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Turbotax 2011 sign 3. Turbotax 2011 sign   Claiming the Special Depreciation Allowance Table of Contents Introduction What Is Qualified Property?Qualified Reuse and Recycling Property Qualified Cellulosic Biofuel Plant Property Qualified Disaster Assistance Property Certain Qualified Property Acquired After December 31, 2007 Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance How Much Can You Deduct? How Can You Elect Not To Claim an Allowance? When Must You Recapture an Allowance? Introduction You can take a special depreciation allowance to recover part of the cost of qualified property (defined next), placed in service during the tax year. Turbotax 2011 sign The allowance applies only for the first year you place the property in service. Turbotax 2011 sign For qualified property placed in service in 2013, you can take an additional 50% special allowance. Turbotax 2011 sign The allowance is an additional deduction you can take after any section 179 deduction and before you figure regular depreciation under MACRS for the year you place the property in service. Turbotax 2011 sign This chapter explains what is qualified property. Turbotax 2011 sign It also includes rules regarding how to figure an allowance, how to elect not to claim an allowance, and when you must recapture an allowance. Turbotax 2011 sign Corporations can elect to accelerate certain minimum tax credits in lieu of claiming the special depreciation allowance for eligible qualified property. Turbotax 2011 sign See Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance , later. Turbotax 2011 sign See chapter 6 for information about getting publications and forms. Turbotax 2011 sign What Is Qualified Property? Your property is qualified property if it is one of the following. Turbotax 2011 sign Qualified reuse and recycling property. Turbotax 2011 sign Qualified cellulosic biofuel plant property. Turbotax 2011 sign Qualified disaster assistance property. Turbotax 2011 sign Certain qualified property acquired after December 31, 2007. Turbotax 2011 sign The following discussions provide information about the types of qualified property listed above for which you can take the special depreciation allowance. Turbotax 2011 sign Qualified Reuse and Recycling Property You can take a 50% special depreciation allowance for qualified reuse and recycling property. Turbotax 2011 sign Qualified reuse and recycling property is any machinery or equipment (not including buildings or real estate), along with any appurtenance, that is used exclusively to collect, distribute, or recycle qualified reuse and recyclable materials (as defined in section 168(m)(3)(B) of the Internal Revenue Code). Turbotax 2011 sign Qualified reuse and recycling property also includes software necessary to operate such equipment. Turbotax 2011 sign The property must meet the following requirements. Turbotax 2011 sign The property must be depreciated under MACRS. Turbotax 2011 sign The property must have a useful life of at least 5 years. Turbotax 2011 sign The original use of the property must begin with you after August 31, 2008. Turbotax 2011 sign You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) after August 31, 2008, with no binding written contract for the acquisition in effect before September 1, 2008. Turbotax 2011 sign The property must be placed in service for use in your trade or business after August 31, 2008. Turbotax 2011 sign Excepted Property Qualified reuse and recycling property does not include any of the following. Turbotax 2011 sign Any rolling stock or other equipment used to transport reuse or recyclable materials. Turbotax 2011 sign Property required to be depreciated using the Alternative Depreciation System (ADS). Turbotax 2011 sign For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . Turbotax 2011 sign Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. Turbotax 2011 sign Property for which you elected not to claim any special depreciation allowance (discussed later). Turbotax 2011 sign Property placed in service and disposed of in the same tax year. Turbotax 2011 sign Property converted from business use to personal use in the same tax year acquired. Turbotax 2011 sign Property converted from personal use to business use in the same or later tax year may be qualified reuse and recycling property. Turbotax 2011 sign Qualified Cellulosic Biofuel Plant Property You can take a 50% special depreciation allowance for qualified cellulosic biofuel plant property. Turbotax 2011 sign Cellulosic biofuel is any liquid fuel which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis. Turbotax 2011 sign Examples include bagasse (from sugar cane), corn stalks, and switchgrass. Turbotax 2011 sign The property must meet the following requirements. Turbotax 2011 sign The property is used in the United States solely to produce cellulosic biofuel. Turbotax 2011 sign The original use of the property must begin with you after December 20, 2006. Turbotax 2011 sign You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) after December 20, 2006, with no binding written contract for acquisition in effect before December 21, 2006. Turbotax 2011 sign The property must be placed in service for use in your trade or business or for the production of income after October 3, 2008, and before January 3, 2013. Turbotax 2011 sign Note. Turbotax 2011 sign For property placed in service after January 2, 2013, and before January 1, 2014, you can take a 50% special depreciation allowance for qualified second generation biofuel plant property that is used solely in the United States to produce second generation biofuel (as defined in section 40(b)(6)(E)). Turbotax 2011 sign The other requirements for qualified second generation biofuel plant property to be eligible for the special depreciation allowance are identical to the requirements discussed for Qualified Cellulosic Biofuel Plant Property above. Turbotax 2011 sign Special Rules Sale-leaseback. Turbotax 2011 sign   If you sold qualified cellulosic biofuel plant property you placed in service after October 3, 2008, and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. Turbotax 2011 sign   The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before December 21, 2006. Turbotax 2011 sign Syndicated leasing transactions. Turbotax 2011 sign   If qualified cellulosic biofuel plant property is originally placed in service by a lessor after October 3, 2008, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. Turbotax 2011 sign   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of sale if the property is sold within 3 months after the final unit is placed in service and the period between the times the first and last units are placed in service does not exceed 12 months. Turbotax 2011 sign Excepted Property Qualified cellulosic biofuel plant property does not include any of the following. Turbotax 2011 sign Property placed in service and disposed of in the same tax year. Turbotax 2011 sign Property converted from business use to personal use in the same tax year it is acquired. Turbotax 2011 sign Property converted from personal use to business use in the same or later tax year may be qualified cellulosic biomass ethanol plant property. Turbotax 2011 sign Property required to be depreciated using the Alternative Depreciation System (ADS). Turbotax 2011 sign For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . Turbotax 2011 sign Property