment of property, see chapter 8. Efile extension For information on destroyed property, see chapter 11 and Publication 547, Casualties, Disasters, and Thefts. Efile extension Can You Use MACRS To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most business and investment property placed in service after 1986. Efile extension MACRS is explained later under Figuring Depreciation Under MACRS . Efile extension You cannot use MACRS to depreciate the following property. Efile extension Property you placed in service before 1987. Efile extension Use the methods discussed in Publication 534. Efile extension Certain property owned or used in 1986. Efile extension See chapter 1 of Publication 946. Efile extension Intangible property. Efile extension Films, video tapes, and recordings. Efile extension Certain corporate or partnership property acquired in a nontaxable transfer. Efile extension Property you elected to exclude from MACRS. Efile extension For more information, see chapter 1 of Publication 946. Efile extension What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. Efile extension To determine basis, you need to know the cost or other basis of your property. Efile extension Cost or other basis. Efile extension   The basis of property you buy is usually its cost plus amounts you paid for items such as sales tax, freight charges, and installation and testing fees. Efile extension The cost includes the amount you pay in cash, debt obligations, other property, or services. Efile extension   There are times when you cannot use cost as basis. Efile extension In these situations, the fair market value (FMV) or the adjusted basis of the property may be used. Efile extension Adjusted basis. Efile extension   To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. Efile extension Basis adjustment for depreciation allowed or allowable. Efile extension   After you place your property in service, you must reduce the basis of the property by the depreciation allowed or allowable, whichever is greater. Efile extension Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Efile extension Depreciation allowable is depreciation you are entitled to deduct. Efile extension   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. Efile extension   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). Efile extension   For more information, see chapter 6. Efile extension How Do You Treat Repairs and Improvements? You generally deduct the cost of repairing business property in the same way as any other business expense. Efile extension However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. Efile extension Treat improvements as separate depreciable property. Efile extension See chapter 1 of Publication 946 for more information. Efile extension Example. Efile extension You repair a small section on a corner of the roof of a barn that you rent to others. Efile extension You deduct the cost of the repair as a business expense. Efile extension However, if you replace the entire roof, the new roof is considered to be an improvement because it increases the value and lengthens the life for the property. Efile extension You depreciate the cost of the new roof. Efile extension Improvements to rented property. Efile extension   You can depreciate permanent improvements you make to business property you rent from someone else. Efile extension Do You Have To File Form 4562? Use Form 4562 to claim your deduction for depreciation and amortization. Efile extension You must complete and attach Form 4562 to your tax return if you are claiming any of the following. Efile extension A section 179 expense deduction for the current year or a section 179 carryover from a prior year. Efile extension Depreciation for property placed in service during the current year. Efile extension Depreciation on any vehicle or other listed property, regardless of when it was placed in service. Efile extension Amortization of costs that began in the current year. Efile extension For more information, see the Instructions for Form 4562. Efile extension How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. Efile extension You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Efile extension You claimed the incorrect amount because of a mathematical error made in any year. Efile extension You claimed the incorrect amount because of a posting error made in any year, for example, omitting an asset from the depreciation schedule. Efile extension You have not adopted a method of accounting for the property placed in service by you in tax years ending after December 29, 2003. Efile extension You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Efile extension Note. Efile extension You have adopted a method of accounting if you used the same incorrect method of depreciation for two or more consecutively filed returns. Efile extension If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. Efile extension See the Instructions for Form 3115. Efile extension Section 179 Expense Deduction You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Efile extension This is the section 179 expense deduction. Efile extension You can elect the section 179 expense deduction instead of recovering the cost by taking depreciation deductions. Efile extension This part of the chapter explains the rules for the section 179 expense deduction. Efile extension It explains what property qualifies for the deduction, what property does not qualify for the deduction, the limits that may apply, how to elect the deduction, and when you may have to recapture the deduction. Efile extension For more information, see chapter 2 of Publication 946. Efile extension What Property Qualifies? To qualify for the section 179 expense deduction, your property must meet all the following requirements. Efile extension It must be eligible property. Efile extension It must be acquired for business use. Efile extension It must have been acquired by purchase. Efile extension Eligible Property To qualify for the section 179 expense deduction, your property must be one of the following types of depreciable property. Efile extension Tangible personal property. Efile extension Qualified real property. Efile extension (Special rules apply to qualified real property that you elect to treat as qualified section 179 real property. Efile extension For more information, see chapter 2 of Publication 946 and section 179(f) of the Internal Revenue Code. Efile extension ) Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services; A research facility used in connection with any of the activities in (a) above; or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. Efile extension Single purpose agricultural (livestock) or horticultural structures. Efile extension Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. Efile extension Off-the-shelf computer software that is readily available for purchase by the general public, is subject to a nonexclusive lease, and has not been substantially modified. Efile extension Tangible personal property. Efile extension   Tangible personal property is any tangible property that is not real property. Efile extension It includes the following property. Efile extension Machinery and equipment. Efile extension Property contained in or attached