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Amend 2010 Tax

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Amend 2010 Tax

Amend 2010 tax Publication 334 - Introductory Material Table of Contents IntroductionOrdering forms and publications. Amend 2010 tax Tax questions. Amend 2010 tax Future Developments What's New for 2013 What's New for 2014 Reminders Photographs of Missing Children Introduction The purpose of this publication is to provide general information about the federal tax laws that apply to small business owners who are sole proprietors and to statutory employees. Amend 2010 tax This publication has information on business income, expenses, and tax credits that may help you file your income tax return. Amend 2010 tax Are you self-employed?   You are self-employed if you carry on a trade or business as a sole proprietor or an independent contractor. Amend 2010 tax Sole proprietor. Amend 2010 tax   A sole proprietor is someone who owns an unincorporated business by himself or herself. Amend 2010 tax However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation. Amend 2010 tax Trade or business. Amend 2010 tax    A trade or business is generally an activity carried on to make a profit. Amend 2010 tax The facts and circumstances of each case determine whether or not an activity is a trade or business. Amend 2010 tax You do not need to actually make a profit to be in a trade or business as long as you have a profit motive. Amend 2010 tax You do need to make ongoing efforts to further the interests of your business. Amend 2010 tax   You do not have to carry on regular full-time business activities to be self-employed. Amend 2010 tax Having a part-time business in addition to your regular job or business may be self-employment. Amend 2010 tax Independent contractor. Amend 2010 tax    People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. Amend 2010 tax However, whether they are independent contractors or employees depends on the facts in each case. Amend 2010 tax The general rule is that an individual is an independent contractor if the payer has the right to control or to direct only the result of the work and not how it will be done. Amend 2010 tax The earnings of a person who is working as an independent contractor are subject to self-employment tax. Amend 2010 tax For more information on determining whether you are an employee or independent contractor, see Publication 15-A, Employer's Supplemental Tax Guide. Amend 2010 tax Statutory employee. Amend 2010 tax   A statutory employee has a checkmark in box 13 of his or her Form W-2, Wage and Tax Statement. Amend 2010 tax Statutory employees use Schedule C or C-EZ to report their wages and expenses. Amend 2010 tax Limited liability company (LLC). Amend 2010 tax   A limited liability company (LLC) is an entity formed under state law by filing articles of organization. Amend 2010 tax Generally, a single-member LLC is disregarded as an entity separate from its owner and reports its income and deductions on its owner's federal income tax return. Amend 2010 tax An owner who is an individual may use Schedule C or C-EZ. Amend 2010 tax Business owned and operated by spouses. Amend 2010 tax   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Amend 2010 tax Do not use Schedule C or C-EZ. Amend 2010 tax Instead, file Form 1065, U. Amend 2010 tax S. Amend 2010 tax Return of Partnership Income. Amend 2010 tax For more information, see Publication 541, Partnerships. Amend 2010 tax    Exception—Community income. Amend 2010 tax If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Amend 2010 tax S. Amend 2010 tax possession, you can treat the business either as a sole proprietorship or a partnership. Amend 2010 tax The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Amend 2010 tax A change in your reporting position will be treated as a conversion of the entity. Amend 2010 tax    Exception—Qualified joint venture. Amend 2010 tax If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. Amend 2010 tax Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. Amend 2010 tax For an explanation of "material participation," see the Instructions for Schedule C, line G. Amend 2010 tax   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Amend 2010 tax Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. Amend 2010 tax For more information, see Qualified Joint Ventures in the Instructions for Schedule SE. Amend 2010 tax This publication does not cover the topics listed in the following table. Amend 2010 tax    IF you need information about: THEN you should see: Corporations Publication 542 Farming Publication 225 Fishermen (Capital Construction Fund)  Publication 595 Partnerships Publication 541 Passive activities Publication 925 Recordkeeping Publication 583 Rental Publication 527 S corporations Instructions for Form 1120S What you need to know. Amend 2010 tax   Table A provides a list of questions you need to answer to help you meet your federal tax obligations. Amend 2010 tax After each question is the location in this publication where you will find the related discussion. Amend 2010 tax Table A. Amend 2010 tax What You Need To Know About Federal Taxes (Note. Amend 2010 tax The following is a list of questions you may need to answer so you can fill out your federal income tax return. Amend 2010 tax Chapters are given to help you find the related discussion in this publication. Amend 2010 tax ) What must I know   Where to find the answer   What kinds of federal taxes do I have to pay? How do I pay them?   