any portion of which is financed with the proceeds of any obligation the interest on which is exempt from tax under section 103 of the Internal Revenue Code. Turbotax 2011 sign Property for which you elected not to claim any special depreciation allowance (discussed later). Turbotax 2011 sign Property for which a deduction was taken under section 179C for certain qualified refinery property. Turbotax 2011 sign Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. Turbotax 2011 sign Qualified Disaster Assistance Property You can take a 50% special depreciation allowance for qualified disaster assistance property placed in service in federally declared disaster areas in which the disaster occurred in 2009. Turbotax 2011 sign A list of the federally declared disaster areas is available at the FEMA website at www. Turbotax 2011 sign fema. Turbotax 2011 sign gov. Turbotax 2011 sign Your property is qualified disaster assistance property if it meets the following requirements. Turbotax 2011 sign The property is nonresidential real property or residential real property placed in service before January 1, 2014, in a federally declared disaster area in which the disaster occurred in 2009. Turbotax 2011 sign You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) on or after the applicable disaster date, with no binding written contract for the acquisition in effect before the applicable disaster date. Turbotax 2011 sign The property must rehabilitate property damaged, or replace property destroyed or condemned, as a result of the applicable federally declared disaster. Turbotax 2011 sign The property must be similar in nature to, and located in the same county as, the rehabilitated or replaced property. Turbotax 2011 sign The original use of the property within the applicable disaster area must have begun with you on or after the applicable disaster date. Turbotax 2011 sign The property is placed in service by you on or before the date which is the last day of the fourth calendar year. Turbotax 2011 sign Substantially all (80% or more) of the use of the property must be in the active conduct of your trade or business in a federally declared disaster area, occurring in 2009. Turbotax 2011 sign It is not excepted property (explained later in Excepted Property ). Turbotax 2011 sign Special Rules Sale-leaseback. Turbotax 2011 sign   If you sold qualified disaster assistance property you placed in service after the applicable disaster date and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. Turbotax 2011 sign   The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before the applicable disaster date. Turbotax 2011 sign Syndicated leasing transactions. Turbotax 2011 sign   If qualified disaster assistance property is originally placed in service by a lessor after the applicable disaster date, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. Turbotax 2011 sign   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of sale if the property is sold within 3 months after the final unit is placed in service and the period between the times the first and last units are placed in service does not exceed 12 months. Turbotax 2011 sign Excepted Property Qualified disaster assistance property does not include any of the following. Turbotax 2011 sign Property required to be depreciated using the Alternative Depreciation System (ADS). Turbotax 2011 sign For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . Turbotax 2011 sign Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103 of the Internal Revenue Code. Turbotax 2011 sign Any qualified revitalization building (defined later) placed in service before January 1, 2010, for which you have elected to claim a commercial revitalization deduction for qualified revitalization expenditures. Turbotax 2011 sign Any property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store, the principal business of which is the sale of alcoholic beverages for consumption off premises. Turbotax 2011 sign Any property for which the special allowance under section 168(k) or section 1400N(d) of the Internal Revenue Code applies. Turbotax 2011 sign Property for which you elected not to claim any special depreciation allowance (discussed later). Turbotax 2011 sign Property placed in service and disposed of in the same tax year. Turbotax 2011 sign Property converted from business use to personal use in the same tax year acquired. Turbotax 2011 sign Property converted from personal use to business use in the same or later tax year may be qualified disaster assistance property. Turbotax 2011 sign Any gambling or animal racing property (defined later). Turbotax 2011 sign Qualified revitalization building. Turbotax 2011 sign   This is a commercial building and its structural components that you placed in service in a renewal community before January 1, 2010. Turbotax 2011 sign If the building is new, the original use of the building must begin with you. Turbotax 2011 sign If the building is not new, you must substantially rehabilitate the building and then place it in service. Turbotax 2011 sign For more information, including definitions of substantially rehabilitated building and qualified revitalization expenditure, see section 1400I(b) of the Internal Revenue Code. Turbotax 2011 sign Gambling or animal racing property. Turbotax 2011 sign   Gambling or animal racing property includes the following personal and real property. Turbotax 2011 sign Any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing. Turbotax 2011 sign Any real property determined by square footage (other than any portion that is less than 100 square feet) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing. Turbotax 2011 sign Certain Qualified Property Acquired After December 31, 2007 You can take a 50% special depreciation deduction allowance for certain qualified property acquired after December 31, 2007. Turbotax 2011 sign Your property is qualified property if it meets the following requirements. Turbotax 2011 sign It is one of the following types of property. Turbotax 2011 sign Tangible property depreciated under MACRS with a recovery period of 20 years or less. Turbotax 2011 sign Water utility property. Turbotax 2011 sign Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. Turbotax 2011 sign (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Turbotax 2011 sign ) Qualified leasehold improvement property (defined under Qualified leasehold improvement property later). Turbotax 2011 sign You must have acquired the property after December 31, 2007, with no binding written contract for the acquisition in effect before January 1, 2008. Turbotax 2011 sign The property must be placed in service for use in your trade or business or for the production of income before January 1, 2014 (before January 1, 2015, for certain property with a long production period and certain aircraft (defined next)). Turbotax 2011 sign The original use of the property must begin with you after December 31, 2007. Turbotax 2011 sign It is not excepted property (explained later in Excepted property). Turbotax 2011 sign Qualified leasehold improvement property. Turbotax 2011 sign    Generally, this is any improvement to an interior part of a building that is nonresidential real property, if all the following requirements are met. Turbotax 2011 sign The improvement is made under or according to a lease by the lessee (or any sublessee) or the lessor of that part of the building. Turbotax 2011 sign