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H and r block Publication 547 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. H and r block Tax questions. H and r block Useful Items - You may want to see: What's New Section C of Form 4684 for Ponzi-type investment schemes. H and r block  Section C of Form 4684 is new for 2013. H and r block You must complete Section C if you are claiming a theft loss deduction due to a Ponzi-type investment scheme and are using Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58. H and r block Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. H and r block You do not need to complete Appendix A. H and r block For details, see Losses from Ponzi-type investment schemes , later. H and r block Reminders Future developments. H and r block   For the latest information about developments related to Publication 547, such as legislation enacted after it was published, go to www. H and r block irs. H and r block gov/pub547. H and r block Photographs of missing children. H and r block  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. H and r block Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. H and r block You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. H and r block Introduction This publication explains the tax treatment of casualties, thefts, and losses on deposits. H and r block A casualty occurs when your property is damaged as a result of a disaster such as a storm, fire, car accident, or similar event. H and r block A theft occurs when someone steals your property. H and r block A loss on deposits occurs when your financial institution becomes insolvent or bankrupt. H and r block This publication discusses the following topics. H and r block Definitions of a casualty, theft, and loss on deposits. H and r block How to figure the amount of your gain or loss. H and r block How to treat insurance and other reimbursements you receive. H and r block The deduction limits. H and r block When and how to report a casualty or theft. H and r block The special rules for disaster area losses. H and r block Forms to file. H and r block   Generally, when you have a casualty or theft, you have to file Form 4684. H and r block You may also have to file one or more of the following forms. H and r block Schedule A (Form 1040). H and r block Form 1040NR, Schedule A (for nonresident aliens). H and r block Schedule D. H and r block Form 4797. H and r block For details on which form to use, see How To Report Gains and Losses , later. H and r block Condemnations. H and r block   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Dispositions of Assets. H and r block Workbooks for casualties and thefts. H and r block   Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property), is available to help you make a list of your stolen or damaged personal-use property and figure your loss. H and r block It includes schedules to help you figure the loss on your home and its contents, and your motor vehicles. H and r block   Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook, is available to help you make a list of your stolen or damaged business or income-producing property and figure your loss. H and r block Comments and suggestions. H and r block   We welcome your comments about this publication and your suggestions for future editions. H and r block   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. H and r block NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. H and r block Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H and r block   You can send your comments from www. H and r block irs. H and r block gov/formspubs/. H and r block Click on “More Information” and then on “Comment on Tax Forms and Publications”. H and r block   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. H and r block Ordering forms and publications. H and r block   Visit www. H and r block irs. H and r block gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. H and r block Internal Revenue Service 1201 N. H and r block Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. H and r block   If you have a tax question, check the information available on IRS. H and r block gov or call 1-800-829-1040. H and r block We cannot answer tax questions sent to either of the above addresses. H and r block Useful Items - You may want to see: Publication 523 Selling Your Home 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 551 Basis of Assets 584 Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) 584-B Business Casualty, Disaster, and   Theft Loss Workbook Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Form 1040NR, Schedule A Itemized Deductions (for nonresident aliens) Schedule D (Form 1040) Capital Gains and Losses 4684 Casualties and Thefts 4797 Sales of Business Property See How To Get Tax Help near the end of this publication for information about getting publications and forms. H and r block Prev  Up  Next   Home   More Online Publications
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H and r block 3. H and r block   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. H and r block The allowance applies only for the first year you place the property in service. H and r block For qualified property placed in service in 2013, you can take an additional 50% special allowance. H and r block 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. H and r block This chapter explains what is qualified property. H and r block 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. H and r block Corporations can elect to accelerate certain minimum tax credits in lieu of claiming the special depreciation allowance for eligible qualified property. H and r block See Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance , later. H and r block See chapter 6 for information about getting publications and forms. H and r block What Is Qualified Property? Your property is qualified property if it is one of the following. H and r block Qualified reuse and recycling property. H and r block Qualified cellulosic biofuel plant property. H and r block Qualified disaster assistance property. H and r block Certain qualified property acquired after December 31, 2007. H and r block The following discussions provide information about the types of qualified property listed above for which you can take the special depreciation allowance. H and r block Qualified Reuse and Recycling Property You can take a 50% special