See chapter 1. Amend 2010 tax What forms must I file?   See chapter 1. Amend 2010 tax What must I do if I have employees?   See Employment Taxes in chapter 1. Amend 2010 tax Do I have to start my tax year in January, or can I start it in any other month?   See Accounting Periods in chapter 2. Amend 2010 tax What method can I use to account for my income and expenses?   See Accounting Methods in chapter 2. Amend 2010 tax What kinds of business income do I have to report on my tax return?   See chapter 5. Amend 2010 tax What kinds of business expenses can I deduct on my tax return?   See Business Expenses in chapter 8. Amend 2010 tax What kinds of expenses are not deductible as business expenses?   See Expenses You Cannot Deduct in chapter 8. Amend 2010 tax What happens if I have a business loss? Can I deduct it?   See chapter 9. Amend 2010 tax What must I do if I disposed of business property during the year?   See chapter 3. Amend 2010 tax What are my rights as a taxpayer?   See chapter 11. Amend 2010 tax Where do I go if I need help with federal tax matters?   See chapter 12. Amend 2010 tax IRS mission. Amend 2010 tax   Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. Amend 2010 tax Comments and suggestions. Amend 2010 tax   We welcome your comments about this publication and your suggestions for future editions. Amend 2010 tax   You can write to us at the following address:  Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Amend 2010 tax NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Amend 2010 tax Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Amend 2010 tax   You can send your comments from www. Amend 2010 tax irs. Amend 2010 tax gov/formspubs/. Amend 2010 tax Click on “More Information” then on “Comment on Tax Forms and Publications. Amend 2010 tax ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Amend 2010 tax Ordering forms and publications. Amend 2010 tax   Visit  www. Amend 2010 tax irs. Amend 2010 tax gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Amend 2010 tax  Internal Revenue Service 1201 N. Amend 2010 tax Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Amend 2010 tax   If you have a tax question, check the information available on IRS. Amend 2010 tax gov or call 1-800-829-1040. Amend 2010 tax We cannot answer tax questions sent to either of the above addresses. Amend 2010 tax Future Developments For the latest information about developments related to Publication 334, such as legislation enacted after it was published, go to www. Amend 2010 tax irs. Amend 2010 tax gov/pub334. Amend 2010 tax What's New for 2013 The following are some of the tax changes for 2013. Amend 2010 tax For information on other changes, go to IRS. Amend 2010 tax gov. Amend 2010 tax Tax rates. Amend 2010 tax . Amend 2010 tax  For tax years beginning in 2013, the social security part of the self-employment tax increases to 12. Amend 2010 tax 4%. Amend 2010 tax The Medicare part of the tax remains at 2. Amend 2010 tax 9%. Amend 2010 tax As a result, the self-employment tax is 15. Amend 2010 tax 3%. Amend 2010 tax Maximum net earnings. Amend 2010 tax  The maximum net self-employment earnings subject to the social security part of the self-employment tax increases to $113,700 for 2013. Amend 2010 tax There is no maximum limit on earnings subject to the Medicare part. Amend 2010 tax Standard mileage rate. Amend 2010 tax  For 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. Amend 2010 tax 5 cents per mile. Amend 2010 tax For more information, see Car and Truck Expenses in chapter 8. Amend 2010 tax Simplified method for business use of home deduction. Amend 2010 tax . Amend 2010 tax  The IRS now provides a simplified method to determine your expenses for business use of your home. Amend 2010 tax For more information, see Business Use of Your Home in chapter 8. Amend 2010 tax What's New for 2014 The following are some of the tax changes for 2014. Amend 2010 tax For information on other changes, go to IRS. Amend 2010 tax gov. Amend 2010 tax Standard mileage rate. Amend 2010 tax  For 2014, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56 cents per mile. Amend 2010 tax Self-employment tax. Amend 2010 tax  The maximum net self-employment earnings subject to the social security part of the self-employment tax is $117,000 for 2014. Amend 2010 tax Reminders Accounting methods. Amend 2010 tax  Certain small business taxpayers may be eligible to adopt or change to the cash method of accounting and may not be required to account for inventories. Amend 2010 tax For more information, see Inventories in chapter 2. Amend 2010 tax Reportable transactions. Amend 2010 tax  You must file Form 8886, Reportable Transaction Disclosure Statement, to report certain transactions. Amend 2010 tax You may have to pay a penalty if you are required to file Form 8886 but do not do so. Amend 2010 tax You may also have to pay interest and penalties on any reportable transaction understatements. Amend 2010 tax Reportable transactions include: Transactions the same as or substantially similar to tax avoidance transactions identified by the IRS, Transactions offered to you under conditions of confidentiality for which you paid an advisor a minimum fee, Transactions for which you have, or a related party has, contractual protection against disallowance of the tax benefits, Transactions that result in losses of at least $2 million in any single tax year ($50,000 if from certain foreign currency transactions) or $4 million in any combination of tax years, and Transactions the same or substantially similar to one of the types of transactions the IRS has identified as a transaction of interest. Amend 2010 tax For more information, see the Instructions for Form 8886. Amend 2010 tax Photographs of Missing Children The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Amend 2010 tax Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Amend 2010 tax You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Amend 2010 tax Prev  Up  Next   Home   More Online Publications