to a building (other than structural components), such as milk tanks, automatic feeders, barn cleaners, and office equipment. Efile extension Gasoline storage tanks and pumps at retail service stations. Efile extension Livestock, including horses, cattle, hogs, sheep, goats, and mink and other fur-bearing animals. Efile extension Facility used for the bulk storage of fungible commodities. Efile extension   A facility used for the bulk storage of fungible commodities is qualifying property for purposes of the section 179 expense deduction if it is used in connection with any of the activities listed earlier in item (3)(a). Efile extension Bulk storage means the storage of a commodity in a large mass before it is used. Efile extension Grain bins. Efile extension   A grain bin is an example of a storage facility that is qualifying section 179 property. Efile extension It is a facility used in connection with the production of grain or livestock for the bulk storage of fungible commodities. Efile extension Single purpose agricultural or horticultural structures. Efile extension   A single purpose agricultural (livestock) or horticultural structure is qualifying property for purposes of the section 179 expense deduction. Efile extension Agricultural structure. Efile extension   A single purpose agricultural (livestock) structure is any building or enclosure specifically designed, constructed, and used for both the following reasons. Efile extension To house, raise, and feed a particular type of livestock and its produce. Efile extension To house the equipment, including any replacements, needed to house, raise, or feed the livestock. Efile extension For this purpose, livestock includes poultry. Efile extension   Single purpose structures are qualifying property if used, for example, to breed chickens or hogs, produce milk from dairy cattle, or produce feeder cattle or pigs, broiler chickens, or eggs. Efile extension The facility must include, as an integral part of the structure or enclosure, equipment necessary to house, raise, and feed the livestock. Efile extension Horticultural structure. Efile extension   A single purpose horticultural structure is either of the following. Efile extension A greenhouse specifically designed, constructed, and used for the commercial production of plants. Efile extension A structure specifically designed, constructed, and used for the commercial production of mushrooms. Efile extension Use of structure. Efile extension   A structure must be used only for the purpose that qualified it. Efile extension For example, a hog barn will not be qualifying property if you use it to house poultry. Efile extension Similarly, using part of your greenhouse to sell plants will make the greenhouse nonqualifying property. Efile extension   If a structure includes work space, the work space can be used only for the following activities. Efile extension Stocking, caring for, or collecting livestock or plants or their produce. Efile extension Maintaining the enclosure or structure. Efile extension Maintaining or replacing the equipment or stock enclosed or housed in the structure. Efile extension Property Acquired by Purchase To qualify for the section 179 expense deduction, your property must have been acquired by purchase. Efile extension For example, property acquired by gift or inheritance does not qualify. Efile extension Property acquired from a related person (that is, your spouse, ancestors, or lineal descendants) is not considered acquired by purchase. Efile extension Example. Efile extension Ken is a farmer. Efile extension He purchased two tractors, one from his brother and one from his father. Efile extension He placed both tractors in service in the same year he bought them. Efile extension The tractor purchased from his father does not qualify for the section 179 expense deduction because he is a related person (as defined above). Efile extension The tractor purchased from his brother does qualify for the deduction because Ken is not a related person (as defined above). Efile extension What Property Does Not Qualify? Land and improvements. Efile extension   Land and land improvements, do not qualify as section 179 property. Efile extension Land improvements include nonagricultural fences, swimming pools, paved parking areas, wharves, docks, bridges, and fences. Efile extension However, agricultural fences do qualify as section 179 property. Efile extension Similarly, field drainage tile also qualifies as section 179 property. Efile extension Excepted property. Efile extension   Even if the requirements explained in the preceding discussions are met, farmers cannot elect the section 179 expense deduction for the following property. Efile extension Certain property you lease to others (if you are a noncorporate lessor). Efile extension Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. Efile extension Property used by a tax-exempt organization (other than a tax-exempt farmers' cooperative) unless the property is used mainly in a taxable unrelated trade or business. Efile extension Property used by governmental units or foreign persons or entities (except property used under a lease with a term of less than 6 months). Efile extension How Much Can You Deduct? Your section 179 expense deduction is generally the cost of the qualifying property. Efile extension However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. Efile extension These limits apply to each taxpayer, not to each business. Efile extension However, see Married individuals under Dollar Limits , later. Efile extension See also the special rules for applying the limits for partnerships and S corporations under Partnerships and S Corporations , later. Efile extension If you deduct only part of the cost of qualifying property as a section 179 expense deduction, you can generally depreciate the cost you do not deduct. Efile extension Use Part I of Form 4562 to figure your section 179 expense deduction. Efile extension Partial business use. Efile extension   When you use property for business and nonbusiness purposes, you can elect the section 179 expense deduction only if you use it more than 50% for business in the year you place it in service. Efile extension If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Efile extension Use the resulting business cost to figure your section 179 expense deduction. Efile extension Trade-in of other property. Efile extension   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 expense deduction includes only the cash you paid. Efile extension For example, if you buy (for cash and a trade-in) a new tractor for use in your business, your cost for the section 179 expense deduction is the cash you paid. Efile extension It does not include the adjusted basis of the old tractor you trade for the new tractor. Efile extension Example. Efile extension J-Bar Farms traded two cultivators having a total adjusted basis of $6,800 for a new cultivator costing $13,200. Efile extension They received an $8,000 trade-in allowance for the old cultivators and paid $5,200 cash for the new cultivator. Efile extension J-Bar also traded a used pickup truck with an adjusted basis of $8,000 for a new pickup truck costing $35,000. Efile extension They received a $5,000 