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H&r Block Free State

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H&r block free state Publication 504 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. H&r block free state Tax questions. H&r block free state Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 504, such as legislation enacted after this publication was published, go to www. H&r block free state irs. H&r block free state gov/pub504. H&r block free state Reminders Relief from joint liability. H&r block free state  In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint tax return. H&r block free state For more information, see Relief from joint liability under Married Filing Jointly. H&r block free state Social security numbers for dependents. H&r block free state  You must include on your tax return the taxpayer identification number (generally the social security number) of every person for whom you claim an exemption. H&r block free state See Exemptions for Dependents under Exemptions, later. H&r block free state Individual taxpayer identification number (ITIN). H&r block free state  The IRS will issue an ITIN to a nonresident or resident alien who does not have and is not eligible to get a social security number (SSN). H&r block free state To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS. H&r block free state It takes about 6 to 10 weeks to get an ITIN. H&r block free state The ITIN is entered wherever an SSN is requested on a tax return. H&r block free state If you are required to include another person's SSN on your return and that person does not have and cannot get an SSN, enter that person's ITIN. H&r block free state Change of address. H&r block free state  If you change your mailing address, be sure to notify the Internal Revenue Service. H&r block free state You can use Form 8822, Change of Address. H&r block free state Mail it to the Internal Revenue Service Center for your old address. H&r block free state (Addresses for the Service Centers are on the back of the form. H&r block free state ) Change of name. H&r block free state  If you change your name, be sure to notify the Social Security Administration using Form SS-5, Application for a Social Security Card. H&r block free state Change of withholding. H&r block free state  If you have been claiming a withholding exemption for your spouse, and you divorce or legally separate, you must give your employer a new Form W-4, Employee's Withholding Allowance Certificate, within 10 days after the divorce or separation showing the correct number of exemptions. H&r block free state Photographs of missing children. H&r block free state  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. H&r block free state Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. H&r block free state You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. H&r block free state Introduction This publication explains tax rules that apply if you are divorced or separated from your spouse. H&r block free state It covers general filing information and can help you choose your filing status. H&r block free state It also can help you decide which exemptions you are entitled to claim, including exemptions for dependents. H&r block free state The publication also discusses payments and transfers of property that often occur as a result of divorce and how you must treat them on your tax return. H&r block free state Examples include alimony, child support, other court-ordered payments, property settlements, and transfers of individual retirement arrangements. H&r block free state In addition, this publication also explains deductions allowed for some of the costs of obtaining a divorce and how to handle tax withholding and estimated tax payments. H&r block free state The last part of the publication explains special rules that may apply to persons who live in community property states. H&r block free state Comments and suggestions. H&r block free state   We welcome your comments about this publication and your suggestions for future editions. H&r block free state   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. H&r block free state NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. H&r block free state Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H&r block free state   You can send your comments from www. H&r block free state irs. H&r block free state gov/formspubs/. H&r block free state Click on “More Information. H&r block free state ”and then on “Comment on Tax Forms and Publications”. H&r block free state   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. H&r block free state Ordering forms and publications. H&r block free state   Visit www. H&r block free state irs. H&r block free state gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. H&r block free state Internal Revenue Service 1201 N. H&r block free state Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. H&r block free state   If you have a tax question, check the information available on IRS. H&r block free state gov or call 1-800-829-1040. H&r block free state We cannot answer tax questions sent to either of the above addresses. H&r block free state Useful Items - You may want to see: Publications 501 Exemptions, Standard Deduction, and Filing Information 544 Sales and Other Dispositions of Assets 555 Community Property 590 Individual Retirement Arrangements (IRAs) 971 Innocent Spouse Relief Form (and Instructions) 8332 Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent 8379 Injured Spouse Allocation 8857 Request for Innocent Spouse Relief See How To Get Tax Help near the end of this publication for information about getting publications and forms. H&r block free state Prev  Up  Next   Home   More Online Publications
