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Tax Returns For Students

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Tax Returns For Students

Tax returns for students 16. Tax returns for students   Rulings Program The IRS has a program for assisting taxpayers who have technical problems with tax laws and regulations. Tax returns for students The IRS will answer inquiries from individuals and organizations about the tax effect of their acts or transactions. Tax returns for students The National Office of the IRS issues rulings on those matters. Tax returns for students A ruling is a written statement to a taxpayer that interprets and applies tax laws to the taxpayer's specific set of facts. Tax returns for students There are also determination letters issued by IRS directors and information letters issued by IRS directors or the National Office. Tax returns for students There is a fee for most types of determination letters and rulings. Tax returns for students For complete information on the rulings program, see the first Internal Revenue Bulletin published each year. Tax returns for students Prev  Up  Next   Home   More Online Publications

The Tax Returns For Students

Tax returns for students 5. Tax returns for students   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. Tax returns for students Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. Tax returns for students Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. Tax returns for students Deduction for employees. Tax returns for students If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. Tax returns for students Business-use requirement. Tax returns for students If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. Tax returns for students In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. Tax returns for students You may also have to recapture (include in income) any excess depreciation claimed in previous years. Tax returns for students A similar inclusion amount applies to certain leased property. Tax returns for students Passenger automobile limits and rules. Tax returns for students Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. Tax returns for students You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. Tax returns for students This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. Tax returns for students It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. Tax returns for students Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Tax returns for students What Is Listed Property? Listed property is any of the following. Tax returns for students Passenger automobiles (as defined later). Tax returns for students Any other property used for transportation, unless it is an excepted vehicle. Tax returns for students Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). Tax returns for students Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. Tax returns for students A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. Tax returns for students Improvements to listed property. Tax returns for students   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. Tax returns for students The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. Tax returns for students For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. Tax returns for students Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). Tax returns for students It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. Tax returns for students The following vehicles are not considered passenger automobiles for these purposes. Tax returns for students An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. Tax returns for students A vehicle used directly in the trade or business of transporting persons or property for pay or hire. Tax returns for students A truck or van that is a qualified nonpersonal use vehicle. Tax returns for students Qualified nonpersonal use vehicles. Tax returns for students   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Tax returns for students They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. Tax returns for students They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Tax returns for students For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. Tax returns for students Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. Tax returns for students Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. Tax returns for students Excepted vehicles. Tax returns for students   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). Tax returns for students Clearly marked police and fire vehicles. Tax returns for students Unmarked vehicles used by law enforcement officers if the use is officially authorized. Tax returns for students Ambulances used as such and hearses used as such. Tax returns for students Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. Tax returns for students Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. Tax returns for students Combines, cranes and derricks, and forklifts. Tax returns for students Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. Tax returns for students Qualified moving vans. Tax returns for students Qualified specialized utility repair trucks. Tax returns for students School buses used in transporting students and employees of schools. Tax returns for students Other buses with a capacity of at least 20 passengers that are used as passenger buses. Tax returns for students Tractors and other special purpose farm vehicles. Tax returns for students Clearly marked police and fire vehicle. Tax returns for students   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. Tax returns for students It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. Tax returns for students It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. Tax returns for students It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. Tax returns for students It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. Tax returns for students A marking on a license plate is not a clear marking for these purposes. Tax returns for students Qualified moving van. Tax returns for students   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. Tax returns for students No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. Tax returns for students Personal use for travel to and from a move site happens no more than five times a month on average. Tax returns for students Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. Tax returns for students Qualified specialized utility repair truck. Tax returns for students   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. Tax returns for students The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. Tax returns for students Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. Tax returns for students The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. Tax returns for students Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. Tax returns for students It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Tax returns for students Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Tax returns for students The following are neither computers nor related peripheral equipment. Tax returns for students Any equipment that is an integral part of other property that is not a computer. Tax returns for students Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. Tax returns