trade-in allowance and paid $30,000 cash for the new pickup truck. Efile extension Only the cash paid by J-Bar qualifies for the section 179 expense deduction. Efile extension J-Bar's business costs that qualify for a section 179 expense deduction are $35,200 ($5,200 + $30,000). Efile extension Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 is $500,000. Efile extension If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 expense deduction among the items in any way, as long as the total deduction is not more than $500,000. Efile extension Qualified real property that you elect to treat as section 179 property is limited to $250,000 of the maximum section 179 deduction of $500,000 for 2013. Efile extension You do not have to claim the full $500,000. Efile extension For specific information on the section 179 dollar limits, see chapter 2 of Publication 946. Efile extension Reduced dollar limit for cost exceeding $2 million. Efile extension   If the cost of your qualifying section 179 property placed in service in 2013 is over $2 million, you must reduce the dollar limit (but not below zero) by the amount of cost over $2 million. Efile extension If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 expense deduction and you cannot carry over the cost that is more than $2,500,000. Efile extension Example. Efile extension This year, James Smith placed in service machinery costing $2,050,000. Efile extension Because this cost is $50,000 more than $2 million, he must reduce his dollar limit to $450,000 ($500,000 − $50,000). Efile extension Limits for sport utility vehicles. Efile extension   The total amount you can elect to deduct for certain sport utility vehicles and certain other vehicles placed in service in 2013 is $25,000. Efile extension This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, and highways that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. Efile extension   For more information, see chapter 2 of Publication 946. Efile extension Limits for passenger automobiles. Efile extension   For a passenger automobile that is placed in service in 2013, the total section 179 and depreciation deduction is limited. Efile extension See Do the Passenger Automobile Limits Apply , later. Efile extension Married individuals. Efile extension   If you are married, how you figure your section 179 expense deduction depends on whether you file jointly or separately. Efile extension If you file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Efile extension If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2 million. Efile extension You must allocate the dollar limit (after any reduction) equally between you, unless you both elect a different allocation. Efile extension If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. Efile extension Joint return after separate returns. Efile extension   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. Efile extension The dollar limit (after reduction for any cost of section 179 property over $2 million). Efile extension The total cost of section 179 property you and your spouse elected to expense on your separate returns. Efile extension Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Efile extension Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. Efile extension Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. Efile extension See Carryover of disallowed deduction , later. Efile extension Taxable income. Efile extension   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Efile extension In addition to net income or loss from a sole proprietorship, partnership, or S corporation, net income or loss derived from a trade or business also includes the following items. Efile extension Section 1231 gains (or losses) as discussed in chapter 9. Efile extension Interest from working capital of your trade or business. Efile extension Wages, salaries, tips, or other pay earned by you (or your spouse if you file a joint return) as an employee of any employer. Efile extension   In addition, figure taxable income without regard to any of the following. Efile extension The section 179 expense deduction. Efile extension The self-employment tax deduction. Efile extension Any net operating loss carryback or carryforward. Efile extension Any unreimbursed employee business expenses. Efile extension Two different taxable income limits. Efile extension   In addition to the business income limit for your section 179 expense deduction, you may have a taxable income limit for some other deduction (for example, charitable contributions). Efile extension You may have to figure the limit for this other deduction taking into account the section 179 expense deduction. Efile extension If so, complete the following steps. Efile extension Step Action 1 Figure taxable income without the section 179 expense deduction or the other deduction. Efile extension 2 Figure a hypothetical section 179 expense deduction using the taxable income figured in Step 1. Efile extension 3 Subtract the hypothetical section 179 expense deduction figured in Step 2 from the taxable income figured in Step 1. Efile extension 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. Efile extension 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in  Step 1. Efile extension 6 Figure your actual section 179 expense deduction using the taxable income figured in Step 5. Efile extension 7 Subtract your actual section 179 expense deduction figured in Step 6 from the taxable income figured in Step 1. Efile extension 8 Figure your actual other deduction using the taxable income figured in Step 7. Efile extension Example. Efile extension On February 1, 2013, the XYZ farm corporation purchased and placed in service qualifying section 179 property that cost $500,000. Efile extension It elects to expense the entire $500,000 cost under section 179. Efile extension In June, the corporation gave a charitable contribution of $10,000. Efile extension A corporation's limit on charitable contributions is figured after subtracting any section 179 expense deduction. Efile extension The business income limit for the section 179 expense deduction is figured after subtracting any allowable charitable contributions. Efile extension XYZ's taxable income figured without the section 179 expense deduction or the deduction for charitable contributions is $520,000. Efile extension XYZ figures its section 179 expense deduction and its deduction for charitable contributions as follows. Efile extension Step 1. Efile extension Taxable income figured without either deduction is $520,000. Efile extension Step 2. Efile extension Using $520,000 as taxable income, XYZ's hypothetical section 179 expense deduction is $500,000. Efile extension Step 3. Efile extension $20,000 ($520,000 − $500,000). Efile extension Step 4. Efile extension Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. Efile extension Step 5. Efile extension $518,000 ($520,000 − $2,000). Efile extension Step 6. Efile extension Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 expense deduction. Efile extension Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 expense deduction. Efile extension Step 7. Efile extension $20,000 ($520,000 − $500,000). Efile extension Step 8. Efile extension Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. Efile