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H&r block free state Depreciation Table of Contents Introduction Special Depreciation AllowanceQualified Property Election Not To Claim the Allowance Rules for Returns Filed Before June 1, 2002 Passenger Automobiles New York Liberty Zone BenefitsSpecial Liberty Zone Depreciation Allowance Increased Section 179 Deduction Liberty Zone Leasehold Improvement Property If you depreciate business property that you acquired and placed in service after September 10, 2001, new law contains provisions that may affect your depreciation deduction for that property. H&r block free state Publication 946, How To Depreciate Property, contains information on depreciation. H&r block free state However, Publication 946 does not contain the new provisions because it was printed before the law was enacted. H&r block free state The new provisions are in the Supplement to Publication 946, which is reprinted below. H&r block free state Supplement to Publication 946 How To Depreciate Property   Introduction After Publication 946 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. H&r block free state The new law made several changes in the tax rules explained in the publication. H&r block free state Some of the changes apply to property placed in service during 2001. H&r block free state This supplemental publication describes those changes and explains what you should do if you are affected by them. H&r block free state The situations and examples in Publication 946 do not reflect any of the changes made by the Job Creation and Worker Assistance Act of 2002. H&r block free state The new law contains the following provisions. H&r block free state 30% depreciation deductions (special depreciation allowance and special New York Liberty Zone (Liberty Zone) depreciation allowance) for the year qualified property is placed in service after September 10, 2001. H&r block free state An increased dollar limit on the section 179 deduction for qualified Liberty Zone property purchased after September 10, 2001. H&r block free state A shorter recovery period for qualified Liberty Zone leasehold improvement property placed in service after September 10, 2001. H&r block free state An increase in the maximum depreciation deduction for 2001 for a qualified passenger automobile placed in service after September 10, 2001. H&r block free state If you believe you qualify for an increased deduction under any of these new rules, you must file the revised 2001 Form 4562 (dated March 2002) for 2001 calendar or fiscal years and 2000 fiscal years ending after September 10, 2001. H&r block free state If you have already filed a tax return, this supplemental publication explains how to claim these benefits and how to elect not to claim the special depreciation allowance or special Liberty Zone depreciation allowance. H&r block free state See Table 2 at the end of the supplement for an overview of the rules that apply if you filed your return before June 1, 2002. H&r block free state Special Depreciation Allowance You can take a special depreciation allowance for qualified property you place in service after September 10, 2001. H&r block free state The allowance is an additional deduction of 30% of the property's depreciable basis. H&r block free state To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. H&r block free state See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. H&r block free state The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. H&r block free state There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. H&r block free state In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. H&r block free state Example 1. H&r block free state On November 1, 2001, you bought and placed in service in your business qualified property that cost $100,000. H&r block free state You did not elect to claim a section 179 deduction. H&r block free state You can deduct 30% of the cost ($30,000) as a special depreciation allowance for 2001. H&r block free state You use the remaining $70,000 of cost to figure your regular depreciation deduction for 2001 and later years. H&r block free state Example 2. H&r block free state The facts are the same as in Example 1, except that you choose to deduct $24,000 of the property's cost as a section 179 deduction. H&r block free state You use the remaining $76,000 of cost to figure your special depreciation allowance of $22,800 ($76,000 × 30%). H&r block free state You use the remaining $53,200 of cost to figure your regular depreciation deduction for 2001 and later years. H&r block free state Qualified Property To qualify for the special depreciation allowance, your property must meet the following requirements. H&r block free state It is new property of one of the following types. H&r block free state Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. H&r block free state See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. H&r block free state Water utility property. H&r block free state See 25-year property on page 22 in Publication 946. H&r block free state Computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. H&r block free state (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. H&r block free state ) Qualified leasehold improvement property (defined later). H&r block free state It meets the following tests (explained later under Tests To Be Met). H&r block free state Acquisition date test. H&r block free state Placed in service date test. H&r block free state Original use test. H&r block free state It is not excepted property (explained later under Excepted Property). H&r block free state