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The Amend 2010 Tax

Amend 2010 tax Depreciation Table of Contents Introduction Special Depreciation AllowanceQualified Property Election Not To Claim the Allowance Rules for Returns Filed Before June 1, 2002 Passenger Automobiles New York Liberty Zone BenefitsSpecial Liberty Zone Depreciation Allowance Increased Section 179 Deduction Liberty Zone Leasehold Improvement Property If you depreciate business property that you acquired and placed in service after September 10, 2001, new law contains provisions that may affect your depreciation deduction for that property. Amend 2010 tax Publication 946, How To Depreciate Property, contains information on depreciation. Amend 2010 tax However, Publication 946 does not contain the new provisions because it was printed before the law was enacted. Amend 2010 tax The new provisions are in the Supplement to Publication 946, which is reprinted below. Amend 2010 tax Supplement to Publication 946 How To Depreciate Property   Introduction After Publication 946 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. Amend 2010 tax The new law made several changes in the tax rules explained in the publication. Amend 2010 tax Some of the changes apply to property placed in service during 2001. Amend 2010 tax This supplemental publication describes those changes and explains what you should do if you are affected by them. Amend 2010 tax The situations and examples in Publication 946 do not reflect any of the changes made by the Job Creation and Worker Assistance Act of 2002. Amend 2010 tax The new law contains the following provisions. Amend 2010 tax 30% depreciation deductions (special depreciation allowance and special New York Liberty Zone (Liberty Zone) depreciation allowance) for the year qualified property is placed in service after September 10, 2001. Amend 2010 tax An increased dollar limit on the section 179 deduction for qualified Liberty Zone property purchased after September 10, 2001. Amend 2010 tax A shorter recovery period for qualified Liberty Zone leasehold improvement property placed in service after September 10, 2001. Amend 2010 tax An increase in the maximum depreciation deduction for 2001 for a qualified passenger automobile placed in service after September 10, 2001. Amend 2010 tax If you believe you qualify for an increased deduction under any of these new rules, you must file the revised 2001 Form 4562 (dated March 2002) for 2001 calendar or fiscal years and 2000 fiscal years ending after September 10, 2001. Amend 2010 tax If you have already filed a tax return, this supplemental publication explains how to claim these benefits and how to elect not to claim the special depreciation allowance or special Liberty Zone depreciation allowance. Amend 2010 tax See Table 2 at the end of the supplement for an overview of the rules that apply if you filed your return before June 1, 2002. Amend 2010 tax Special Depreciation Allowance You can take a special depreciation allowance for qualified property you place in service after September 10, 2001. Amend 2010 tax The allowance is an additional deduction of 30% of the property's depreciable basis. Amend 2010 tax To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. Amend 2010 tax See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. Amend 2010 tax The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. Amend 2010 tax There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Amend 2010 tax In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. Amend 2010 tax Example 1. Amend 2010 tax On November 1, 2001, you bought and placed in service in your business qualified property that cost $100,000. Amend 2010 tax You did not elect to claim a section 179 deduction. Amend 2010 tax You can deduct 30% of the cost ($30,000) as a special depreciation allowance for 2001. Amend 2010 tax You use the remaining $70,000 of cost to figure your regular depreciation deduction for 2001 and later years. Amend 2010 tax Example 2. Amend 2010 tax The facts are the same as in Example 1, except that you choose to deduct $24,000 of the property's cost as a section 179 deduction. Amend 2010 tax You use the remaining $76,000 of cost to figure your special depreciation allowance of $22,800 ($76,000 × 30%). Amend 2010 tax You use the remaining $53,200 of cost to figure your regular depreciation deduction for 2001 and later years. Amend 2010 tax Qualified Property To qualify for the special depreciation allowance, your property must meet the following requirements. Amend 2010 tax It is new property of one of the following types. Amend 2010 tax Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. Amend 2010 tax See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. Amend 2010 tax Water utility property. Amend 2010 tax See 25-year property on page 22 in Publication 946. Amend 2010 