for students Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. Tax returns for students Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. Tax returns for students The use of your property in performing services as an employee is a business use only if both the following requirements are met. Tax returns for students The use is for your employer's convenience. Tax returns for students The use is required as a condition of your employment. Tax returns for students If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. Tax returns for students Employer's convenience. Tax returns for students   Whether the use of listed property is for your employer's convenience must be determined from all the facts. Tax returns for students The use is for your employer's convenience if it is for a substantial business reason of the employer. Tax returns for students The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. Tax returns for students Condition of employment. Tax returns for students   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. Tax returns for students The use of property must be required for you to perform your duties properly. Tax returns for students Your employer does not have to require explicitly that you use the property. Tax returns for students However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. Tax returns for students Example 1. Tax returns for students Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. Tax returns for students She owns and uses a motorcycle to deliver packages to downtown offices. Tax returns for students We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. Tax returns for students Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Tax returns for students Example 2. Tax returns for students Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Tax returns for students He must travel to these sites on a regular basis. Tax returns for students Uplift does not furnish an automobile or explicitly require him to use his own automobile. Tax returns for students However, it pays him for any costs he incurs in traveling to the various sites. Tax returns for students The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Tax returns for students Example 3. Tax returns for students Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. Tax returns for students The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. Tax returns for students Example 4. Tax returns for students Marilyn Lee is a pilot for Y Company, a small charter airline. Tax returns for students Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. Tax returns for students Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. Tax returns for students Marilyn owns her own airplane. Tax returns for students The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. Tax returns for students Example 5. Tax returns for students David Rule is employed as an engineer with Zip, an engineering contracting firm. Tax returns for students He occasionally takes work home at night rather than work late in the office. Tax returns for students He owns and uses a home computer which is virtually identical to the office model. Tax returns for students His use of the computer is neither for the convenience of his employer nor required as a condition of employment. Tax returns for students What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. Tax returns for students To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. Tax returns for students If this requirement is not met, the following rules apply. Tax returns for students Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. Tax returns for students Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. Tax returns for students Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. Tax returns for students This rule applies each year of the recovery period. Tax returns for students Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. Tax returns for students A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. Tax returns for students Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. Tax returns for students It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Tax returns for students Exception for leased property. Tax returns for students   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Tax returns for students   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. Tax returns for students This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. Tax returns for students Occasional or incidental leasing activity is insufficient. Tax returns for students For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. Tax returns for students An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Tax returns for students How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. Tax returns for students For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Tax returns for students You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. Tax returns for students For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). Tax returns for students For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. Tax returns for students Entertainment use. Tax returns for students   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. Tax returns for students Commuting use. Tax returns for students   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. Tax returns for students For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. Tax returns for students This is also true for a business meeting held in a car while commuting to work. Tax returns for students Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. Tax returns for students The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. Tax returns for students Use of your automobile by another person. Tax returns for students   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. Tax returns for students That use is directly connected with your business. Tax returns for students You properly report the value of the use as income to the other person and withhold tax on the income where required. Tax returns for students You are paid a fair market rent. Tax returns for students Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). Tax returns for students Employee deductions. Tax returns for students   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. Tax returns for students See Can Employees Claim a Deduction , earlier. Tax returns for students Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. Tax returns for students However, it does not include the following uses. Tax returns for students The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). Tax returns for students The use of property as pay for the services of a 5% owner or related person. Tax returns for students The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. Tax returns for students Property does not stop being used predominantly for qualified business use because of a transfer at death. Tax returns for students Exception for leasing or compensatory use of aircraft. Tax returns for students   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. Tax returns for students 5% owner. Tax returns for students   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. Tax returns for students   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. Tax returns for students More