Qualified leasehold improvement property. H&r block free state    Generally, this is any improvement to an interior part of a building that is nonresidential real property, provided all of the following requirements are met. H&r block free state The improvement is made under or pursuant to a lease by the lessee (or any sublessee) or the lessor of that part of the building. H&r block free state That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. H&r block free state The improvement is placed in service more than 3 years after the date the building was first placed in service. H&r block free state   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. H&r block free state The enlargement of the building. H&r block free state Any elevator or escalator. H&r block free state Any structural component benefiting a common area. H&r block free state The internal structural framework of the building. H&r block free state   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. H&r block free state However, a binding commitment between related persons is not treated as a lease. H&r block free state Related persons. H&r block free state   For this purpose, the following are related persons. H&r block free state Members of an affiliated group. H&r block free state The persons listed in items (1) through (9) under Related persons on page 8 of Publication 946 (except that “80% or more” should be substituted for “more than 10%” each place it appears). H&r block free state An executor and a beneficiary of the same estate. H&r block free state Tests To Be Met To qualify for the special depreciation allowance, the property must meet all of the following tests. H&r block free state Acquisition date test. H&r block free state    Generally, you must have acquired the property either: After September 10, 2001, and before September 11, 2004, but only if no written binding contract for the acquisition was in effect before September 11, 2001, or Pursuant to a written binding contract entered into after September 10, 2001, and before September 11, 2004. H&r block free state   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001, and before September 11, 2004. H&r block free state Placed in service date test. H&r block free state   Generally, the property must be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. H&r block free state   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. H&r block free state Original use test. H&r block free state   The original use of the property must have begun with you after September 10, 2001. H&r block free state “Original use” means the first use to which the property is put, whether or not by you. H&r block free state Additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test. H&r block free state Excepted Property The following property does not qualify for the special depreciation allowance. H&r block free state Property used by any person before September 11, 2001. H&r block free state Property required to be depreciated using ADS. H&r block free state This includes listed property used 50% or less in a qualified business use. H&r block free state Qualified New York Liberty Zone leasehold improvement property (defined next). H&r block free state Qualified New York Liberty Zone leasehold improvement property. H&r block free state   This is any qualified leasehold improvement property (as defined earlier) if all of the following requirements are met. H&r block free state The improvement is to a building located in the New York Liberty Zone (defined later under New York Liberty Zone Benefits). H&r block free state The improvement is placed in service after September 10, 2001, and before January 1, 2007. H&r block free state No written binding contract for the improvement was in effect before September 11, 2001. H&r block free state Election Not To Claim the Allowance You can elect not to claim the special depreciation allowance for qualified property. H&r block free state If you make this election for any property, it applies to all property in the same property class placed in service during the year. H&r block free state To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. H&r block free state When to make election. H&r block free state   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. H&r block free state   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 the original return (not including extensions). H&r block free state Attach the election statement to the amended return. H&r block free state At the top of the election statement, write “Filed pursuant to section 301. H&r block free state 9100–2. H&r block free state ” Revoking an election. H&r block free state   Once you elect not to deduct the special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. H&r block free state A request to revoke the election is subject to a user fee. H&r block free state Rules for Returns Filed Before June 1, 2002 The following rules apply if you placed qualified property in service after September 10, 2001, and filed your return before June 1, 2002. H&r block free state The rules apply to returns for the following years. H&r block free state 2000 fiscal years that end after September 10, 2001. H&r block free state 2001 calendar and fiscal years. H&r block free state Claiming the allowance. H&r block free state   If you did not claim the allowance on your return and did not make the election not to claim the allowance, you can do either of the following to claim the allowance. H&r block free state File an amended return by the due date (not including extensions) of your return for the year following the year the property was placed in service. H&r block free state Write “Filed Pursuant to