depreciation allowance for qualified reuse and recycling property. H and r block 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). H and r block Qualified reuse and recycling property also includes software necessary to operate such equipment. H and r block The property must meet the following requirements. H and r block The property must be depreciated under MACRS. H and r block The property must have a useful life of at least 5 years. H and r block The original use of the property must begin with you after August 31, 2008. H and r block 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. H and r block The property must be placed in service for use in your trade or business after August 31, 2008. H and r block Excepted Property Qualified reuse and recycling property does not include any of the following. H and r block Any rolling stock or other equipment used to transport reuse or recyclable materials. H and r block Property required to be depreciated using the Alternative Depreciation System (ADS). H and r block 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 . H and r block Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. H and r block Property for which you elected not to claim any special depreciation allowance (discussed later). H and r block Property placed in service and disposed of in the same tax year. H and r block Property converted from business use to personal use in the same tax year acquired. H and r block Property converted from personal use to business use in the same or later tax year may be qualified reuse and recycling property. H and r block Qualified Cellulosic Biofuel Plant Property You can take a 50% special depreciation allowance for qualified cellulosic biofuel plant property. H and r block Cellulosic biofuel is any liquid fuel which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis. H and r block Examples include bagasse (from sugar cane), corn stalks, and switchgrass. H and r block The property must meet the following requirements. H and r block The property is used in the United States solely to produce cellulosic biofuel. H and r block The original use of the property must begin with you after December 20, 2006. H and r block 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. H and r block 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. H and r block Note. H and r block 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)). H and r block 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. H and r block Special Rules Sale-leaseback. H and r block   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. H and r block   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. H and r block Syndicated leasing transactions. H and r block   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. H and r block   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. H and r block Excepted Property Qualified cellulosic biofuel plant property does not include any of the following. H and r block Property placed in service and disposed of in the same tax year. H and r block Property converted from business use to personal use in the same tax year it is acquired. H and r block Property converted from personal use to business use in the same or later tax year may be qualified cellulosic biomass ethanol plant property. H and r block Property required to be depreciated using the Alternative Depreciation System (ADS). H and r block 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 . H and r block 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. H and r block Property for which you elected not to claim any special depreciation allowance (discussed later). H and r block Property for which a deduction was taken under section 179C for certain qualified refinery property. H and r block Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. H and r block 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. H and r block A list of the federally declared disaster areas is available at the FEMA website at www. H and r block fema. H and r block gov. H and r block Your property is qualified disaster assistance property if it meets the following requirements. H and r block 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. H and r block 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. H and r block The property must rehabilitate property damaged, or replace property destroyed or condemned, as a result of the applicable federally declared disaster. H and r block The property must be similar in nature to, and located in the same county as, the rehabilitated or replaced property. H and r block The original use of the property within the applicable disaster area must have begun with you on or after the applicable disaster date. H and r block The property is placed in service by you on or before the date which is the last day of the fourth calendar year. H and r block 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. H and r block It is not excepted property (explained later in Excepted Property ). H and r block Special Rules Sale-leaseback. H and r block   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. H and r block   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. H and r block Syndicated leasing transactions. H and r block   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. H and r block   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. H and r block Excepted Property Qualified disaster assistance property does not include any of the following. H and r block Property required to be depreciated using the Alternative Depreciation System (ADS). H and r block 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 . H and r block Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103 of the Internal Revenue Code. H and r block 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. H and r block 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. H and r block Any property for which the special allowance under section 168(k) or section 1400N(d) of the Internal Revenue Code applies. H and r block Property for which you elected not to claim any special depreciation allowance (discussed later). H and r block Property placed in service and disposed of in the same tax year. H and r block Property converted from business use to personal use in the same tax year acquired. H and r block Property converted from personal use to business use in the same or later tax year may