extension Carryover of disallowed deduction. Efile extension   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. Efile extension   The amount you carry over is used in determining your section 179 expense deduction in the next year. Efile extension However, it is subject to the limits in that year. Efile extension If you place more than one property in service in a year, you can select the properties for which all or a part of the cost will be carried forward. Efile extension Your selections must be shown in your books and records. Efile extension Example. Efile extension Last year, Joyce Jones placed in service a machine that cost $8,000 and elected to deduct all $8,000 under section 179. Efile extension The taxable income from her business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) was $6,000. Efile extension Her section 179 expense deduction was limited to $6,000. Efile extension The $2,000 cost that was not allowed as a section 179 expense deduction (because of the business income limit) is carried to this year. Efile extension This year, Joyce placed another machine in service that cost $9,000. Efile extension Her taxable income from business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) is $10,000. Efile extension Joyce can deduct the full cost of the machine ($9,000) but only $1,000 of the carryover from last year because of the business income limit. Efile extension She can carry over the balance of $1,000 to next year. Efile extension Partnerships and S Corporations The section 179 expense deduction limits apply both to the partnership or S corporation and to each partner or shareholder. Efile extension The partnership or S corporation determines its section 179 expense deduction subject to the limits. Efile extension It then allocates the deduction among its partners or shareholders. Efile extension If you are a partner in a partnership or shareholder of an S corporation, you add the amount allocated from the partnership or S corporation to any section 179 costs not related to the partnership or S corporation and then apply the dollar limit to this total. Efile extension To determine any reduction in the dollar limit for costs over $560,000, you do not include any of the cost of section 179 property placed in service by the partnership or S corporation. Efile extension After you apply the dollar limit, you apply the business income limit to any remaining section 179 costs. Efile extension For more information, see chapter 2 of Publication 946. Efile extension Example. Efile extension In 2013, Partnership P placed in service section 179 property with a total cost of $2,160,000. Efile extension P must reduce its dollar limit by $160,000 ($2,160,000 − $2,000,000). Efile extension Its maximum section 179 expense deduction is $340,000 ($500,000 − $160,000), and it elects to expense that amount. Efile extension Because P's taxable income from the active conduct of all its trades or businesses for the year was $400,000, it can deduct the full $340,000. Efile extension P allocates $100,000 of its section 179 expense deduction and $110,000 of its taxable income to John, one of its partners. Efile extension John also conducts a business as a sole proprietor and in 2013, placed in service in that business, section 179 property costing $28,000. Efile extension John's taxable income from that business was $10,000. Efile extension In addition to the $100,000 allocated from P, he elects to expense the $28,000 of his sole proprietorship's section 179 costs. Efile extension However, John's deduction is limited to his business taxable income of $120,000 ($110,000 from P plus $10,000 from his sole proprietorship). Efile extension He carries over $8,000 ($128,000 − $120,000) of the elected section 179 costs to 2014. Efile extension How Do You Elect the Deduction? You elect to take the section 179 expense deduction by completing Part I of Form 4562. Efile extension If you elect the deduction for listed property, complete Part V of  Form 4562 before completing Part I. Efile extension   File Form 4562 with either of the following: Your original tax return (whether or not you filed it timely), or An amended return filed within the time prescribed by law. Efile extension An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Efile extension The amended return must also include any resulting adjustments to taxable income. Efile extension Revoking an election. Efile extension   An election (or any specification made in the election) to take a section 179 expense deduction for 2013 can be revoked without IRS approval by filing an amended return. Efile extension The amended return must be filed within the time prescribed by law. Efile extension The amended return must also include any resulting adjustments to taxable income (for example, allowable depreciation in that tax year for the item of section 179 property for which the election pertains. Efile extension ) Once made, the revocation is irrevocable. Efile extension When Must You Recapture the Deduction? You may have to recapture the section 179 expense deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. Efile extension In the year the business use drops to 50% or less, you include the recapture amount as ordinary income. Efile extension You also increase the basis of the property by the recapture amount. Efile extension Recovery periods for property are discussed later. Efile extension If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Efile extension Instead, use the rules for recapturing depreciation explained in  chapter 9 under Section 1245 Property. Efile extension   If the property is listed property, do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Efile extension Instead, use the rules for recapturing depreciation explained in chapter 5 of Publication 946 under Recapture of Excess Depreciation. Efile extension Figuring the recapture amount. Efile extension   To figure the amount to recapture, take the following steps. Efile extension Figure the allowable depreciation for the section 179 expense deduction you claimed. Efile extension Begin with the year you placed the property in service and include the year of recapture. Efile extension Subtract the depreciation figured in (1) from the section 179 expense deduction you actually claimed. Efile extension The result is the amount you must recapture. Efile extension Example. Efile extension In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. Efile extension The property is not listed property. Efile extension He elected a $5,000 section 179 expense deduction for the property and also elected not to claim a special depreciation allowance. Efile extension He used the property only for business in 2011 and 2012. Efile extension During 2013, he used the property 40% for business and 60% for personal use. Efile extension He figures his recapture amount as follows. Efile extension Section 179 expense deduction claimed (2011) $5,000 Minus: Allowable depreciation (instead of section 179 expense deduction):   2011 $1,250   2012 1,875   2013 ($1,250 × 40% (business)) 500 3,625 2013 — Recapture amount $1,375     Paul must include $1,375 in income for 2013. Efile extension Where to report recapture. Efile extension   Report