Rev. H&r block free state Proc. H&r block free state 2002–33” at the top of the amended return. H&r block free state File Form 3115, Application for Change in Accounting Method, with your return for the year following the year the property was placed in service. H&r block free state Your return must be filed by the due date (including extensions). H&r block free state Write “Automatic Change Filed Under Rev. H&r block free state Proc. H&r block free state 2002–33” on the appropriate line of Form 3115. H&r block free state You must also file a copy (with signature) of the completed Form 3115 with the IRS National Office no later than when you file the original with your return. H&r block free state For more information about filing Form 3115, including the address to send it to, see Revenue Procedure 2002–9, Revenue Procedure 2002–19, and Revenue Procedure 2002–33. H&r block free state Example 1. H&r block free state You are an individual and you use the calendar year. H&r block free state You placed qualified property in service for your business in December 2001. H&r block free state You filed your 2001 income tax return before April 15, 2002. H&r block free state You did not claim the special depreciation allowance for the property and did not make the election not to claim the allowance. H&r block free state You can claim the special allowance by filing an amended 2001 return by April 15, 2003, with “Filed Pursuant to Rev. H&r block free state Proc. H&r block free state 2002–33” at the top of the amended return. H&r block free state You must file an amended return by April 15, 2003, even if you get an extension of time to file your 2002 tax return. H&r block free state Example 2. H&r block free state The facts concerning your 2001 return are the same as in Example 1. H&r block free state In addition, you got an automatic 4-month extension of time (to August 15, 2003) to file your 2002 return. H&r block free state You can claim the special allowance by filing a Form 3115 (with “Filed Pursuant to Rev. H&r block free state Proc. H&r block free state 2002–33” on the appropriate line) with your 2002 return by August 15, 2003. H&r block free state You must also file a copy of this Form 3115 with the IRS National Office no later than when you file your 2002 return. H&r block free state Electing not to claim the allowance. H&r block free state   Generally, you have elected not to claim the special depreciation allowance for a class of property if you: Filed your return timely (including extensions) for the year you placed qualified property in service and indicated on a statement with the return that you are not claiming the allowance, or Filed your return timely and filed an amended return within 6 months of the due date of the original return (not including extensions) and indicated on a statement with the amended return that you are not claiming the allowance. H&r block free state The statement must indicate that you are not deducting the special depreciation allowance and the class of property to which the election applies. H&r block free state The statement can be either attached to or written on the return. H&r block free state You can, for example, write “not deducting 30%” on Form 4562. H&r block free state Deemed election. H&r block free state   If you have not followed either of the procedures described above to elect not to claim the allowance, you may still be treated as making the election. H&r block free state You will be treated as making the election if you meet both of the following conditions. H&r block free state You filed your return for the year you placed the property in service and claimed depreciation, but not the special allowance, for any class of property. H&r block free state You do not file an amended return or a Form 3115 within the time prescribed for claiming the special allowance. H&r block free state See Claiming the allowance, earlier. H&r block free state Passenger Automobiles The limit on your depreciation deduction (including any section 179 deduction) for any passenger automobile that is qualified property (defined earlier) placed in service after September 10, 2001, and for which you claim the special depreciation allowance is increased. H&r block free state Generally, the limit is increased from $3,060 to $7,660. H&r block free state However, if the automobile is a qualified electric car, the limit is increased from $9,280 to $23,080 ($22,980 if placed in service in 2002). H&r block free state Table 1 shows the maximum deduction amounts for 2001. H&r block free state Table 1. H&r block free state Maximum Deduction for 2001 Qualified Vehicle Placed in Service Before Sept. H&r block free state 11 Placed in Service After Sept. H&r block free state 10 Passenger automobile $3,060 $7,660 Electric car 9,280 23,080 1 1$22,980 if you place an electric car in service in 2002. H&r block free state Election not to claim the allowance. H&r block free state   The increased maximum depreciation deduction does not apply if you elected not to claim the special depreciation allowance as explained earlier under Election Not To Claim the Allowance and Rules for Returns Filed Before June 1, 2002. H&r block free state New York Liberty Zone Benefits Several benefits are available for property you place in service in the New York Liberty Zone (Liberty Zone). H&r block free state They include a special depreciation allowance for the year you place the property in service, an increased section 179 deduction, and the classification of certain leasehold improvement property as 5-year property. H&r block free state Area defined. H&r block free state   The New York Liberty Zone is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway) in