tax Computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. Amend 2010 tax (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Amend 2010 tax ) Qualified leasehold improvement property (defined later). Amend 2010 tax It meets the following tests (explained later under Tests To Be Met). Amend 2010 tax Acquisition date test. Amend 2010 tax Placed in service date test. Amend 2010 tax Original use test. Amend 2010 tax It is not excepted property (explained later under Excepted Property). Amend 2010 tax Qualified leasehold improvement property. Amend 2010 tax    Generally, this is any improvement to an interior part of a building that is nonresidential real property, provided all of the following requirements are met. Amend 2010 tax The improvement is made under or pursuant to a lease by the lessee (or any sublessee) or the lessor of that part of the building. Amend 2010 tax That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. Amend 2010 tax The improvement is placed in service more than 3 years after the date the building was first placed in service. Amend 2010 tax   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. Amend 2010 tax The enlargement of the building. Amend 2010 tax Any elevator or escalator. Amend 2010 tax Any structural component benefiting a common area. Amend 2010 tax The internal structural framework of the building. Amend 2010 tax   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. Amend 2010 tax However, a binding commitment between related persons is not treated as a lease. Amend 2010 tax Related persons. Amend 2010 tax   For this purpose, the following are related persons. Amend 2010 tax Members of an affiliated group. Amend 2010 tax The persons listed in items (1) through (9) under Related persons on page 8 of Publication 946 (except that “80% or more” should be substituted for “more than 10%” each place it appears). Amend 2010 tax An executor and a beneficiary of the same estate. Amend 2010 tax Tests To Be Met To qualify for the special depreciation allowance, the property must meet all of the following tests. Amend 2010 tax Acquisition date test. Amend 2010 tax    Generally, you must have acquired the property either: After September 10, 2001, and before September 11, 2004, but only if no written binding contract for the acquisition was in effect before September 11, 2001, or Pursuant to a written binding contract entered into after September 10, 2001, and before September 11, 2004. Amend 2010 tax   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001, and before September 11, 2004. Amend 2010 tax Placed in service date test. Amend 2010 tax   Generally, the property must be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. Amend 2010 tax   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. Amend 2010 tax Original use test. Amend 2010 tax   The original use of the property must have begun with you after September 10, 2001. Amend 2010 tax “Original use” means the first use to which the property is put, whether or not by you. Amend 2010 tax Additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test. Amend 2010 tax Excepted Property The following property does not qualify for the special depreciation allowance. Amend 2010 tax Property used by any person before September 11, 2001. Amend 2010 tax Property required to be depreciated using ADS. Amend 2010 tax This includes listed property used 50% or less in a qualified business use. Amend 2010 tax Qualified New York Liberty Zone leasehold improvement property (defined next). Amend 2010 tax Qualified New York Liberty Zone leasehold improvement property. Amend 2010 tax   This is any qualified leasehold improvement property (as defined earlier) if all of the following requirements are met. Amend 2010 tax The improvement is to a building located in the New York Liberty Zone (defined later under New York Liberty Zone Benefits). Amend 2010 tax The improvement is placed in service after September 10, 2001, and before January 1, 2007. Amend 2010 tax No written binding contract for the improvement was in effect before September 11, 2001. Amend 2010 tax Election Not To Claim the Allowance You can elect not to claim the special depreciation allowance for qualified property. Amend 2010 tax If you make this election for any property, it applies to all property in the same property class placed in service during the year. Amend 2010 tax To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. Amend 2010 tax When to make election. Amend 2010 tax   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. Amend 2010 tax   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). Amend 2010 tax Attach the election statement to the amended return. Amend 2010 tax At the top of the election statement, write “Filed pursuant to section 301. Amend 2010 tax 9100–2. Amend 2010 tax ” Revoking an election. Amend 2010 tax   Once you elect not to deduct the special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Amend 2010 tax A request to revoke the election is subject to a user fee. Amend 2010 tax Rules for Returns Filed Before June 1, 2002 The following rules apply if you placed qualified property in service after September 10, 2001, and filed your return before June 1, 2002. Amend 2010 tax The rules apply to returns for the following years. Amend 2010 tax 2000 fiscal years that end after September 10, 2001. Amend 2010 tax 2001 calendar and fiscal years. Amend 2010 tax Claiming the allowance. Amend 2010 tax   If you did not claim