than 5% of the outstanding stock of the corporation. Tax returns for students Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Tax returns for students Related persons. Tax returns for students   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . Tax returns for students For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. Tax returns for students Examples. Tax returns for students   The following examples illustrate whether the use of business property is qualified business use. Tax returns for students Example 1. Tax returns for students John Maple is the sole proprietor of a plumbing contracting business. Tax returns for students John employs his brother, Richard, in the business. Tax returns for students As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. Tax returns for students The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. Tax returns for students The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. Tax returns for students Example 2. Tax returns for students John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. Tax returns for students He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. Tax returns for students This use of company automobiles by employees is not a qualified business use. Tax returns for students Example 3. Tax returns for students James Company Inc. Tax returns for students owns several automobiles that its employees use for business purposes. Tax returns for students The employees also are allowed to take the automobiles home at night. Tax returns for students The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. Tax returns for students This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. Tax returns for students Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. Tax returns for students However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. Tax returns for students Example 1. Tax returns for students Sarah Bradley uses a home computer 50% of the time to manage her investments. Tax returns for students She also uses the computer 40% of the time in her part-time consumer research business. Tax returns for students Sarah's home computer is listed property because it is not used at a regular business establishment. Tax returns for students She does not use the computer predominantly for qualified business use. Tax returns for students Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. Tax returns for students She must depreciate it using the straight line method over the ADS recovery period. Tax returns for students Her combined business/investment use for determining her depreciation deduction is 90%. Tax returns for students Example 2. Tax returns for students If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. Tax returns for students She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. Tax returns for students Her combined business/investment use for determining her depreciation deduction is 90%. Tax returns for students Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. Tax returns for students You also increase the adjusted basis of your property by the same amount. Tax returns for students Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. Tax returns for students To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. Tax returns for students Example. Tax returns for students In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. Tax returns for students She used it only for qualified business use for 2009 through 2012. Tax returns for students Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. Tax returns for students She began depreciating it using the 200% DB method over a 5-year GDS recovery period. Tax returns for students The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. Tax returns for students During 2013, she used the truck 50% for business and 50% for personal purposes. Tax returns for students She includes $4,018 excess depreciation in her gross income for 2013. Tax returns for students The excess depreciation is determined as follows. Tax returns for students Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. Tax returns for students (Depreciation is from Table A-1. Tax returns for students ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. Tax returns for students The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. Tax returns for students Where to figure and report recapture. Tax returns for students   Use Form 4797, Part IV, to figure the recapture amount. Tax returns for students Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. Tax returns for students For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. Tax returns for students If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. Tax returns for students Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. Tax returns for students Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). Tax returns for students For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. Tax returns for students The inclusion amount is the sum of Amount A and Amount B, described next. Tax returns for students However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. Tax returns for students Amount A. Tax returns for students   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . Tax returns for students   The fair market value of the property is the value on the first day of the lease term. Tax returns for students If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. Tax returns for students Amount B. Tax returns for students   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . Tax returns for students Maximum inclusion amount. Tax returns for students   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. Tax returns for students Inclusion amount worksheet. Tax returns for students   The following worksheet is provided to help you figure the inclusion amount for leased listed property. Tax returns for students Inclusion Amount Worksheet for Leased Listed Property 1. Tax returns for students Fair market value   2. Tax returns for students Business/investment use for first year business use is 50% or less   3. Tax returns for students Multiply line 1 by line 2. Tax returns for students   4. Tax returns for students Rate (%) from Table A-19   5. Tax returns for students Multiply line 3 by line 4. Tax returns for students This is Amount A. Tax returns for students   6. Tax returns for students Fair market value   7. Tax returns for students Average business/investment use for years property leased before the first year business use is 50% or less . Tax returns for students . Tax returns for students . Tax returns for students . Tax returns for students . Tax returns for students . Tax returns for students . Tax returns for students . Tax returns for students . Tax returns for students . Tax returns for students . Tax returns for students . Tax returns for students . Tax returns for students   8. Tax returns for students Multiply line 6 by line 7   9. Tax returns for students Rate (%) from Table A-20   10. Tax returns for students Multiply line 8 by line 9. Tax returns for students This is Amount B. Tax returns for students   11. Tax returns for students Add line 5 and line 10. Tax returns for students This is your inclusion amount. Tax returns for students Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Tax returns for students )         Example. Tax returns for students