the Borough of Manhattan in the City of New York, New York. H&r block free state Special Liberty Zone Depreciation Allowance You can take a special depreciation allowance for qualified Liberty Zone property you place in service after September 10, 2001. H&r block free state The allowance is an additional deduction of 30% of the property's depreciable basis. H&r block free state To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. H&r block free state See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. H&r block free state The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. H&r block free state There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. H&r block free state In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. H&r block free state You cannot claim the special Liberty Zone depreciation allowance for property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. H&r block free state Qualified property is eligible for only one special depreciation allowance. H&r block free state Example 1. H&r block free state On November 1, 2001, you bought and placed in service in your business, which is in the Liberty Zone, qualified Liberty Zone property that cost $200,000. H&r block free state You did not elect to claim a section 179 deduction. H&r block free state You can deduct 30% of the cost ($60,000) as a special Liberty Zone depreciation allowance for 2001. H&r block free state You use the remaining $140,000 of cost to figure your regular depreciation deduction for 2001 and later years. H&r block free state Example 2. H&r block free state The facts are the same as in Example 1, except that you choose to deduct $59,000 of the property's cost as a section 179 deduction. H&r block free state (See Increased Section 179 Deduction, later, for information concerning how this section 179 deduction amount is figured). H&r block free state You use the remaining $141,000 of cost to figure your special Liberty Zone depreciation allowance of $42,300 ($141,000 × 30%). H&r block free state You use the remaining $98,700 of cost to figure your regular depreciation deduction for 2001 and later years. H&r block free state Qualified Liberty Zone Property For a 2001 calendar or fiscal year and a 2000 fiscal year that ends after September 10, 2001, property qualifies for the special Liberty Zone depreciation allowance if it meets the following requirements. H&r block free state It is one of the following types of property. H&r block free state Used property depreciated under MACRS with a recovery period of 20 years or less. H&r block free state See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. H&r block free state Used water utility property. H&r block free state See 25-year property on page 22 in Publication 946. H&r block free state Used computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. H&r block free state (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. H&r block free state ) Certain nonresidential real property and residential rental property (defined later). H&r block free state It meets the following tests (explained later under Tests to be met). H&r block free state Acquisition date test. H&r block free state Placed in service date test. H&r block free state Substantial use test. H&r block free state Original use test. H&r block free state It is not excepted property (explained later under Excepted property). H&r block free state Nonresidential real property and residential rental property. H&r block free state   This property is qualifying property only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the terrorist attack of September 11, 2001. H&r block free state Property is treated as replacing destroyed or condemned property if, as part of an integrated plan, such property replaces real property included in a continuous area that includes real property destroyed or condemned. H&r block free state   For these purposes, real property is considered destroyed (or condemned) only if an entire building or structure was destroyed (or condemned) as a result of the terrorist attack. H&r block free state Otherwise, the property is considered damaged real property. H&r block free state For example, if certain structural components of a building (such as walls, floors, or plumbing fixtures) are damaged or destroyed as a result of the terrorist attack, but the building is not destroyed (or condemned), then only costs related to replacing the damaged or destroyed structural components qualify for the special Liberty Zone depreciation allowance. H&r block free state Tests to be met. H&r block free state   To qualify for the special Liberty Zone depreciation allowance, your property must meet all of the following tests. H&r block free state Acquisition date test. H&r block free state   You must have acquired the property by purchase after September 10, 2001, and there must not have been a binding written contract for the acquisition in effect before September 11, 2001. H&r block free state   For information on the acquisition of property by purchase, see Property Acquired by Purchase on page 15 of Publication 946. H&r block free state   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001. H&r block free state Placed in service date test. H&r block free state   Generally, the property must be placed in service for use in your trade or business or for the production of income before January 1, 2007 (January 1, 2010, in the case of qualifying nonresidential real property and residential rental property). H&r block free state   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. H&r block free state Substantial use test. H&r block free state   Substantially all use of the property