the allowance on your return and did not make the election not to claim the allowance, you can do either of the following to claim the allowance. Amend 2010 tax File an amended return by the due date (not including extensions) of your return for the year following the year the property was placed in service. Amend 2010 tax Write “Filed Pursuant to Rev. Amend 2010 tax Proc. Amend 2010 tax 2002–33” at the top of the amended return. Amend 2010 tax File Form 3115, Application for Change in Accounting Method, with your return for the year following the year the property was placed in service. Amend 2010 tax Your return must be filed by the due date (including extensions). Amend 2010 tax Write “Automatic Change Filed Under Rev. Amend 2010 tax Proc. Amend 2010 tax 2002–33” on the appropriate line of Form 3115. Amend 2010 tax You must also file a copy (with signature) of the completed Form 3115 with the IRS National Office no later than when you file the original with your return. Amend 2010 tax For more information about filing Form 3115, including the address to send it to, see Revenue Procedure 2002–9, Revenue Procedure 2002–19, and Revenue Procedure 2002–33. Amend 2010 tax Example 1. Amend 2010 tax You are an individual and you use the calendar year. Amend 2010 tax You placed qualified property in service for your business in December 2001. Amend 2010 tax You filed your 2001 income tax return before April 15, 2002. Amend 2010 tax You did not claim the special depreciation allowance for the property and did not make the election not to claim the allowance. Amend 2010 tax You can claim the special allowance by filing an amended 2001 return by April 15, 2003, with “Filed Pursuant to Rev. Amend 2010 tax Proc. Amend 2010 tax 2002–33” at the top of the amended return. Amend 2010 tax You must file an amended return by April 15, 2003, even if you get an extension of time to file your 2002 tax return. Amend 2010 tax Example 2. Amend 2010 tax The facts concerning your 2001 return are the same as in Example 1. Amend 2010 tax In addition, you got an automatic 4-month extension of time (to August 15, 2003) to file your 2002 return. Amend 2010 tax You can claim the special allowance by filing a Form 3115 (with “Filed Pursuant to Rev. Amend 2010 tax Proc. Amend 2010 tax 2002–33” on the appropriate line) with your 2002 return by August 15, 2003. Amend 2010 tax You must also file a copy of this Form 3115 with the IRS National Office no later than when you file your 2002 return. Amend 2010 tax Electing not to claim the allowance. Amend 2010 tax   Generally, you have elected not to claim the special depreciation allowance for a class of property if you: Filed your return timely (including extensions) for the year you placed qualified property in service and indicated on a statement with the return that you are not claiming the allowance, or Filed your return timely and filed an amended return within 6 months of the due date of the original return (not including extensions) and indicated on a statement with the amended return that you are not claiming the allowance. Amend 2010 tax The statement must indicate that you are not deducting the special depreciation allowance and the class of property to which the election applies. Amend 2010 tax The statement can be either attached to or written on the return. Amend 2010 tax You can, for example, write “not deducting 30%” on Form 4562. Amend 2010 tax Deemed election. Amend 2010 tax   If you have not followed either of the procedures described above to elect not to claim the allowance, you may still be treated as making the election. Amend 2010 tax You will be treated as making the election if you meet both of the following conditions. Amend 2010 tax You filed your return for the year you placed the property in service and claimed depreciation, but not the special allowance, for any class of property. Amend 2010 tax You do not file an amended return or a Form 3115 within the time prescribed for claiming the special allowance. Amend 2010 tax See Claiming the allowance, earlier. Amend 2010 tax Passenger Automobiles The limit on your depreciation deduction (including any section 179 deduction) for any passenger automobile that is qualified property (defined earlier) placed in service after September 10, 2001, and for which you claim the special depreciation allowance is increased. Amend 2010 tax Generally, the limit is increased from $3,060 to $7,660. Amend 2010 tax However, if the automobile is a qualified electric car, the limit is increased from $9,280 to $23,080 ($22,980 if placed in service in 2002). Amend 2010 tax Table 1 shows the maximum deduction amounts for 2001. Amend 2010 tax Table 1. Amend 2010 tax Maximum Deduction for 2001 Qualified Vehicle Placed in Service Before Sept. Amend 2010 tax 11 Placed in Service After Sept. Amend 2010 tax 10 Passenger automobile $3,060 $7,660 Electric car 9,280 23,080 1 1$22,980 if you place an electric car in service in 2002. Amend 2010 tax Election not to claim the allowance. Amend 2010 tax   The increased maximum depreciation deduction does not apply if you elected not to claim the special depreciation allowance as explained earlier under Election Not To Claim the Allowance and Rules for Returns Filed Before June 1, 2002. Amend 2010 tax New York Liberty Zone Benefits Several benefits are available for property you place in service in the New York Liberty Zone (Liberty Zone). Amend 2010 tax They include a special depreciation allowance for the year