That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. Turbotax 2011 sign The improvement is placed in service more than 3 years after the date the building was first placed in service by any person. Turbotax 2011 sign The improvement is section 1250 property. Turbotax 2011 sign See chapter 3 in Publication 544, Sales and Other Dispositions of Assets, for the definition of section 1250 property. Turbotax 2011 sign   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. Turbotax 2011 sign The enlargement of the building. Turbotax 2011 sign Any elevator or escalator. Turbotax 2011 sign Any structural component benefiting a common area. Turbotax 2011 sign The internal structural framework of the building. Turbotax 2011 sign   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. Turbotax 2011 sign However, a lease between related persons is not treated as a lease. Turbotax 2011 sign Related persons. Turbotax 2011 sign   For this purpose, the following are related persons. Turbotax 2011 sign Members of an affiliated group. Turbotax 2011 sign An individual and a member of his or her family, including only a spouse, child, parent, brother, sister, half-brother, half-sister, ancestor, and lineal descendant. Turbotax 2011 sign A corporation and an individual who directly or indirectly owns 80% or more of the value of the outstanding stock of that corporation. Turbotax 2011 sign Two corporations that are members of the same controlled group. Turbotax 2011 sign A trust fiduciary and a corporation if 80% or more of the value of the outstanding stock is directly or indirectly owned by or for the trust or grantor of the trust. Turbotax 2011 sign The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Turbotax 2011 sign The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. Turbotax 2011 sign A tax-exempt educational or charitable organization and any person (or, if that person is an individual, a member of that person's family) who directly or indirectly controls the organization. Turbotax 2011 sign Two S corporations, and an S corporation and a regular corporation, if the same persons own 80% or more of the value of the outstanding stock of each corporation. Turbotax 2011 sign A corporation and a partnership if the same persons own both of the following. Turbotax 2011 sign 80% or more of the value of the outstanding stock of the corporation. Turbotax 2011 sign 80% or more of the capital or profits interest in the partnership. Turbotax 2011 sign The executor and beneficiary of any estate. Turbotax 2011 sign Long Production Period Property To be qualified property, long production period property must meet the following requirements. Turbotax 2011 sign It must meet the requirements in (2)-(5), above. Turbotax 2011 sign The property has a recovery period of at least 10 years or is transportation property. Turbotax 2011 sign Transportation property is tangible personal property used in the trade or business of transporting persons or property. Turbotax 2011 sign The property is subject to section 263A of the Internal Revenue Code. Turbotax 2011 sign The property has an estimated production period exceeding 1 year and an estimated production cost exceeding $1,000,000. Turbotax 2011 sign Noncommercial Aircraft To be qualified property, noncommercial aircraft must meet the following requirements. Turbotax 2011 sign It must meet the requirements in (2)-(5), above. Turbotax 2011 sign The aircraft must not be tangible personal property used in the trade or business of transporting persons or property (except for agricultural or firefighting purposes). Turbotax 2011 sign The aircraft must be purchased (as discussed under Property Acquired by Purchase in chapter 2 ) by a purchaser who at the time of the contract for purchase, makes a nonrefundable deposit of the lesser of 10% of the cost or $100,000. Turbotax 2011 sign The aircraft must have an estimated production period exceeding four months and a cost exceeding $200,000. Turbotax 2011 sign Special Rules Sale-leaseback. Turbotax 2011 sign   If you sold qualified property you placed in service after December 31, 2007, and leased it back within 3 months after you originally placed in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. Turbotax 2011 sign   The property will not qualify for the special depreciation allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before January 1, 2008. Turbotax 2011 sign Syndicated leasing transactions. Turbotax 2011 sign   If qualified property is originally placed in service by a lessor after December 31, 2007, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. Turbotax 2011 sign   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of the last sale if the property is sold within 3 months after the final unit is placed in service and the period between the time the first and last units are placed in service does not exceed 12 months. Turbotax 2011 sign Excepted Property Qualified property does not include any of the following. Turbotax 2011 sign Property placed in service and disposed of in the same tax year. Turbotax 2011 sign Property converted from business use to personal use in the same tax year acquired. Turbotax 2011 sign Property converted from personal use to business use in the same or later tax year may be qualified property. Turbotax 2011 sign Property required to be depreciated under the Alternative Depreciation System (ADS). Turbotax 2011 sign This includes listed property used 50% or less in a qualified business use. Turbotax 2011 sign For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . Turbotax 2011 sign Qualified restaurant property (as defined in section 168(e)(7) of the Internal Revenue Code). Turbotax 2011 sign Qualified retail improvement property (as defined in section 168(e)(8) of the Internal Revenue Code). Turbotax 2011 sign Property for which you elected not to claim any special depreciation allowance (discussed later). Turbotax 2011 sign Property for which you elected to accelerate certain credits in lieu of the special depreciation allowance (discussed next). Turbotax 2011 sign Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance An election made by a corporation to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, continues to apply to round 2 extension property (as defined in section 168(k)(4)(I)(iv)), unless the corporation made an election not to apply the section 168(k)(4) election to round 2 extension property for its first tax year ending after December 31, 2010. Turbotax 2011 sign For 2013, round 2 extension property generally is long production period and noncommercial aircraft if acquired after March 31, 2008, and placed in service after December 31, 2012, but before January 1, 2014. Turbotax 2011 sign An election made by a corporation to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, continues to apply to round 3 extension property (as defined in section 168(k)(4)(J)(iv)), unless the corporation makes an election not to apply the section 168(k)(4) election to round 3 extension property. Turbotax 2011 sign If a corporation did not make a section 168(k)(4) election for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, the corporation may elect for its first tax year ending after December 31, 2012, to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for only round 3 extension property. Turbotax 2011 sign If you make an election to accelerate these credits in lieu of claiming the special depreciation allowance for eligible property, you must not take the 50% special