any recapture of the section 179 expense deduction as ordinary income in Part IV of Form 4797 and include it in income on Schedule F (Form 1040). Efile extension Recapture for qualified section 179 GO Zone property. Efile extension   If any qualified section 179 GO Zone property ceases to be used in the GO Zone in a later year, you must recapture the benefit of the increased section 179 expense deduction as “other income. Efile extension ” Claiming the Special Depreciation Allowance For qualified property (defined below) placed in service in 2013, you can take an additional 50% special depreciation allowance. Efile extension The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under MACRS. Efile extension Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50%. Efile extension What is Qualified Property? For farmers, qualified property generally is certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Efile extension Certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Efile extension   Certain qualified property (defined below) acquired after December 31, 2007, and before January 1, 2014, is eligible for a 50% special depreciation allowance. Efile extension   Qualified property includes the following: Tangible property depreciated under the Modified Accelerated Cost Recovery System (MACRS) with a recovery period of 20 years or less. Efile extension Water utility property. Efile extension Off-the-shelf computer software. Efile extension Qualified leasehold improvement property. Efile extension   Qualified property must also meet all of the following tests: You must have acquired qualified property by purchase after December 31, 2007. Efile extension If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify. Efile extension Qualified property must be placed in service after December 31, 2007 and placed in service before January 1, 2014 (before January 1, 2015 for certain property with a long production period and for certain aircraft). Efile extension The original use of the property must begin with you after December 31, 2007. Efile extension For more information, see chapter 3 of Publication 946. Efile extension How Can You Elect Not To Claim the Allowance? You can elect, for any class of property, not to deduct the special depreciation allowance for all property in such class placed in service during the tax year. Efile extension To make the election, attach a statement to your return indicating the class of property for which you are making the election. Efile extension Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. Efile extension However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Efile extension Attach the election statement to the amended return. Efile extension On the amended return, write “Filed pursuant to section 301. Efile extension 9100-2. Efile extension ” Once made, the election may not be revoked without IRS consent. Efile extension If you elect not to have the special depreciation allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. Efile extension When Must You Recapture an Allowance When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. Efile extension For more information, see chapter 3 of Publication 946. Efile extension Figuring Depreciation Under MACRS The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. Efile extension MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Efile extension Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. Efile extension To be sure you can use MACRS to figure depreciation for your property, see Can You Use MACRS To Depreciate Your Property, earlier. Efile extension This part explains how to determine which MACRS depreciation system applies to your property. Efile extension It also discusses the following information that you need to know before you can figure depreciation under MACRS. Efile extension Property's recovery class. Efile extension Placed-in-service date. Efile extension Basis for depreciation. Efile extension Recovery period. Efile extension Convention. Efile extension Depreciation method. Efile extension Finally, this part explains how to use this information to figure your depreciation deduction. Efile extension Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. Efile extension You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Efile extension Required use of ADS. Efile extension   You must use ADS for the following property. Efile extension All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. Efile extension Listed property used 50% or less in a qualified business use. Efile extension See Additional Rules for Listed Property , later. Efile extension Any tax-exempt use property. Efile extension Any tax-exempt bond-financed property. Efile extension Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. Efile extension Any tangible property used predominantly outside the United States during the year. Efile extension If you are required to use ADS to depreciate your property, you cannot claim the special depreciation allowance. Efile extension Electing ADS. Efile extension   Although your property may qualify for GDS, you can elect to use ADS. Efile extension The election generally must cover all property in the same property class you placed in service during the year. Efile extension However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. Efile extension Once you make this election, you can never revoke it. Efile extension   You make the election by completing line 20 in Part III of Form 4562. Efile extension Which Property Class Applies Under GDS? The following is a list of the nine property classes under GDS. Efile extension 3-year property. Efile extension 5-year property. Efile extension 7-year property. Efile extension 10-year property. Efile extension 15-year property. Efile extension 20-year property. Efile extension 25-year property. Efile extension Residential rental property. Efile extension Nonresidential real property. Efile extension See Which Property Class Applies Under GDS in chapter 4 of Publication 946 for examples of the types of property included in each class. Efile extension What Is the Placed-in-Service Date? You begin to claim depreciation when your property is placed in service for use either in a trade or business or for the production of income. Efile extension The placed-in-service date for your property is the date the property is ready and available for a specific use. Efile extension It is therefore not necessarily the date it is first used. Efile extension If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. Efile extension See Placed in Service under When Does Depreciation Begin and End , earlier, for examples illustrating when property is placed in service. Efile extension What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. Efile extension Reduce that amount by any credits and deductions allocable to the property. Efile extension The following are examples of some of the credits and deductions that reduce basis. Efile extension Any deduction for section 179 property. Efile extension Any deduction for removal of barriers to the disabled and the elderly. Efile extension Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. Efile extension Any special depreciation allowance. Efile