On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. Tax returns for students The lease is for a period of 5 years. Tax returns for students Larry does not use the computer at a regular business establishment, so it is listed property. Tax returns for students His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. Tax returns for students He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. Tax returns for students The computer has a 5-year recovery period under both GDS and ADS. Tax returns for students 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. Tax returns for students 8%. Tax returns for students The applicable percentage from Table A-20 is 22. Tax returns for students 0%. Tax returns for students Larry's deductible rent for the computer for 2013 is $800. Tax returns for students Larry uses the Inclusion amount worksheet. Tax returns for students to figure the amount he must include in income for 2013. Tax returns for students His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). Tax returns for students Inclusion Amount Worksheet for Leased Listed Property 1. Tax returns for students Fair market value $3,000   2. Tax returns for students Business/investment use for first year business use is 50% or less 40 % 3. Tax returns for students Multiply line 1 by line 2. Tax returns for students 1,200   4. Tax returns for students Rate (%) from Table A-19 −19. Tax returns for students 8 % 5. Tax returns for students Multiply line 3 by line 4. Tax returns for students This is Amount A. Tax returns for students −238   6. Tax returns for students Fair market value 3,000   7. Tax returns for students Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. Tax returns for students Multiply line 6 by line 7 2,100   9. Tax returns for students Rate (%) from Table A-20 22. Tax returns for students 0 % 10. Tax returns for students Multiply line 8 by line 9. Tax returns for students This is Amount B. Tax returns for students 462   11. Tax returns for students Add line 5 and line 10. Tax returns for students This is your inclusion amount. Tax returns for students Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Tax returns for students ) $224           Lease beginning in the last 9 months of your tax year. Tax returns for students    The inclusion amount is subject to a special rule if all the following apply. Tax returns for students The lease term begins within 9 months before the close of your tax year. Tax returns for students You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. Tax returns for students The lease term continues into your next tax year. Tax returns for students Under this special rule, add the inclusion amount to income in the next tax year. Tax returns for students Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. Tax returns for students Skip lines 6 through 9 of the worksheet and enter zero on line 10. Tax returns for students Example 1. Tax returns for students On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. Tax returns for students The property is 5-year property with a fair market value of $10,000. Tax returns for students Her property has a recovery period of 5 years under ADS. Tax returns for students The lease is for 5 years. Tax returns for students Her business use of the property was 50% in 2012 and 90% in 2013. Tax returns for students She paid rent of $3,600 for 2012, of which $3,240 is deductible. Tax returns for students She must include $147 in income in 2013. Tax returns for students The $147 is the sum of Amount A and Amount B. Tax returns for students Amount A is $147 ($10,000 × 70% × 2. Tax returns for students 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . Tax returns for students Amount B is zero. Tax returns for students Lease for less than one year. Tax returns for students   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. Tax returns for students The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. Tax returns for students The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). Tax returns for students   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. Tax returns for students If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. Tax returns for students Example 2. Tax returns for students On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. Tax returns for students This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. Tax returns for students The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. Tax returns for students He must include $71 in income in 2013. Tax returns for students The $71 is the sum of Amount A and Amount B. Tax returns for students Amount A is $71 ($15,000 × 45% × 2. Tax returns for students 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. Tax returns for students Amount B is zero. Tax returns for students Where to report inclusion amount. Tax returns for students   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. Tax returns for students For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. Tax returns for students If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. Tax returns for students Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. Tax returns for students This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. Tax returns for students Exception for leased cars. Tax returns for students   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. Tax returns for students For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . Tax returns for students Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. Tax returns for students They are based on the date you placed the automobile in service. Tax returns for students Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. Tax returns for students Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Tax returns for students 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. Tax returns for students 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. Tax returns for students 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. Tax returns for students 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. Tax returns for students If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Tax returns for students 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Tax returns for students If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. Tax returns for students If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. Tax returns for students The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. Tax returns for students Example. Tax returns for students On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. Tax returns for students She used the car only in her business. Tax returns for students She files her tax return based on the calendar year. Tax returns for students She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Tax returns for students Under MACRS, a car is 5-year property. Tax returns for students Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. Tax returns for students Virginia multiplies the $14,500 unadjusted basis of her car by 0. Tax returns for students 20 to get her MACRS depreciation of $2,900 for 2013. Tax returns for students This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. Tax returns for students She can deduct the full $2,900. Tax returns for students Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. Tax