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

Learn more about your rights to federal records.


Freedom of Information Act

The Freedom of Information Act (FOIA) is a law that gives you the right to access information from the federal government.

How to Make a FOIA Request

Any person can make a FOIA request for any federal agency record. To make a request, write a letter to the agency that describes the information you want, and the format you want it in, in as much detail as possible.

You can find a sample FOIA request letter in Your Right to Federal Records (PDF). You can also download this publication to an e-reader or order a free print copy.

When you complete your letter, send it to the agency's FOIA contact. Find the FOIA contact for every federal agency.

Before you send a FOIA request, it’s a good idea to look at an agency’s website first to see what's already available. FOIA requires that federal agencies release certain information automatically, without the need for you to make a request.

If the records you seek are about yourself, you can request them under both the FOIA and the Privacy Act of 1974.

Learn more about how to make a FOIA request.

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Privacy Act of 1974

The Privacy Act of 1974 establishes certain controls over what personal information is collected by the federal government and how it is used.

How to Request Information Under the Privacy Act

Write a letter to the agency that you believe may have a file pertaining to you. You can find detailed instructions and a sample letter in Your Right to Federal Records (PDF). You can also download this publication to an e-reader or order a free print copy.

If the records you seek are about yourself, you can request them under both the FOIA and the Privacy Act of 1974.

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The Tax Extension Online

Tax extension online IRAs and Other Retirement Plans Table of Contents 2002 ChangesSimplified Employee Pensions (SEPs) 403(b) Plans Later ChangeDeemed IRAs 2002 Changes Simplified Employee Pensions (SEPs) Contribution limit increased. Tax extension online   For plan years beginning after December 31, 2001, the annual limit on the amount of employer contributions to a SEP increases to the lesser of the following amounts. Tax extension online 25% of an eligible employee's compensation. Tax extension online $40,000 (subject to cost-of-living adjustments after 2002). Tax extension online Deduction limit. Tax extension online   For years beginning after 2001, the following changes apply to the SEP deduction limit. Tax extension online Elective deferrals (SARSEPs). Tax extension online   Elective deferrals under a SARSEP are not subject to the deduction limit that applies to employer contributions. Tax extension online Also, elective deferrals are not taken into account when figuring the amount you can deduct for employer contributions that are not elective deferrals. Tax extension online Definition of compensation. Tax extension online    Compensation for figuring the deduction for employer contributions includes elective deferrals under a SARSEP. Tax extension online More information. Tax extension online   For more information about SEPs, see Publication 560, Retirement Plans for Small Business. Tax extension online 403(b) Plans Figuring catch-up contributions. Tax extension online   When figuring allowable catch-up contributions, combine all contributions made by your employer on your behalf to the following plans. Tax extension online Qualified retirement plans. Tax extension online 403(b) plans. Tax extension online Simplified employee pensions (SEP). Tax extension online SIMPLE plans. Tax extension online   The total amount of the catch-up contributions to all plans maintained by your employer cannot exceed the annual limit. Tax extension online For 2002, the limit is $1,000. Tax extension online Rollovers to and from 403(b) plans. Tax extension online   If a distribution includes both pre-tax contributions and after-tax contributions, the portion of the distribution that is rolled over is treated as consisting first of pre-tax amounts (contributions and earnings that would be includible in income if no rollover occurred). Tax extension online This means that if you roll over an amount that is at least as much as the pre-tax portion of the distribution, you do not have to include any of the distribution in income. Tax extension online Years of service for church employees and ministers. Tax extension online   If you are a minister or church employee, treat all of your years of service as an employee of a church or a convention or association of churches as years of service with one employer. Tax extension online Prior law required church employees and ministers to figure years of service separately for each employer. Tax extension online   As a minister or church employee, all contributions made to 403(b) plans on your behalf, as an employee of a church or a convention or association of churches, are considered made by one employer. Tax extension online Foreign missionaries. Tax extension online   If you are a foreign missionary, contributions to your 403(b) account will not be treated as exceeding the limit on annual additions if the contributions are not more than the greater of: $3,000, or Your includible compensation. Tax extension online More information. Tax extension online   For more information about 403(b) plans, see Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). Tax extension online Later Change Deemed IRAs For plan years beginning after 2002, a qualified employer plan can provide for voluntary employee contributions to a separate account or annuity that is deemed to be an IRA. Tax extension online For this purpose, a qualified employer plan includes a deferred compensation plan (section 457(b) plan) maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state. Tax extension online The term qualified employer plan also includes: A qualified pension, profit-sharing, or stock bonus plan (section 401(a) plan), A qualified employee annuity plan (section 403(a) plan), and A tax-sheltered annuity plan (section 403(b) plan). Tax extension online More information about IRAs can be found in Publication 590, Individual Retirement Arrangements (IRAs). Tax extension online Prev  Up  Next   Home   More Online Publications