depreciation allowance for the property and must depreciate the basis in the property under MACRS using the straight line method. Turbotax 2011 sign See Which Depreciation Method Applies in chapter 4 . Turbotax 2011 sign Once made, the election cannot be revoked without IRS consent. Turbotax 2011 sign Additional guidance. Turbotax 2011 sign   For additional guidance on the election to accelerate the research or minimum tax credit in lieu of claiming the special depreciation allowance, see Rev. Turbotax 2011 sign Proc. Turbotax 2011 sign 2008-65 on page 1082 of Internal Revenue Bulletin 2008-44, available at www. Turbotax 2011 sign irs. Turbotax 2011 sign gov/pub/irs-irbs/irb08-44. Turbotax 2011 sign pdf, Rev. Turbotax 2011 sign Proc. Turbotax 2011 sign 2009-16 on page 449 of Internal Revenue Bulletin 2009-06, available at www. Turbotax 2011 sign irs. Turbotax 2011 sign gov/pub/irs-irbs/irb09-06. Turbotax 2011 sign pdf, and Rev. Turbotax 2011 sign Proc. Turbotax 2011 sign 2009-33 on page 150 of Internal Revenue Bulletin 2009-29, available at www. Turbotax 2011 sign irs. Turbotax 2011 sign gov/pub/irs-irbs/irb09-29. Turbotax 2011 sign pdf. Turbotax 2011 sign Also, see Form 3800, General Business Credit; Form 8827, Credit for Prior Year Minimum Tax — Corporations; and related instructions. Turbotax 2011 sign   Additional guidance regarding the election to accelerate the minimum tax credit in lieu of claiming the special depreciation allowance for round 2 extension property and round 3 extension property may also be available in later Internal Revenue Bulletins available at www. Turbotax 2011 sign irs. Turbotax 2011 sign gov/irb. Turbotax 2011 sign How Much Can You Deduct? Figure the special depreciation allowance by multiplying the depreciable basis of qualified reuse and recycling property, qualified cellulosic biofuel plant property, qualified disaster assistance property, and certain qualified property acquired after December 31, 2007, by 50%. Turbotax 2011 sign For qualified property other than listed property, enter the special allowance on line 14 in Part II of Form 4562. Turbotax 2011 sign For qualified property that is listed property, enter the special allowance on line 25 in Part V of Form 4562. Turbotax 2011 sign If you place qualified property in service in a short tax year, you can take the full amount of a special depreciation allowance. Turbotax 2011 sign Depreciable basis. Turbotax 2011 sign   This is the property's cost or other basis multiplied by the percentage of business/investment use, reduced by the total amount of any credits and deductions allocable to the property. Turbotax 2011 sign   The following are examples of some credits and deductions that reduce depreciable basis. Turbotax 2011 sign Any section 179 deduction. Turbotax 2011 sign Any deduction for removal of barriers to the disabled and the elderly. Turbotax 2011 sign Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. Turbotax 2011 sign Basis adjustment to investment credit property under section 50(c) of the Internal Revenue Code. Turbotax 2011 sign   For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. Turbotax 2011 sign   For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . Turbotax 2011 sign For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . Turbotax 2011 sign Depreciating the remaining cost. Turbotax 2011 sign   After you figure your special depreciation allowance for your qualified property, you can use the remaining cost to figure your regular MACRS depreciation deduction (discussed in chapter 4 . Turbotax 2011 sign Therefore, you must reduce the depreciable basis of the property by the special depreciation allowance before figuring your regular MACRS depreciation deduction. Turbotax 2011 sign Example. Turbotax 2011 sign On November 1, 2013, Tom Brown bought and placed in service in his business qualified property that cost $450,000. Turbotax 2011 sign He did not elect to claim a section 179 deduction. Turbotax 2011 sign He deducts 50% of the cost ($225,000) as a special depreciation allowance for 2013. Turbotax 2011 sign He uses the remaining $225,000 of cost to figure his regular MACRS depreciation deduction for 2013 and later years. Turbotax 2011 sign Like-kind exchanges and involuntary conversions. Turbotax 2011 sign   If you acquire qualified property in a like-kind exchange or involuntary conversion, the carryover basis of the acquired property is eligible for a special depreciation allowance. Turbotax 2011 sign After you figure your special allowance, you can use the remaining carryover basis to figure your regular MACRS depreciation deduction. Turbotax 2011 sign In the year you claim the allowance (the year you place in service the property received in the exchange or dispose of involuntarily converted property), you must reduce the carryover basis of the property by the allowance before figuring your regular MACRS depreciation deduction. Turbotax 2011 sign See Figuring the Deduction for Property Acquired in a Nontaxable Exchange , in chapter 4 under How Is the Depreciation Deduction Figured . Turbotax 2011 sign The excess basis (the part of the acquired property's basis that exceeds its carryover basis) is also eligible for a special depreciation allowance. Turbotax 2011 sign How Can You Elect Not To Claim an Allowance? You can elect, for any class of property, not to deduct any special allowances for all property in such class placed in service during the tax year. Turbotax 2011 sign To make an election, attach a statement to your return indicating what election you are making and the class of property for which you are making the election. Turbotax 2011 sign When to make election. Turbotax 2011 sign   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. Turbotax 2011 sign   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). Turbotax 2011 sign Attach the election statement to the amended return. Turbotax 2011 sign On the amended return, write “Filed pursuant to section 301. Turbotax 2011 sign 9100-2. Turbotax 2011 sign ” Revoking an election. Turbotax 2011 sign   Once you elect not to deduct a special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Turbotax 2011 sign A request to revoke the election is a request for a letter ruling. Turbotax 2011 sign If you elect not to have any special allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. Turbotax 2011 sign When Must You Recapture an Allowance? When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. Turbotax 2011 sign See When Do You Recapture MACRS Depreciation in chapter 4 or more information. Turbotax 2011 sign Recapture of allowance deducted for qualified GO Zone property. Turbotax 2011 sign   If, in any year after the year you claim the special depreciation allowance for qualified GO Zone property (including specified GO Zone extension property), the property ceases to be used in the GO Zone, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. Turbotax 2011 sign For additional guidance, see Notice 2008-25 on page 484 of Internal Revenue Bulletin 2008-9. Turbotax 2011 sign Qualified cellulosic biomass ethanol plant property and qualified cellulosic biofuel plant property. Turbotax 2011 sign   If, in any year after the year you claim the special depreciation allowance for any qualified cellulosic biomass ethanol plant property or qualified biofuel plant property, the property ceases to be qualified cellulosic biomass ethanol plant property or qualified biofuel plant property, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. Turbotax 2011 sign Recapture of allowance for qualified Recovery Assistance property. Turbotax 2011 sign   If, in any year after the year you claim the special depreciation allowance for qualified Recovery Assistance property, the property ceases to be used in the Kansas disaster area, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. Turbotax 2011 sign For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. Turbotax 2011 sign Recapture of allowance for qualified disaster assistance property. Turbotax 2011 sign   If, in any year after the year you claim the special depreciation allowance for qualified disaster assistance property, the property ceases to be used in the applicable disaster area, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. Turbotax 2011 sign   For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. Turbotax 2011 sign Prev  Up  Next   Home   More Online Publications