must be in the Liberty Zone and in the active conduct of your trade or business in the Liberty Zone. H&r block free state Original use test. H&r block free state   The original use of the property in the Liberty Zone must have begun with you after September 10, 2001. H&r block free state   Used property can be qualified Liberty Zone property if it has not previously been used within the Liberty Zone. H&r block free state Also, additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test if the original use of the property in the Liberty Zone began with you. H&r block free state Excepted property. H&r block free state   The following property does not qualify for the special Liberty Zone depreciation allowance. H&r block free state Property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. H&r block free state Property required to be depreciated using ADS. H&r block free state This includes listed property used 50% or less in a qualified business use. H&r block free state Qualified New York Liberty Zone leasehold improvement property (defined earlier in Excepted Property under Special Depreciation Allowance). H&r block free state Example. H&r block free state In December 2001, you bought and placed in service in your business in the Liberty Zone the following property. H&r block free state New office furniture with a MACRS recovery period of 7 years. H&r block free state A used computer with a MACRS recovery period of 5 years. H&r block free state The computer had not previously been used within the Liberty Zone. H&r block free state Because the office furniture is new property, it qualifies for the special depreciation allowance, but not the special Liberty Zone depreciation allowance. H&r block free state Because the computer is used property that had not previously been used in the Liberty Zone, it qualifies for the special Liberty Zone depreciation allowance, but not the special depreciation allowance. H&r block free state Election Not To Claim the Liberty Zone Allowance You can elect not to claim the special Liberty Zone depreciation allowance for qualified property. H&r block free state If you make this election for any property, it applies to all property in the same property class placed in service during the year. H&r block free state To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. H&r block free state When to make the election. H&r block free state   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. H&r block free state   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 the original return (not including extensions). H&r block free state Attach the election statement to the amended return. H&r block free state At the top of the election statement, write “Filed pursuant to section 301. H&r block free state 9100–2. H&r block free state ” Revoking an election. H&r block free state   Once you elect not to deduct the special Liberty Zone depreciation allowance for a class of property, you cannot revoke the election without IRS consent. H&r block free state A request to revoke the election is subject to a user fee. H&r block free state Returns filed before June 1, 2002. H&r block free state   The rules that apply to the special depreciation allowance discussed earlier in Rules for Returns Filed Before June 1, 2002 under Special Depreciation Allowance also apply to the special Liberty Zone depreciation allowance. H&r block free state Increased Section 179 Deduction Under section 179 of the Internal Revenue Code, you can choose 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. H&r block free state For tax years beginning in 2000, that limit was $20,000. H&r block free state For tax years beginning in 2001 and 2002, that limit is generally $24,000. H&r block free state If the cost of qualifying section 179 property placed in service in a year is over $200,000, you must reduce the dollar limit (but not below zero) by the amount of the cost over $200,000. H&r block free state Increased Dollar Limit The dollar limit on the section 179 deduction is increased for certain property placed in service in the Liberty Zone. H&r block free state The increase is the smaller of the following amounts. H&r block free state $35,000. H&r block free state The cost of section 179 property that is qualified Liberty Zone property placed in service during the year. H&r block free state If you use the revised 2001 Form 4562 (dated March 2002) for a tax year beginning in 2000, you must reduce the section 179 dollar limit to $20,000 before adding the additional amount for qualified property. H&r block free state Qualified property. H&r block free state   To qualify for the increased section 179 deduction, your property must be section 179 property that is either: Qualified Liberty Zone property, or Property that would be qualified Liberty Zone property except that it is eligible for the special depreciation allowance. H&r block free state Qualified Liberty Zone property is explained earlier in Qualified Liberty Zone Property under Special Liberty Zone Depreciation Allowance. H&r block free state Property eligible for the special depreciation allowance is explained earlier in Qualified Property under Special Depreciation Allowance. H&r block free state For information on the requirements that must be met for property to qualify for the section 179 deduction, see What Property Qualifies? on page 14 of Publication 946. H&r block free state Example 1. H&r block free state In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $25,000. H&r block free state Because this cost is less than $35,000, the dollar limit on the section 179 deduction is increased by $25,000 to $49,000 ($24,000 + $25,000). H&r block free state Example 2. H&r