be qualified disaster assistance property. H and r block Any gambling or animal racing property (defined later). H and r block Qualified revitalization building. H and r block   This is a commercial building and its structural components that you placed in service in a renewal community before January 1, 2010. H and r block If the building is new, the original use of the building must begin with you. H and r block If the building is not new, you must substantially rehabilitate the building and then place it in service. H and r block For more information, including definitions of substantially rehabilitated building and qualified revitalization expenditure, see section 1400I(b) of the Internal Revenue Code. H and r block Gambling or animal racing property. H and r block   Gambling or animal racing property includes the following personal and real property. H and r block 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. H and r block 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. H and r block 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. H and r block Your property is qualified property if it meets the following requirements. H and r block It is one of the following types of property. H and r block Tangible property depreciated under MACRS with a recovery period of 20 years or less. H and r block Water utility property. H and r block Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. H and r block (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. H and r block ) Qualified leasehold improvement property (defined under Qualified leasehold improvement property later). H and r block You must have acquired the property after December 31, 2007, with no binding written contract for the acquisition in effect before January 1, 2008. H and r block 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)). H and r block The original use of the property must begin with you after December 31, 2007. H and r block It is not excepted property (explained later in Excepted property). H and r block Qualified leasehold improvement property. H and r block    Generally, this is any improvement to an interior part of a building that is nonresidential real property, if all the following requirements are met. H and r block 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. H and r block That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. H and r block The improvement is placed in service more than 3 years after the date the building was first placed in service by any person. H and r block The improvement is section 1250 property. H and r block See chapter 3 in Publication 544, Sales and Other Dispositions of Assets, for the definition of section 1250 property. H and r block   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. H and r block The enlargement of the building. H and r block Any elevator or escalator. H and r block Any structural component benefiting a common area. H and r block The internal structural framework of the building. H and r block   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. H and r block However, a lease between related persons is not treated as a lease. H and r block Related persons. H and r block   For this purpose, the following are related persons. H and r block Members of an affiliated group. H and r block 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. H and r block A corporation and an individual who directly or indirectly owns 80% or more of the value of the outstanding stock of that corporation. H and r block Two corporations that are members of the same controlled group. H and r block 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. H and r block The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. H and r block 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. H and r block 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. H and r block 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. H and r block A corporation and a partnership if the same persons own both of the following. H and r block 80% or more of the value of the outstanding stock of the corporation. H and r block 80% or more of the capital or profits interest in the partnership. H and r block The executor and beneficiary of any estate. H and r block Long Production Period Property To be qualified property, long production period property must meet the following requirements. H and r block It must meet the requirements in (2)-(5), above. H and r block The property has a recovery period of at least 10 years or is transportation property. H and r block Transportation property is tangible personal property used in the trade or business of transporting persons or property. H and r block The property is subject to section 263A of the Internal Revenue Code. H and r block The property has an estimated production period exceeding 1 year and an estimated production cost exceeding $1,000,000. H and r block Noncommercial Aircraft To be qualified property, noncommercial aircraft must meet the following requirements. H and r block It must meet the requirements in (2)-(5), above. H and r block 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). H and r block 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. H and r block The aircraft must have an estimated production period exceeding four months and a cost exceeding $200,000. H and r block Special Rules Sale-leaseback. H and r block   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. H and r block   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. H and r block Syndicated leasing transactions. H and r block   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. H and r block   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. H and r block Excepted Property Qualified property does not include any of the following. H and r block Property placed in service and disposed of in the same tax year. H and r block Property converted from business use to personal use in the same tax year acquired. H and r block Property converted from personal use to business use in the same or later tax year may be qualified property. H and r block Property required to be depreciated under the Alternative Depreciation System (ADS). H and r block This includes listed property used 50% or less in a qualified business use. H and r block 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 . H and r block Qualified restaurant property (as defined in section 168(e)(7) of