you place the property in service, an increased section 179 deduction, and the classification of certain leasehold improvement property as 5-year property. Amend 2010 tax Area defined. Amend 2010 tax   The New York Liberty Zone is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway) in the Borough of Manhattan in the City of New York, New York. Amend 2010 tax Special Liberty Zone Depreciation Allowance You can take a special depreciation allowance for qualified Liberty Zone property you place in service after September 10, 2001. Amend 2010 tax The allowance is an additional deduction of 30% of the property's depreciable basis. Amend 2010 tax To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. Amend 2010 tax See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. Amend 2010 tax The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. Amend 2010 tax There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Amend 2010 tax In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. Amend 2010 tax You cannot claim the special Liberty Zone depreciation allowance for property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. Amend 2010 tax Qualified property is eligible for only one special depreciation allowance. Amend 2010 tax Example 1. Amend 2010 tax On November 1, 2001, you bought and placed in service in your business, which is in the Liberty Zone, qualified Liberty Zone property that cost $200,000. Amend 2010 tax You did not elect to claim a section 179 deduction. Amend 2010 tax You can deduct 30% of the cost ($60,000) as a special Liberty Zone depreciation allowance for 2001. Amend 2010 tax You use the remaining $140,000 of cost to figure your regular depreciation deduction for 2001 and later years. Amend 2010 tax Example 2. Amend 2010 tax The facts are the same as in Example 1, except that you choose to deduct $59,000 of the property's cost as a section 179 deduction. Amend 2010 tax (See Increased Section 179 Deduction, later, for information concerning how this section 179 deduction amount is figured). Amend 2010 tax You use the remaining $141,000 of cost to figure your special Liberty Zone depreciation allowance of $42,300 ($141,000 × 30%). Amend 2010 tax You use the remaining $98,700 of cost to figure your regular depreciation deduction for 2001 and later years. Amend 2010 tax Qualified Liberty Zone Property For a 2001 calendar or fiscal year and a 2000 fiscal year that ends after September 10, 2001, property qualifies for the special Liberty Zone depreciation allowance if it meets the following requirements. Amend 2010 tax It is one of the following types of property. Amend 2010 tax Used property depreciated under MACRS with a recovery period of 20 years or less. Amend 2010 tax See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. Amend 2010 tax Used water utility property. Amend 2010 tax See 25-year property on page 22 in Publication 946. Amend 2010 tax Used computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. Amend 2010 tax (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Amend 2010 tax ) Certain nonresidential real property and residential rental property (defined later). Amend 2010 tax It meets the following tests (explained later under Tests to be met). Amend 2010 tax Acquisition date test. Amend 2010 tax Placed in service date test. Amend 2010 tax Substantial use test. Amend 2010 tax Original use test. Amend 2010 tax It is not excepted property (explained later under Excepted property). Amend 2010 tax Nonresidential real property and residential rental property. Amend 2010 tax   This property is qualifying property only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the terrorist attack of September 11, 2001. Amend 2010 tax Property is treated as replacing destroyed or condemned property if, as part of an integrated plan, such property replaces real property included in a continuous area that includes real property destroyed or condemned. Amend 2010 tax   For these purposes, real property is considered destroyed (or condemned) only if an entire building or structure was destroyed (or condemned) as a result of the terrorist attack. Amend 2010 tax Otherwise, the property is considered damaged real property. Amend 2010 tax For example, if certain structural components of a building (such as walls, floors, or plumbing fixtures) are damaged or destroyed as a result of the terrorist attack, but the building is not destroyed (or condemned), then only costs related to replacing the damaged or destroyed structural components qualify for the special Liberty Zone depreciation allowance. Amend 2010 tax Tests to be met. Amend 2010 tax   To qualify for the special Liberty Zone depreciation allowance, your property must meet all of the following tests. Amend 2010 tax Acquisition date test. Amend 2010 tax   You must have acquired the property by purchase after September 10, 2001, and there must not have been a binding written contract for the acquisition in effect before September 11, 2001. Amend 2010 tax   For information on the acquisition of property by purchase, see Property Acquired by Purchase on page 15 of Publication 946. Amend 2010 tax   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001. Amend 2010 tax Placed in service date test. Amend 2010 tax   Generally, the property must be placed in service for use in your trade or business or for the production of income before January 1, 2007 (January 1, 2010, in the case of qualifying nonresidential real property and