block free state In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $75,000. H&r block free state Because $35,000 is less than the cost of the property you place in service, the dollar limit on the section 179 deduction you can claim is increased by $35,000 to $59,000 ($24,000 + $35,000). H&r block free state Reduced Dollar Limit Generally, you must reduce the dollar limit for a year by the cost of qualifying section 179 property placed in service in the year that is more than $200,000. H&r block free state However, if the cost of your Liberty Zone property exceeds $200,000, you take into account only 50% (instead of 100%) of the cost of qualified property placed in service in a year. H&r block free state Example. H&r block free state In 2002, you place in service in your business, which is in the Liberty Zone, qualified property costing $460,000. H&r block free state Your increased dollar limit is $59,000 ($35,000 + $24,000). H&r block free state Because 50% of the cost of the property you place in service ($230,000) is $30,000 more than $200,000, you must reduce your $59,000 dollar limit to $29,000 ($59,000 - $30,000). H&r block free state Recapture Rules Rules similar to those explained on page 20 of Publication 946 under When Must You Recapture the Deduction? apply with respect to any qualified property you stop using in the Liberty Zone. H&r block free state Returns Filed Before June 1, 2002 If you filed a return before June 1, 2002, and did not deduct the increased section 179 amount for qualified property placed in service after September 10, 2001, you can deduct the increased amount by filing an amended return by the due date (not including extensions) of the return for the year after the year the property was placed in service. H&r block free state This rule applies to returns for the following years. H&r block free state 2000 fiscal years that end after September 10, 2001. H&r block free state 2001 calendar and fiscal years. H&r block free state On the amended return, write “Filed Pursuant to Rev. H&r block free state Proc. H&r block free state 2002–33. H&r block free state ” Liberty Zone Leasehold Improvement Property Qualified Liberty Zone leasehold improvement property (described earlier in Qualified Property under Special Depreciation Allowance) is 5-year property. H&r block free state This means that it is depreciated over a recovery period of 5 years. H&r block free state For information about recovery periods, see Which Recovery Period Applies? on page 23 of Publication 946. H&r block free state The straight-line method must be used with respect to qualified Liberty Zone leasehold improvement property. H&r block free state Under ADS, the recovery period for qualified Liberty Zone leasehold improvement property is 9 years. H&r block free state Returns Filed Before June 1, 2002 If you filed either of the following returns before June 1, 2002, and did not depreciate qualified Liberty Zone leasehold improvement property placed in service during the tax year as 5-year property using the straight line method, you should file an amended return before you file your return for the year after the year the property was placed in service. H&r block free state Your 2000 fiscal year return (for a 2000 fiscal year that ends after September 10, 2001). H&r block free state Your 2001 calendar or fiscal year return. H&r block free state On the amended return, write “Filed Pursuant to Rev. H&r block free state Proc. H&r block free state 2002–33. H&r block free state ” Table 2. H&r block free state Rules for Returns Filed Before June 1, 2002 Note:This chart highlights the rules for returns affected by the Job Creation and Worker Assistance Act of 2002 that were filed before June 1, 2002, without accounting for any of the new benefits under the law. H&r block free state See the text for definitions and examples. H&r block free state Do not rely on this chart alone. H&r block free state IF you want to. H&r block free state . H&r block free state . H&r block free state THEN you. H&r block free state . H&r block free state . H&r block free state BY. H&r block free state . H&r block free state . H&r block free state claim the special depreciation allowance or special Liberty Zone depreciation allowance • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service, or • must file Form 3115, Application for Change in Accounting Method, with your return for the year after the year the property was placed in service • the due date (including extensions) of your return for the year after the year the property was placed in service, and • must file a copy of your completed Form 3115 with the IRS National Office • the date you file the original Form 3115 with your return for the year after the year the property was placed in service. H&r block free state elect not to claim the special depreciation allowance or the special Liberty Zone depreciation allowance 1 • must have filed your return timely for the year the property was placed in service, and   • must file an amended return stating you are not claiming the allowance • the date that is 6 months after the due date of the original return (not including extensions). H&r block free state deduct the increased section 179 amount • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service. H&r block free state use a 5-year recovery period for depreciating qualified Liberty Zone leasehold improvement property • should file an amended return • the date you file your return for the year after the year the property was placed in service. H&r block free state 1See also Deemed election under Rules for Returns Filed Before June 1, 2002, earlier. 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