the Internal Revenue Code). H and r block Qualified retail improvement property (as defined in section 168(e)(8) of the Internal Revenue Code). H and r block Property for which you elected not to claim any special depreciation allowance (discussed later). H and r block Property for which you elected to accelerate certain credits in lieu of the special depreciation allowance (discussed next). H and r block 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. H and r block 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. H and r block 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. H and r block 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. H and r block 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. H and r block See Which Depreciation Method Applies in chapter 4 . H and r block Once made, the election cannot be revoked without IRS consent. H and r block Additional guidance. H and r block   For additional guidance on the election to accelerate the research or minimum tax credit in lieu of claiming the special depreciation allowance, see Rev. H and r block Proc. H and r block 2008-65 on page 1082 of Internal Revenue Bulletin 2008-44, available at www. H and r block irs. H and r block gov/pub/irs-irbs/irb08-44. H and r block pdf, Rev. H and r block Proc. H and r block 2009-16 on page 449 of Internal Revenue Bulletin 2009-06, available at www. H and r block irs. H and r block gov/pub/irs-irbs/irb09-06. H and r block pdf, and Rev. H and r block Proc. H and r block 2009-33 on page 150 of Internal Revenue Bulletin 2009-29, available at www. H and r block irs. H and r block gov/pub/irs-irbs/irb09-29. H and r block pdf. H and r block Also, see Form 3800, General Business Credit; Form 8827, Credit for Prior Year Minimum Tax — Corporations; and related instructions. H and r block   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. H and r block irs. H and r block gov/irb. H and r block 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%. H and r block For qualified property other than listed property, enter the special allowance on line 14 in Part II of Form 4562. H and r block For qualified property that is listed property, enter the special allowance on line 25 in Part V of Form 4562. H and r block If you place qualified property in service in a short tax year, you can take the full amount of a special depreciation allowance. H and r block Depreciable basis. H and r block   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. H and r block   The following are examples of some credits and deductions that reduce depreciable basis. H and r block Any section 179 deduction. H and r block Any deduction for removal of barriers to the disabled and the elderly. H and r block Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. H and r block Basis adjustment to investment credit property under section 50(c) of the Internal Revenue Code. H and r block   For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. H and r block   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 . H and r block 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 . H and r block Depreciating the remaining cost. H and r block   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 . H and r block Therefore, you must reduce the depreciable basis of the property by the special depreciation allowance before figuring your regular MACRS depreciation deduction. H and r block Example. H and r block On November 1, 2013, Tom Brown bought and placed in service in his business qualified property that cost $450,000. H and r block He did not elect to claim a section 179 deduction. H and r block He deducts 50% of the cost ($225,000) as a special depreciation allowance for 2013. H and r block He uses the remaining $225,000 of cost to figure his regular MACRS depreciation deduction for 2013 and later years. H and r block Like-kind exchanges and involuntary conversions. H and r block   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. H and r block After you figure your special allowance, you can use the remaining carryover basis to figure your regular MACRS depreciation deduction. H and r block 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. H and r block See Figuring the Deduction for Property Acquired in a Nontaxable Exchange , in chapter 4 under How Is the Depreciation Deduction Figured . H and r block The excess basis (the part of the acquired property's basis that exceeds its carryover basis) is also eligible for a special depreciation allowance. H and r block 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. H and r block 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. H and r block When to make election. H and r block   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. H and r block   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). H and r block Attach the election statement to the amended return. H and r block On the amended return, write “Filed pursuant to section 301. H and r block 9100-2. H and r block ” Revoking an election. H and r block   Once you elect not to deduct a special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. H and r block A request to revoke the election is a request for a letter ruling. H and r block If you elect not to have any special allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. H and r block 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. H and r block See When Do You Recapture MACRS Depreciation in chapter 4 or more information. H and r block Recapture of allowance deducted for qualified GO Zone property. H and r block   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. H and r block For additional guidance, see Notice 2008-25 on page 484 of Internal Revenue Bulletin 2008-9. H and r block Qualified cellulosic biomass ethanol plant property and qualified cellulosic biofuel plant property. H and r block   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. H and r block Recapture of allowance for qualified Recovery Assistance property. H and r block   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. H and r block For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. H and r block Recapture of allowance for qualified disaster assistance property. H and r block   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. H and r block   For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. H and r block Prev  Up  Next   Home   More Online Publications