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Turbotax 2011 sign Listed Property Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Listed Property DefinedPassenger Automobile Defined Dwelling Unit Other Property Used for Transportation Computers and Related Peripheral Equipment Predominant Use TestMeeting the Predominant Use Test Qualified Business Use Method of Allocating Use Applying the Predominant Use Test Deductions After Recovery Period Leased PropertyLessor Lessee What Records Must Be KeptAdequate Records Reporting Information on Form 4562 Deductions in Later Years Appendix Topics - This chapter discusses: Listed property defined The predominant use test What records must be kept Useful Items - You may want to see: Publication 463 Travel, Entertainment, and Gift Expenses 587 Business Use of Your Home (Including Use by Day-Care Providers) 917 Business Use of a Car 946 How To Depreciate Property Form (and Instructions) 2106–EZ Unreimbursed Employee Business Expenses 2106 Employee Business Expenses 4255 Recapture of Investment Credit 4562 Depreciation and Amortization This chapter discusses some special rules and recordkeeping requirements for listed property. Turbotax 2011 sign For complete coverage of the rules, including the rules concerning passenger automobiles, see Publication 946. Turbotax 2011 sign If listed property is not used predominantly (more than 50%) in a qualified business use as discussed inPredominant Use Test, later, the section 179 deduction is not allowable and the property must be depreciated using the straight line method. Turbotax 2011 sign Listed Property Defined Listed property is any of the following: Any passenger automobile (defined later), Any other property used for transportation, Any property of a type generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment), Any computer and related peripheral equipment, defined later, unless it is used only at a regular business establishment and owned or leased by the person operating the establishment. Turbotax 2011 sign A regular business establishment includes a portion of a dwelling unit (defined later), if, and only if, that portion is used both regularly and exclusively for business as discussed in Publication 587. Turbotax 2011 sign Any cellular telephone (or similar telecommunication equipment) placed in service or leased in a tax year beginning after 1989. Turbotax 2011 sign Passenger Automobile Defined 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 (at 6,000 pounds or less of gross vehicle weight for trucks and vans). Turbotax 2011 sign It includes any part, component, or other item physically attached to the automobile or usually included in the purchase price of an automobile. Turbotax 2011 sign A passenger automobile does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business, and A vehicle used directly in the trade or business of transporting persons or property for compensation or hire. Turbotax 2011 sign Dwelling Unit A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. Turbotax 2011 sign It does not include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis. Turbotax 2011 sign Other Property Used for Transportation Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles for transporting persons or goods. Turbotax 2011 sign Listed property does not include: Any vehicle which, by reason of its design, is not likely to be used more than a minimal amount for personal purposes, such as clearly marked police and fire vehicles, ambulances, or hearses used for those purposes, Any vehicle that is designed to carry cargo and that has a loaded gross vehicle weight over 14,000 pounds, bucket trucks (cherry pickers), cement mixers, combines, cranes and derricks, delivery trucks with seating only for the driver (or only for the driver plus a folding jump seat), dump trucks (including garbage trucks), flatbed trucks, forklifts, qualified moving vans, qualified specialized utility repair trucks, and refrigerated trucks, Any passenger bus used for that purpose with a capacity of at least 20 passengers and school buses, Any tractor or other special purpose farm vehicle, and unmarked vehicles used by law enforcement officers if the use is officially authorized, and Any vehicle, such as a taxicab, if substantially all its use is in the trade or business of providing services to transport persons or property for compensation or hire by unrelated persons. Turbotax 2011 sign Computers and Related Peripheral Equipment A computer is a programmable electronically activated device that: Is capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention, and Consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Turbotax 2011 sign Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Turbotax 2011 sign Computer or peripheral equipment does not include: Any equipment which is an integral part of property which is not a computer, Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment, and Equipment of a kind, used primarily for the user's amusement or entertainment, such as video games. Turbotax 2011 sign Predominant Use Test If “listed property,” defined earlier, placed in service after June 18, 1984, is not used predominantly (more than 50%) in a qualified business use during any tax year: The section 179 deduction on the property is not allowable, and You must depreciate the property using the straight line method. Turbotax 2011 sign Listed property placed in service before 1987. Turbotax 2011 sign   For listed property placed in service before 1987, depreciate the property over the following period: Class of Property Listed Property Recovery Period 3-year property 5 years 5-year property 12 years 10-year property 25 years 18-year real property 40 years 19-year real property 40 years If you must use the above recovery periods for listed property not used predominantly in a trade or business, use the percentages from Table 16 titled Listed Property Not Used Predominantly (Other Than 18- or 19-year Real Property), and Table 17 for 18- or 19-year real property, near the end of this publication in the Appendix. Turbotax 2011 sign Listed property placed in service after 1986. Turbotax 2011 sign   For information on listed property placed in service after 1986, see Publication 946. Turbotax 2011 sign Meeting the Predominant Use Test Listed property meets the predominant use test for any tax year if its business use is more than 50% of its total use. Turbotax 2011 sign You must allocate the use of any item of listed property used for more than one purpose during