extension Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. Efile extension For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property , earlier. Efile extension Also, see chapter 6. Efile extension For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. Efile extension Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. Efile extension It is determined based on the depreciation system (GDS or ADS) used. Efile extension See Table 7-1 for recovery periods under both GDS and ADS for some commonly used assets. Efile extension For a complete list of recovery periods, see the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Efile extension House trailers for farm laborers. Efile extension   To depreciate a house trailer you supply as housing for those who work on your farm, use one of the following recovery periods if the house trailer is mobile (it has wheels and a history of movement). Efile extension A 7-year recovery period under GDS. Efile extension A 10-year recovery period under ADS. Efile extension   However, if the house trailer is not mobile (its wheels have been removed and permanent utilities and pipes attached to it), use one of the following recovery periods. Efile extension A 20-year recovery period under GDS. Efile extension A 25-year recovery period under ADS. Efile extension Water wells. Efile extension   Water wells used to provide water for raising poultry and livestock are land improvements. Efile extension If they are depreciable, use one of the following recovery periods. Efile extension A 15-year recovery period under GDS. Efile extension A 20-year recovery period under ADS. Efile extension   The types of water wells that can be depreciated were discussed earlier in Irrigation systems and water wells under Property Having a Determinable Useful Life . Efile extension Table 7-1. Efile extension Farm Property Recovery Periods   Recovery Period in Years Assets GDS ADS Agricultural structures (single purpose) 10 15 Automobiles 5 5 Calculators and copiers 5 6 Cattle (dairy or breeding) 5 7 Communication equipment1 7 10 Computer and peripheral equipment 5 5 Drainage facilities 15 20 Farm buildings2 20 25 Farm machinery and equipment 7 10 Fences (agricultural) 7 10 Goats and sheep (breeding) 5 5 Grain bin 7 10 Hogs (breeding) 3 3 Horses (age when placed in service)     Breeding and working (12 years or less) 7 10 Breeding and working (more than 12 years) 3 10 Racing horses 3 12 Horticultural structures (single purpose) 10 15 Logging machinery and equipment3 5 6 Nonresidential real property 394 40 Office furniture, fixtures, and equipment (not calculators, copiers, or typewriters) 7 10 Paved lots 15 20 Residential rental property 27. Efile extension 5 40 Tractor units (over-the-road) 3 4 Trees or vines bearing fruit or nuts 10 20 Truck (heavy duty, unloaded weight 13,000 lbs. Efile extension or more) 5 6 Truck (actual weight less than 13,000 lbs) 5 5 Water wells 15 20 1 Not including communication equipment listed in other classes. Efile extension 2 Not including single purpose agricultural or horticultural structures. Efile extension 3 Used by logging and sawmill operators for cutting of timber. Efile extension 4 For property placed in service after May 12, 1993; for property placed in service before May 13, 1993,  the recovery period is 31. Efile extension 5 years. Efile extension Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. Efile extension The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. Efile extension Use one of the following conventions. Efile extension The half-year convention. Efile extension The mid-month convention. Efile extension The mid-quarter convention. Efile extension For a detailed explanation of each convention, see Which Convention Applies in chapter 4 of Publication 946. Efile extension Also, see the Instructions for Form 4562. Efile extension Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. Efile extension The 200% declining balance method over a GDS recovery period. Efile extension The 150% declining balance method over a GDS recovery period. Efile extension The straight line method over a GDS recovery period. Efile extension The straight line method over an ADS recovery period. Efile extension Depreciation Table. Efile extension   The following table lists the types of property you can depreciate under each method. Efile extension The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. Efile extension Depreciation Table System/Method   Type of Property GDS using  150% DB • All property used in a farming business (except real property)   • All 15- and 20-year property   • Nonfarm 3-, 5-, 7-, and 10-year property1 GDS using SL • Nonresidential real property   • Residential rental property   • Trees or vines bearing fruit or nuts   • All 3-, 5-, 7-, 10-, 15-, and 20-year property1 ADS using SL • Property used predomi- nantly outside the United States   • Farm property used when an election not to apply the uniform capitalization rules is in effect   • Tax-exempt property   • Tax-exempt bond-financed property   • Imported property2   • Any property for which you elect to use this method1 GDS using  200% DB • Nonfarm 3-, 5-, 7-, and 10-year property 1Elective method 2See section 168(g)(6) of the Internal Revenue  Code Property used in farming business. Efile extension   For personal property placed in service after 1988 in a farming business, you must use the 150% declining balance method over a GDS recovery period or you can elect one of the following methods. Efile extension The straight line method over a GDS recovery period. Efile extension The straight line method over an ADS recovery period. Efile extension For property placed in service before 1999, you could have elected to use the 150% declining balance method using the ADS recovery periods for certain property classes. Efile extension If you made this election, continue to use the same method and recovery period for that property. Efile extension Real property. Efile extension   You can depreciate real property using the straight line method under either GDS or ADS. Efile extension Switching to straight line. Efile extension   If you use a declining balance method, you switch to the straight line method in the year it provides an equal or greater deduction. Efile extension If you use the MACRS percentage tables, discussed later under How Is the Depreciation Deduction Figured , you do not need to determine in which year your deduction is greater using the straight line method. Efile extension The tables have the switch to the straight line method built into their rates. Efile extension Fruit or nut trees and vines. Efile extension   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a 10-year recovery period. Efile extension ADS required for some farmers. Efile extension   If you elect not to apply the uniform capitalization rules to any plant shown in Table 6-1 of chapter 6 and produced in your farming business, you must use ADS for all property you place in service in any year the election is in effect. Efile extension See chapter 6 for a discussion of the application of the uniform capitalization rules to farm property. Efile extension Electing a different method. Efile extension   As shown in the Depreciation Table , you can elect a different method for