returns for students The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. Tax returns for students Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. Tax returns for students Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. Tax returns for students 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. Tax returns for students If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Tax returns for students 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Tax returns for students Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. Tax returns for students The maximum deduction amounts for trucks and vans are shown in the following table. Tax returns for students Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. Tax returns for students 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. Tax returns for students 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Tax returns for students 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. Tax returns for students 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. Tax returns for students 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. Tax returns for students 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. Tax returns for students If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Tax returns for students 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Tax returns for students Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. Tax returns for students Then use the information from this worksheet to prepare Form 4562. Tax returns for students Depreciation Worksheet for Passenger Automobiles   Part I   1. Tax returns for students MACRS system (GDS or ADS)     2. Tax returns for students Property class     3. Tax returns for students Date placed in service     4. Tax returns for students Recovery period     5. Tax returns for students Method and convention     6. Tax returns for students Depreciation rate (from tables)     7. Tax returns for students Maximum depreciation deduction for this year from the appropriate table       8. Tax returns for students Business/investment-use percentage       9. Tax returns for students Multiply line 7 by line 8. Tax returns for students This is your adjusted maximum depreciation deduction       10. Tax returns for students Section 179 deduction claimed this year (not more than line 9). Tax returns for students Enter -0- if this is not the year you placed the car in service. Tax returns for students         Note. Tax returns for students  1) If line 10 is equal to line 9, stop here. Tax returns for students Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. Tax returns for students  2) If line 10 is less than line 9, complete Part II. Tax returns for students   Part II   11. Tax returns for students Subtract line 10 from line 9. Tax returns for students This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. Tax returns for students Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. Tax returns for students Multiply line 12 by line 8. Tax returns for students This is your business/investment cost       14. Tax returns for students Section 179 deduction claimed in the year you placed the car in service       15. Tax returns for students Subtract line 14 from line 13. Tax returns for students This is your tentative basis for depreciation       16. Tax returns for students Multiply line 15 by . Tax returns for students 50 if the 50% special depreciation allowance applies. Tax returns for students This is your special depreciation allowance. Tax returns for students Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. Tax returns for students Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. Tax returns for students  2) If line 16 is less than line 11, complete Part III. Tax returns for students   Part III   17. Tax returns for students Subtract line 16 from 11. Tax returns for students This is the limit on the amount you can deduct for MACRS depreciation       18. Tax returns for students Subtract line 16 from line 15. Tax returns for students This is your basis for depreciation. Tax returns for students       19. Tax returns for students Multiply line 18 by line 6. Tax returns for students This is your tentative MACRS depreciation deduction. Tax returns for students       20. Tax returns for students Enter the lesser of line 17 or line 19. Tax returns for students This is your MACRS depreciation deduction. Tax returns for students     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. Tax returns for students 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. Tax returns for students             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. Tax returns for students If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. Tax returns for students You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. Tax returns for students The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. Tax returns for students See Maximum Depreciation Deduction , earlier. Tax returns for students Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. Tax returns for students You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. Tax returns for students There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. Tax returns for students Example. Tax returns for students In May 2007, you bought and placed in service a car costing $31,500. Tax returns for students The car was 5-year property under GDS (MACRS). Tax returns for students You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Tax returns for students You used the car exclusively for business during the recovery period (2007 through 2012). Tax returns for students You figured your depreciation as shown below. Tax returns for students Year Percentage Amount Limit   Allowed 2007 20. Tax returns for students 0% $6,300 $2,960   $2,960 2008 32. Tax returns for students 0 10,080 4,800   4,800 2009 19. Tax returns for students 2 6,048 2,850   2,850 2010 11. Tax returns for students 52 3,629 1,675   1,675 2011 11. Tax returns for students 52 3,629 1,675   1,675 2012 5. Tax returns for students 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). Tax returns for students If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. Tax returns for students If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. Tax returns for students However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. Tax returns for students For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. Tax returns for students Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. Tax returns for students Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. Tax returns for students This excess basis is the additional cash paid for the new automobile in the trade-in. Tax returns for students The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. Tax returns for students Special rules apply in determining the passenger automobile limits. Tax returns for students These rules and examples are discussed in section 1. Tax returns for students 168(i)-6(d)(3) of the regulations. Tax returns for students Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. Tax returns for students For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. Tax returns for students 168(i)-6(i) and 1. Tax returns for students 168(i)-6(j) of the regulations. Tax returns for students What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. Tax