the tax year among its various uses. Turbotax 2011 sign The percentage of investment use of listed property cannot be used as part of the percentage of qualified business use to meet the predominant use test. Turbotax 2011 sign However, the combined total of business and investment use is taken into account to figure your depreciation deduction for the property. Turbotax 2011 sign Note: Property does not stop being predominantly used in a qualified business use because of a transfer at death. Turbotax 2011 sign Example. Turbotax 2011 sign Sarah Bradley uses a home computer 50% of the time to manage her investments. Turbotax 2011 sign She also uses the computer 40% of the time in her part-time consumer research business. Turbotax 2011 sign Sarah's home computer is listed property because it is not used at a regular business establishment. Turbotax 2011 sign Because her business use of the computer does not exceed 50%, the computer is not predominantly used in a qualified business use for the tax year. Turbotax 2011 sign Because she does not meet the predominant use test, she cannot elect a section 179 deduction for this property. Turbotax 2011 sign Her combined rate of business/investment use for determining her depreciation deduction is 90%. Turbotax 2011 sign Qualified Business Use A qualified business use is any use in your trade or business. Turbotax 2011 sign However, it does not include: The use of property held merely to produce income (investment use), The leasing of property to any 5% owner or related person (to the point that the property is used by a 5% owner or person related to the owner or lessee of the property), The use of property as compensation for the performance of services by a 5% owner or related person, or The use of property as compensation for the performance of services by any person (other than a5% owner or related person) unless the value of the use is included in that person's gross income for the use of the property and income tax is withheld on that amount where required. Turbotax 2011 sign See Employees, later. Turbotax 2011 sign 5% owner. Turbotax 2011 sign   A 5% owner of a business, other than a corporation, is any person who owns more than 5% of the capital or profits interest in the business. Turbotax 2011 sign   A 5% owner of a corporation is any person who owns, or is considered to own: More than 5% of the outstanding stock of the corporation, or Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Turbotax 2011 sign Related person. Turbotax 2011 sign   A related person is anyone related to a taxpayer as discussed under Related persons, in chapter 2 under Nonqualifying Property in Publication 946. Turbotax 2011 sign Entertainment Use The use of listed property for entertainment, recreation, or amusement purposes is treated as a qualified business use only to the extent that expenses (other than interest and property tax expenses) for its use are deductible as ordinary and necessary business expenses. Turbotax 2011 sign See Publication 463. Turbotax 2011 sign Leasing or Compensatory Use of Aircraft If at least 25% of the total use of any aircraft during the tax year is for a qualified business use, the leasing or compensatory use of the aircraft by a 5% owner or related person is treated as a qualified business use. Turbotax 2011 sign Commuting The use of a vehicle for commuting is not business use, regardless of whether work is performed during the trip. Turbotax 2011 sign Use of Your Passenger Automobile by Another Person If someone else uses your automobile, that use is not business use unless: That use is directly connected with your business, The value of the use is property reported by you as income to the other person and tax is withheld on the income where required, or The value of the use results in a payment of fair market rent. Turbotax 2011 sign Any payment to you for the use of the automobile is treated as a rent payment for 3). Turbotax 2011 sign Employees Any use by an employee of his or her own listed property (or listed property rented by an employee) in performing services as an employee is not business use unless: The use is for the employer's convenience, and The use is required as a condition of employment. Turbotax 2011 sign Use for the employer's convenience. Turbotax 2011 sign   Whether the use of listed property is for the employer's convenience must be determined from all the facts. Turbotax 2011 sign The use is for the employer's convenience if it is for a substantial business reason of the employer. Turbotax 2011 sign The use of listed property during the employee's regular working hours to carry on the employer's business is generally for the employer's convenience. Turbotax 2011 sign Use required as a condition of employment. Turbotax 2011 sign   Whether the use of listed property is a condition of employment depends on all the facts and circumstances. Turbotax 2011 sign The use of property must be required for the employee to perform duties properly. Turbotax 2011 sign The employer need not explicitly require the employee to use the property. Turbotax 2011 sign A mere statement by the employer that the use of the property is a condition of employment is not sufficient. Turbotax 2011 sign Example 1. Turbotax 2011 sign Virginia Sycamore is employed as a courier with We Deliver which provides local courier services. Turbotax 2011 sign She owns and uses a motorcycle to deliver packages to downtown offices. Turbotax 2011 sign We Deliver explicitly requires all delivery persons to own a small car or motorcycle for use in their employment. Turbotax 2011 sign The company reimburses delivery persons for their costs. Turbotax 2011 sign Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Turbotax 2011 sign Example 2. Turbotax 2011 sign Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Turbotax 2011 sign He must travel to these sites on a regular basis. Turbotax 2011 sign Uplift does not furnish an automobile or explicitly require him to use his own automobile. Turbotax 2011 sign However, it reimburses him for any costs he incurs in traveling to the various sites. Turbotax 2011 sign The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Turbotax 2011 sign Method of Allocating Use For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Turbotax 2011 sign You determine the percentage of qualified business use by dividing the number of miles the vehicle is driven for business purposes during the year by the total number of miles the vehicle is driven for all purposes (including business miles) during the year. Turbotax 2011 sign For other items of listed property, allocate the property's use on the basis of the most appropriate unit of time. Turbotax 2011 sign For example, you can determine the percentage of business use of a computer by dividing the number of hours the computer is used for business purposes during the year by the total number of hours the computer is used for all purposes (including business hours) during the year. Turbotax 2011 sign Applying the Predominant Use Test You must apply the predominant use test for an item of listed property each year of the recovery period. Turbotax 2011 sign First Recovery Year If any item of listed property is not used predominantly in a qualified business use in the year it is placed in service: The property is not eligible for a section 179 deduction, and The depreciation deduction must be figured using the straight line method. Turbotax 2011 sign Note: The required use of the