depreciation for certain types of property. Efile extension You must make the election by the due date of the return (including extensions) for the year you placed the property in service. Efile extension However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). Efile extension Attach the election to the amended return and write “Filed pursuant to section 301. Efile extension 9100-2” on the election statement. Efile extension File the amended return at the same address you filed the original return. Efile extension Once you make the election, you cannot change it. Efile extension    If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. Efile extension However, you can make the election on a property-by-property basis for residential rental and nonresidential real property. Efile extension Straight line election. Efile extension   Instead of using the declining balance method, you can elect to use the straight line method over the GDS recovery period. Efile extension Make the election by entering “S/L” under column (f) in Part III of Form 4562. Efile extension ADS election. Efile extension   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. Efile extension ADS uses the straight line method of depreciation over the ADS recovery periods, which are generally longer than the GDS recovery periods. Efile extension The ADS recovery periods for many assets used in the business of farming are listed in Table 7–1. Efile extension Additional ADS recovery periods for other classes of property may be found in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Efile extension How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed-in-service date, basis amount, recovery period, convention, and depreciation method that applies to your property. Efile extension Then you are ready to figure your depreciation deduction. Efile extension You can figure it in one of two ways. Efile extension You can use the percentage tables provided by the IRS. Efile extension You can figure your own deduction without using the tables. Efile extension Figuring your own MACRS deduction will generally result in a slightly different amount than using the tables. Efile extension Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. Efile extension These percentage tables are in Appendix A of Publication 946. Efile extension Rules for using the tables. Efile extension   The following rules cover the use of the percentage tables. Efile extension You must apply the rates in the percentage tables to your property's unadjusted basis. Efile extension Unadjusted basis is the same basis amount you would use to figure gain on a sale but figured without reducing your original basis by any MACRS depreciation taken in earlier years. Efile extension You cannot use the percentage tables for a short tax year. Efile extension See chapter 4 of Publication 946 for information on how to figure the deduction for a short tax year. Efile extension You generally must continue to use them for the entire recovery period of the property. Efile extension You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to the property, which is depreciated as a separate property. Efile extension Basis adjustment due to casualty loss. Efile extension   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. Efile extension For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. Efile extension See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Efile extension Figuring depreciation using the 150% DB method and half-year convention. Efile extension    Table 7-2 has the percentages for 3-, 5-, 7-, and 20-year property. Efile extension The percentages are based on the 150% declining balance method with a change to the straight line method. Efile extension This table covers only the half-year convention and the first 8 years for 20-year property. Efile extension See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Efile extension   The following examples show how to figure depreciation under MACRS using the percentages in Table 7-2 . Efile extension Example 1. Efile extension During the year, you bought an item of 7-year property for $10,000 and placed it in service. Efile extension You do not elect a section 179 expense deduction for this property. Efile extension In addition, the property is not qualified property for purposes of the special depreciation allowance. Efile extension The unadjusted basis of the property is $10,000. Efile extension You use the percentages in Table 7-2 to figure your deduction. Efile extension Since this is 7-year property, you multiply $10,000 by 10. Efile extension 71% to get this year's depreciation of $1,071. Efile extension For next year, your depreciation will be $1,913 ($10,000 × 19. Efile extension 13%). Efile extension Example 2. Efile extension You had a barn constructed on your farm at a cost of $20,000. Efile extension You placed the barn in service this year. Efile extension You elect not to claim the special depreciation allowance. Efile extension The barn is 20-year property and you use the table percentages to figure your deduction. Efile extension You figure this year's depreciation by multiplying $20,000 (unadjusted basis) by 3. Efile extension 75% to get $750. Efile extension For next year, your depreciation will be $1,443. Efile extension 80 ($20,000 × 7. Efile extension 219%). Efile extension Table 7-2. Efile extension 150% Declining Balance Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 25. Efile extension 0 % 15. Efile extension 00 % 10. Efile extension 71 % 3. Efile extension 750 % 2 37. Efile extension 5   25. Efile extension 50   19. Efile extension 13   7. Efile extension 219   3 25. Efile extension 0   17. Efile extension 85   15. Efile extension 03   6. Efile extension 677   4 12. Efile extension 5   16. Efile extension 66   12. Efile extension 25   6. Efile extension 177   5     16. Efile extension 66   12. Efile extension 25   5. Efile extension 713   6     8. Efile extension 33   12. Efile extension 25   5. Efile extension 285   7         12. Efile extension 25   4. Efile extension 888   8         6. Efile extension 13   4. Efile extension 522   Figuring depreciation using the straight line method and half-year convention. Efile extension   The following table has the straight line percentages for 3-, 5-, 7-, and 20-year property using the half-year convention. Efile extension The table covers only the first 8 years for 20-year property. Efile extension See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Efile extension Table 7-3. Efile extension Straight Line Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 16. Efile extension 67 % 10 % 7. Efile extension 14 % 2. Efile extension 5 % 2 33. Efile extension 33   20   14. Efile extension 29   5. Efile extension 0   3 33. Efile extension 33   20   14. Efile extension 29   5. Efile extension 0   4 16. Efile extension 67   20   14. Efile extension 28   5. Efile extension 0   5     20   14. Efile extension 29   5. Efile extension 0   6     10   14. Efile extension 28   5. Efile extension 0   7         14. Efile extension 29   5. Efile extension 0   8         7. Efile extension 14   5. Efile extension 0    
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Japan 2011 Earthquake/Tsunami – U.S. Government Information