returns for students For listed property, you must keep records for as long as any recapture can still occur. Tax returns for students Recapture can occur in any tax year of the recovery period. Tax returns for students Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Tax returns for students You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. Tax returns for students However, your records should back up your receipts in an orderly manner. Tax returns for students Elements of expenditure or use. Tax returns for students   Your records or other documentary evidence must support all the following. Tax returns for students The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. Tax returns for students The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. Tax returns for students The date of the expenditure or use. Tax returns for students The business or investment purpose for the expenditure or use. Tax returns for students   Written documents of your expenditure or use are generally better evidence than oral statements alone. Tax returns for students You do not have to keep a daily log. Tax returns for students However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. Tax returns for students Timeliness. Tax returns for students   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. Tax returns for students An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. Tax returns for students   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. Tax returns for students Business purpose supported. Tax returns for students   Generally, an adequate record of business purpose must be in the form of a written statement. Tax returns for students However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. Tax returns for students A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Tax returns for students For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Tax returns for students Business use supported. Tax returns for students   An adequate record contains enough information on each element of every business or investment use. Tax returns for students The amount of detail required to support the use depends on the facts and circumstances. Tax returns for students For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Tax returns for students   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. Tax returns for students Separate or combined expenditures or uses. Tax returns for students   Each use by you normally is considered a separate use. Tax returns for students However, you can combine repeated uses as a single item. Tax returns for students   Record each expenditure as a separate item. Tax returns for students Do not combine it with other expenditures. Tax returns for students If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. Tax returns for students If you combine these expenses, you do not need to support the business purpose of each expense. Tax returns for students Instead, you can divide the expenses based on the total business use of the listed property. Tax returns for students   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. Tax returns for students For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. Tax returns for students You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. Tax returns for students Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Tax returns for students Confidential information. Tax returns for students   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. Tax returns for students You must keep it elsewhere and make it available as support to the IRS director for your area on request. Tax returns for students Substantial compliance. Tax returns for students   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. Tax returns for students   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. Tax returns for students By your own oral or written statement containing detailed information as to the element. Tax returns for students By other evidence sufficient to establish the element. Tax returns for students   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Tax returns for students If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Tax returns for students Sampling. Tax returns for students   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. Tax returns for students Example 1. Tax returns for students Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. Tax returns for students She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. Tax returns for students There is no other business use of the automobile, but she and family members also use it for personal purposes. Tax returns for students She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. Tax returns for students Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. Tax returns for students If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Tax returns for students Example 2. Tax returns for students Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. Tax returns for students Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. Tax returns for students The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Tax returns for students Example 3. Tax returns for students Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. Tax returns for students For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. Tax returns for students During these weeks, his business use of the automobile does not follow a consistent pattern. Tax returns for students During the fourth week of each month, he delivers all business orders taken during the previous month. Tax returns for students The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. Tax returns for students The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. Tax returns for students Loss of records. Tax returns for students   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Tax returns for students How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. Tax returns for students Any deduction for a vehicle. Tax returns for students A depreciation deduction for any other listed property. Tax returns for students If you claim any deduction for a vehicle, you also must provide the information requested in Section B. Tax returns for students If you provide the vehicle for your employee's use, the employee must give you this information. Tax returns for students If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. Tax returns for students Vehicles used by your employees. Tax returns for students   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. Tax returns for students You maintain a written policy statement that prohibits one of the following uses of the vehicles. Tax returns for students All personal use including commuting. Tax returns for students Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. Tax returns for students You treat all use of the vehicles by your employees as personal use. Tax returns for students You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. Tax returns for students For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. Tax returns for students Exceptions. Tax returns for students   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. Tax returns for students Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. Tax returns for students Prev  Up  Next   Home   More Online Publications