residential rental property). Amend 2010 tax   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. Amend 2010 tax Substantial use test. Amend 2010 tax   Substantially all use of the property must be in the Liberty Zone and in the active conduct of your trade or business in the Liberty Zone. Amend 2010 tax Original use test. Amend 2010 tax   The original use of the property in the Liberty Zone must have begun with you after September 10, 2001. Amend 2010 tax   Used property can be qualified Liberty Zone property if it has not previously been used within the Liberty Zone. Amend 2010 tax Also, additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test if the original use of the property in the Liberty Zone began with you. Amend 2010 tax Excepted property. Amend 2010 tax   The following property does not qualify for the special Liberty Zone depreciation allowance. Amend 2010 tax Property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. Amend 2010 tax Property required to be depreciated using ADS. Amend 2010 tax This includes listed property used 50% or less in a qualified business use. Amend 2010 tax Qualified New York Liberty Zone leasehold improvement property (defined earlier in Excepted Property under Special Depreciation Allowance). Amend 2010 tax Example. Amend 2010 tax In December 2001, you bought and placed in service in your business in the Liberty Zone the following property. Amend 2010 tax New office furniture with a MACRS recovery period of 7 years. Amend 2010 tax A used computer with a MACRS recovery period of 5 years. Amend 2010 tax The computer had not previously been used within the Liberty Zone. Amend 2010 tax Because the office furniture is new property, it qualifies for the special depreciation allowance, but not the special Liberty Zone depreciation allowance. Amend 2010 tax Because the computer is used property that had not previously been used in the Liberty Zone, it qualifies for the special Liberty Zone depreciation allowance, but not the special depreciation allowance. Amend 2010 tax Election Not To Claim the Liberty Zone Allowance You can elect not to claim the special Liberty Zone depreciation allowance for qualified property. Amend 2010 tax If you make this election for any property, it applies to all property in the same property class placed in service during the year. Amend 2010 tax To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. Amend 2010 tax When to make the election. Amend 2010 tax   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. Amend 2010 tax   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). Amend 2010 tax Attach the election statement to the amended return. Amend 2010 tax At the top of the election statement, write “Filed pursuant to section 301. Amend 2010 tax 9100–2. Amend 2010 tax ” Revoking an election. Amend 2010 tax   Once you elect not to deduct the special Liberty Zone depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Amend 2010 tax A request to revoke the election is subject to a user fee. Amend 2010 tax Returns filed before June 1, 2002. Amend 2010 tax   The rules that apply to the special depreciation allowance discussed earlier in Rules for Returns Filed Before June 1, 2002 under Special Depreciation Allowance also apply to the special Liberty Zone depreciation allowance. Amend 2010 tax Increased Section 179 Deduction Under section 179 of the Internal Revenue Code, you can choose to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Amend 2010 tax For tax years beginning in 2000, that limit was $20,000. Amend 2010 tax For tax years beginning in 2001 and 2002, that limit is generally $24,000. Amend 2010 tax If the cost of qualifying section 179 property placed in service in a year is over $200,000, you must reduce the dollar limit (but not below zero) by the amount of the cost over $200,000. Amend 2010 tax Increased Dollar Limit The dollar limit on the section 179 deduction is increased for certain property placed in service in the Liberty Zone. Amend 2010 tax The increase is the smaller of the following amounts. Amend 2010 tax $35,000. Amend 2010 tax The cost of section 179 property that is qualified Liberty Zone property placed in service during the year. Amend 2010 tax If you use the revised 2001 Form 4562 (dated March 2002) for a tax year beginning in 2000, you must reduce the section 179 dollar limit to $20,000 before adding the additional amount for qualified property. Amend 2010 tax Qualified property. Amend 2010 tax   To qualify for the increased section 179 deduction, your property must be section 179 property that is either: Qualified Liberty Zone property, or Property that would be qualified Liberty Zone property except that it is eligible for the special depreciation allowance. Amend 2010 tax Qualified Liberty Zone property is explained earlier in Qualified Liberty Zone Property under Special Liberty Zone Depreciation Allowance. Amend 2010 tax Property eligible for the special depreciation allowance is explained earlier in Qualified Property under Special Depreciation Allowance. Amend 2010 tax For information on the requirements that must be met for property to qualify for the section 179 deduction, see What Property Qualifies? on page 14 of Publication 946. Amend 2010 tax Example 1. Amend 2010 tax In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $25,000. Amend 2010 tax Because this cost is less than $35,000, the dollar limit on the section 179 deduction is increased by $25,000 to $49,000 ($24,000 + $25,000). Amend 2010 tax Example 2. Amend 2010 tax In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $75,000. Amend 2010 tax Because $35,000 is less than the cost of the property you place in service, the dollar limit on the section 179 deduction you can claim is increased by $35,000 to $59,000 ($24,000 + $35,000). Amend 2010 tax Reduced Dollar Limit Generally, you must reduce the dollar limit for a year by the cost of qualifying section 179 property placed in service in the year that is more than $200,000. Amend 2010 tax However, if the cost of your Liberty Zone property exceeds $200,000, you take into account only 50% (instead of 100%) of the cost of qualified property placed in service in a year. Amend 2010 tax Example. Amend 2010 tax In 2002, you place in service in your business, which is in the Liberty Zone, qualified property costing $460,000. Amend 2010 tax Your increased dollar limit is $59,000 ($35,000 + $24,000). Amend 2010 tax Because 50% of the cost of the property you place in service ($230,000) is $30,000 more than $200,000, you must reduce your $59,000 dollar limit to $29,000 ($59,000 - $30,000). Amend 2010 tax Recapture Rules Rules similar to those explained on page 20 of Publication 946 under When Must You Recapture the Deduction? apply with respect to any qualified property you stop using in the Liberty Zone. Amend 2010 tax Returns Filed Before June 1, 2002 If you filed a return before June 1, 2002, and did not deduct the increased section 179 amount for qualified property placed in service after September 10, 2001, you can deduct the increased amount by filing an amended return by the due date (not including extensions) of the return for the year after the year the property was placed in service. Amend 2010 tax This rule applies to returns for the following years. Amend 2010 tax 2000 fiscal years that end after September 10, 2001. Amend 2010 tax 2001 calendar and fiscal years. Amend 2010 tax On the amended return, write “Filed Pursuant to Rev. Amend 2010 tax Proc. Amend 2010 tax 2002–33. Amend 2010 tax ” Liberty Zone Leasehold Improvement Property Qualified Liberty Zone leasehold improvement property (described earlier in Qualified Property under Special Depreciation Allowance) is 5-year property. Amend 2010 tax This means that it is depreciated over a recovery period of 5 years. Amend 2010 tax For information about recovery periods, see Which Recovery Period Applies? on page 23 of Publication 946. Amend 2010 tax The straight-line method must be used with respect to qualified Liberty Zone leasehold improvement property. Amend 2010 tax Under ADS, the recovery period for qualified Liberty Zone leasehold improvement property is 9 years. Amend 2010 tax Returns Filed Before June 1, 2002 If you filed either of the following returns before June 1, 2002, and did not depreciate qualified Liberty Zone leasehold improvement property placed in service during the tax year as 5-year property using the straight line method, you should file an amended return before you file your return for the year after the year the property was placed in service. Amend 2010 tax Your 2000 fiscal year return (for a 2000 fiscal year that ends after September 10, 2001). Amend 2010 tax Your 2001 calendar or fiscal year return. Amend 2010 tax On the amended return, write “Filed Pursuant to Rev. Amend 2010 tax Proc. Amend 2010 tax 2002–33. Amend 2010 tax ” Table 2. Amend 2010 tax Rules for Returns Filed Before June 1, 2002 Note:This chart highlights the rules for returns affected by the Job Creation and Worker Assistance Act of 2002 that were filed before June 1, 2002, without accounting for any of the new benefits under the law. Amend 2010 tax See the text for definitions and examples. Amend 2010 tax Do not rely on this chart alone. Amend 2010 tax IF you want to. Amend 2010 tax . Amend 2010 tax . Amend 2010 tax THEN you. Amend 2010 tax . Amend 2010 tax . Amend 2010 tax BY. Amend 2010 tax . Amend 2010 tax . Amend 2010 tax claim the special depreciation allowance or special Liberty Zone depreciation allowance • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service, or • must file Form 3115, Application for Change in Accounting Method, with your return for the year after the year the property was placed in service • the due date (including extensions) of your return for the year after the year the property was placed in service, and • must file a copy of your completed Form 3115 with the IRS National Office • the date you file the original Form 3115 with your return for the year after the year the property was placed in service. Amend 2010 tax elect not to claim the special depreciation allowance or the special Liberty Zone depreciation allowance 1 • must have filed your return timely for the year the property was placed in service, and   • must file an amended return stating you are not claiming the allowance • the date that is 6 months after the due date of the original return (not including extensions). Amend 2010 tax deduct the increased section 179 amount • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service. Amend 2010 tax use a 5-year recovery period for depreciating qualified Liberty Zone leasehold improvement property • should file an amended return • the date you file your return for the year after the year the property was placed in service. Amend 2010 tax 1See also Deemed election under Rules for Returns Filed Before June 1, 2002, earlier. Amend 2010 tax Prev  Up  Next   Home   More Online Publications