In the United States

Environmental Monitoring

The EPA has its radiation air monitoring (RadNet) data, frequently asked questions, and other resources on http://www.epa.gov/japan2011/. Here you can:

Food Safety

The U.S. Food and Drug Administration (FDA) has deemed that based on current information, there is no risk to the U.S. food supply.

In response to the ongoing situation in Japan, the EPA has taken steps to increase the level of nationwide monitoring of milk, precipitation, drinking water, and other potential exposure routes.

  • EPA conducts radiological monitoring of milk under its RADNET program
  • The U.S. Food and Drug Administration has jurisdiction over the safety, labeling and identity of milk and milk products in interstate commerce.
  • States have jurisdiction over those facilities located within their territory.

Results from a screening sample taken March 25 from Spokane, WA detected 0.8 pCi/L of iodine-131, which is more than 5,000 times lower than the Derived Intervention Level set by the U.S. Food and Drug Administration.

  • These types of findings are to be expected in the coming days and are far below levels of public health concern, including for infants and children.
  • Iodine-131 has a very short half-life of approximately eight days, and the level detected in milk and milk products is therefore expected to drop relatively quickly.

Radiation is all around us in our daily lives, and these findings are a miniscule amount compared to what people experience every day. For example, people are exposed to low levels of radiation on round trip cross country flights, watching television, and even from construction materials.

  • The U.S. Food and Drug Administration has jurisdiction over 80 percent of the food supply, including seafood, dairy, and produce. The U.S. Department of Agriculture regulates meat, poultry, and processed egg products, while FDA regulates all other food products.
  • The U.S. Department of Agriculture has stated that Japan has not exported any beef products to the United States for nearly a year.
  • The U.S. Department of Agriculture has stated that Japan is not currently eligible to export any poultry or processed egg products to the U.S.
  • The U.S. Food and Drug Administration and Customs and Border Protection carefully screen all food products for unsafe substances, including radiological material at Ports of Entry.
  • Learn more about keeping food safe during an emergency.

Potassium Iodide (KI)

The Centers for Disease Control (CDC) does not recommend that people in the United States take potassium iodide supplements (also called KI) in response to the damaged nuclear reactors in Japan.

  • Only take KI on the advice of emergency management officials, public health officials, or your doctor.
  • There are health risks associated with taking KI.

Food, Mail, Ships, and Cargo from Japan

The U.S. Customs and Border Protection (CBP) is monitoring developments in Japan carefully and uses several types of radiation detection equipment in air and sea ports, mail facilities, and elsewhere to ensure safety.

  • CBP and the U.S. Food and Drug Administration carefully screen all food products for unsafe substances, including radiological material, at Ports of Entry.
  • All inbound travelers, baggage, and cargo are screened for radiological materials.
  • CBP employs radiation monitors at international mail facilities.

American Citizens in Japan

American Embassy in Japan

All U.S. citizens in Japan should continue to carefully monitor the situation and follow the guidance of the U.S. and Japanese governments.

Authorized Departures

The U.S. government has authorized the voluntary departure from Japan of eligible family members of U.S. government personnel assigned to the U.S. Embassy in Tokyo, the U.S. Consulate in Nagoya, the Foreign Service Institute Field School in Yokohama, and U.S. Forces Japan.

Evacuations

Travel to and from Japan

Disaster Preparedness

The tragic events in Japan remind us that disasters can strike at any time. The best way to make sure your family is taken care of when disaster strikes is to be prepared.

Additional Information

  • Earthquake in Japan – See facts from the U.S. Geological Survey about the 9.0 earthquake.
  • Earthquake Preparedness and Response – The U.S. Centers for Disease Control and Prevention provides helpful tips on how to prepare for an earthquake and what to do during a quake.
  • Earthquakes, Flooding, and Radiation – The National Institutes of Health provides information and resources about natural disasters and their effects.
  • Tsunami Health Effects – The U.S. Centers for Disease Control and Prevention describes the immediate, secondary, and long-term health effects of a tsunami.
  • Tsunami Preparedness – The Federal Emergency Management Agency explains what a tsunami is and provides guidance on what to do during a tsunami watch or warning.
  • Radiation – Read about the assistance and expertise that the U.S. Department of Energy is providing to Japanese response and recovery efforts.

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