straight line method for an item of listed property that does not meet the predominant use test is not the same as electing the straight line method. Turbotax 2011 sign 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. Turbotax 2011 sign Years After the First Recovery Year If you use listed property predominantly (more than 50%) in a qualified business use in the tax year you place it in service, but not in a subsequent tax year during the recovery period, the following rules apply: Figure depreciation using the straight line method. Turbotax 2011 sign Do this for each year, beginning with the year you no longer use the property predominantly in a qualified business use, and Figure any excess depreciation on the property and add it to: Your gross income, and The adjusted basis of your property. Turbotax 2011 sign See Recapture of excess depreciation, next. Turbotax 2011 sign Recapture of excess depreciation. Turbotax 2011 sign   You must include any excess depreciation in your gross income for the first tax year the property is not predominantly used in a qualified business use. Turbotax 2011 sign Any excess depreciation must also be added to the adjusted basis of your property. Turbotax 2011 sign Excess depreciation is the excess (if any) of: The amount of depreciation allowable for the property (including any section 179 deduction claimed) for tax years before the first tax year the property was not predominantly used in a qualified business use, over The amount of depreciation that would have been allowable for those years if the property were not used predominantly in a qualified business use for the year it was placed in service. Turbotax 2011 sign This means you figure your depreciation using the percentages fromTable 16 or 17. Turbotax 2011 sign For information on investment credit recapture, see the instructions for Form 4255. Turbotax 2011 sign Deductions After Recovery Period When listed property (other than passenger automobiles) is used for business, investment, and personal purposes, no deduction is ever allowable for the personal use. Turbotax 2011 sign In tax years after the recovery period, you must determine if there is any unrecovered basis remaining before you compute the depreciation deduction for that tax year. Turbotax 2011 sign To make this determination, figure the depreciation for earlier tax years as if your property were used 100% for business or investment purposes, beginning with the first tax year in which some or all use is for business or investment. Turbotax 2011 sign See Car Used 50% or Less for Business in Publication 917. Turbotax 2011 sign Leased Property The limitations on cost recovery deductions apply to the rental of listed property. Turbotax 2011 sign The following discussion covers the rules that apply to the lessor (the owner of the property) and the lessee (the person who rents the property from the owner). Turbotax 2011 sign SeeLeasing a Car in Publication 917 for a discussion of leased passenger automobiles. Turbotax 2011 sign Lessor The limitations on cost recovery generally do not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Turbotax 2011 sign A person is considered regularly engaged in the business of leasing listed property only if contracts for leasing of listed property are entered into with some frequency over a continuous period of time. Turbotax 2011 sign This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of the person's business in its entirety. Turbotax 2011 sign Occasional or incidental leasing activity is insufficient. Turbotax 2011 sign For example, a person leasing only one passenger automobile during a tax year is not regularly engaged in the business of leasing automobiles. Turbotax 2011 sign 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. Turbotax 2011 sign Lessee A lessee of listed property (other than passenger automobiles), must include an amount in gross income called the inclusion amount for the first tax year the property is not used predominantly in a qualified business use. Turbotax 2011 sign Inclusion amount for property leased before 1987. Turbotax 2011 sign   You determine the inclusion amount for property leased after June 18, 1984 and before 1987 by multiplying the fair market value of the property by both the average business/investment use percentage and the applicable percentage. Turbotax 2011 sign You can find the applicable percentages for listed property that is 5- or 10-year recovery property in Tables 19 or 20 in Appendix A of Publication 946. Turbotax 2011 sign   The lease term for listed property other than 18- or 19-year real property, and residential rental or nonresidential real property, includes options to renew. Turbotax 2011 sign For 18- or 19-year real property and residential rental or nonresidential real property that is listed property, the period of the lease does not include any option to renew at fair market value, determined at the time of renewal. Turbotax 2011 sign You treat 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 as one lease. Turbotax 2011 sign Special rules. Turbotax 2011 sign   The lessee adds the inclusion amount to gross income in the next tax year if: The lease term begins within 9 months before the close of the lessee's tax year, The lessee does not use the property predominantly in a qualified business use during that portion of the tax year, and The lease term continues into the lessee's next tax year. Turbotax 2011 sign The lessee determines the inclusion amount by taking into account the average of the business/investment use for both tax years and the applicable percentage for the tax year the lease term begins. Turbotax 2011 sign   If the lease term is less than one year, the amount included in gross income is the amount that bears the same ratio to the additional inclusion amount as the number of days in the lease term bears to 365. Turbotax 2011 sign Maximum inclusion amount. Turbotax 2011 sign   The inclusion amount cannot be more than the sum of the deductible amounts of rent allocable to the lessee's tax year in which the amount must be included in gross income. Turbotax 2011 sign What Records Must Be Kept You cannot take any depreciation or section 179 deduction for the use of listed property (including passenger automobiles) unless you can prove business/investment use with adequate records or sufficient evidence to support your own statements. Turbotax 2011 sign How long to keep records. Turbotax 2011 sign   For listed property, records must be kept for as long as any excess depreciation can be recaptured (included in income). Turbotax 2011 sign 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. Turbotax 2011 sign It is not necessary to record information in an account book, diary, or similar record if the information is already shown on the receipt. Turbotax 2011 sign However, your records should back up your receipts in an orderly manner. Turbotax 2011 sign Elements of Expenditure or Use The records or other documentary evidence must support: 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, 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, The date of the expenditure or use, and The business or investment purpose for the expenditure or use. Turbotax 2011 sign Written documents of your expenditure or use are generally better evidence than oral statements alone. Turbotax 2011 sign A written record prepared at or near the time of the expenditure or use has greater value as proof of the expenditure or use. Turbotax 2011 sign A daily log is not required. Turbotax 2011 sign 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 and backed up by other documents is preferable to a statement prepared later. Turbotax 2011 sign Timeliness The elements of an expenditure or use must be recorded at the time you have full knowledge of the elements. Turbotax 2011 sign 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 is generally considered a timely record if in the regular course of business: The statement is submitted by an employee to the employer, or The statement is submitted by an independent contractor to the client or customer. Turbotax 2011 sign For example, a log maintained on a weekly basis, which accounts for use during the week, will be considered a record made at or near the time of use. Turbotax 2011 sign Business Purpose Supported An adequate record of business purpose must generally be in the form of a written statement. Turbotax 2011 sign However, the amount of backup necessary to establish a business purpose depends on the facts and circumstances of each case. Turbotax 2011 sign A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Turbotax 2011 sign 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. Turbotax 2011 sign Business Use Supported An adequate record contains enough information on each element of every business or investment use. Turbotax 2011 sign The amount of detail required to support the use depends on the facts and circumstances. Turbotax 2011 sign For example, a taxpayer whose only business use of a 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. Turbotax 2011 sign Although an adequate record generally must be written, a record of the business use of listed property, such as a computer or automobile, can be prepared in a computer memory device using a logging program. Turbotax 2011 sign Separate or Combined Expenditures or Uses Each use by you is normally considered a separate use. Turbotax 2011 sign However, repeated uses can be combined as a single item. Turbotax 2011 sign Each expenditure is recorded as a separate item and not combined with other expenditures. Turbotax 2011 sign If you choose, however, amounts spent for the use of listed property during a tax year, such as for gasoline or automobile repairs, can be combined. Turbotax 2011 sign If these expenses are combined, you do not need to support the business purpose of each expense. Turbotax 2011 sign Instead, you can divide the expenses based on the total business use of the listed property. Turbotax 2011 sign Uses which can be considered part of a single use, such as a round trip or uninterrupted business use, can be accounted for by a single record. Turbotax 2011 sign For example, use of a truck to make deliveries at several locations which begin and end at the business premises and can include a stop at the business in between deliveries can be accounted for by a single record of miles driven. Turbotax 2011 sign Use of a passenger automobile by a salesperson for a business trip away from home over a period of time can be accounted for by a single record of miles traveled. Turbotax 2011 sign Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Turbotax 2011 sign Confidential Information If any of the information on the elements of an expenditure or use is confidential, it does not need to be in the account book or similar record if it is recorded at or near the time of the expenditure or use. Turbotax 2011 sign It must be kept elsewhere and made available as support to the district director on request. Turbotax 2011 sign Substantial Compliance 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 district director's satisfaction, you can establish this element by any evidence the district director deems adequate. Turbotax 2011 sign If you fail to establish that you have substantially complied with the adequate records requirement for an element of an expenditure or use to the district director's satisfaction, you must establish the element: By your own oral or written statement containing detailed information as to the element, and By other evidence sufficient to establish the element. Turbotax 2011 sign If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Turbotax 2011 sign If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Turbotax 2011 sign Sampling You can maintain an adequate record for portions of a tax year and use that record to support your business and investment use for the entire tax year if it can be shown by other evidence that the periods for which an adequate record is maintained are representative of use throughout the year. Turbotax 2011 sign Loss of Records 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. Turbotax 2011 sign Reporting Information on Form 4562 If you claim a deduction for any listed property, you must provide the requested information on page 2, Section B of Form 4562. Turbotax 2011 sign If you claim a deduction for any vehicle, you must answer certain questions onpage 2 of Form 4562 to provide information about the vehicle use. Turbotax 2011 sign Employees. Turbotax 2011 sign   Employees claiming the standard mileage rate or actual expenses (including depreciation) must use Form 2106 instead of Part V of Form 4562. Turbotax 2011 sign Employees claiming the standard mileage rate may be able to use Form 2106–EZ. Turbotax 2011 sign Employer who provides vehicles to employees. Turbotax 2011 sign   An employer who provides vehicles to employees must obtain enough information from those employees to provide the requested information onForm 4562. Turbotax 2011 sign   An employer who provides more than five vehicles to employees need not include any information on his or her tax return. Turbotax 2011 sign Instead, the employer must obtain the information from his or her employees and indicate on his or her return that the information was obtained and is being retained. Turbotax 2011 sign   You do not need to provide the information requested on page 2 of Form 4562 if, as an employer: You can satisfy the requirements of a written policy statement for vehicles either not used for personal purposes, or not used for personal purposes other than commuting, or You treat all vehicle use by employees as personal use. Turbotax 2011 sign See the instructions for Form 4562. Turbotax 2011 sign Deductions in Later Years When listed property is used for business, investment, and personal purposes, no deduction is allowable for its personal use either in the current year or any later tax year. Turbotax 2011 sign In later years, you must determine if there is any remaining unadjusted or unrecovered basis before you compute the depreciation deduction for that tax year. Turbotax 2011 sign In making this determination, figure the depreciation deductions for earlier tax years as if the listed property were used 100% for business or investment purposes in those years, beginning with the first tax year in which some or all of the property use is for business or investment. Turbotax 2011 sign For more information about deductions after the recovery period for automobiles, see Publication 917. Turbotax 2011 sign Appendix The following tables are for use in figuring depreciation deductions under the ACRS system. Turbotax 2011 sign Table 1. Turbotax 2011 sign 15-Year Real Property* (Other Than Low-Inclome Housing) Table 3. Turbotax 2011 sign Low-Income Housing* Table 6 - Table 9 Table 6 - Table 9 Table 10 - Table 13 Table 14 - Table 17 Prev  Up  Next   Home   More Online Publications