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Unemployment Taxes 2011

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Unemployment Taxes 2011

Unemployment taxes 2011 4. Unemployment taxes 2011   Reporting Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Information Returns Schedule D and Form 8949Long and Short Term Net Gain or Loss Treatment of Capital Losses Capital Gains Tax Rates Form 4797Mark-to-market election. Unemployment taxes 2011 Introduction This chapter explains how to report capital gains and losses and ordinary gains and losses from sales, exchanges, and other dispositions of property. Unemployment taxes 2011 Although this discussion refers to Schedule D (Form 1040) and Form 8949, many of the rules discussed here also apply to taxpayers other than individuals. Unemployment taxes 2011 However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Unemployment taxes 2011 Topics - This chapter discusses: Information returns Schedule D (Form 1040) Form 4797 Form 8949 Useful Items - You may want to see: Publication 550 Investment Income and Expenses 537 Installment Sales Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-S Proceeds From Real Estate Transactions 4684 Casualties and Thefts 4797 Sales of Business Property 6252 Installment Sale Income 6781 Gains and Losses from Section 1256 Contracts and Straddles 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. Unemployment taxes 2011 Information Returns If you sell or exchange certain assets, you should receive an information return showing the proceeds of the sale. Unemployment taxes 2011 This information is also provided to the IRS. Unemployment taxes 2011 Form 1099-B. Unemployment taxes 2011   If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a substitute statement from the broker. Unemployment taxes 2011 Use the Form 1099-B or a substitute statement to complete Form 8949 and/or Schedule D. Unemployment taxes 2011 Whether or not you receive 1099-B, you must report all taxable sales of stock, bonds, commodities, etc. Unemployment taxes 2011 on Form 8949 and/or Schedule D, as applicable. Unemployment taxes 2011 For more information on figuring gains and losses from these transactions, see chapter 4 in Publication 550. Unemployment taxes 2011 For information on reporting the gains and losses, see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Unemployment taxes 2011 Form 1099-S. Unemployment taxes 2011   An information return must be provided on certain real estate transactions. Unemployment taxes 2011 Generally, the person responsible for closing the transaction (the “real estate reporting person”) must report on Form 1099-S sales or exchanges of the following types of property. Unemployment taxes 2011 Land (improved or unimproved), including air space. Unemployment taxes 2011 An inherently permanent structure, including any residential, commercial, or industrial building. Unemployment taxes 2011 A condominium unit and its related fixtures and common elements (including land). Unemployment taxes 2011 Stock in a cooperative housing corporation. Unemployment taxes 2011 If you sold or exchanged any of the above types of property, the “real estate reporting person” must give you a copy of Form 1099-S or a statement containing the same information as the Form 1099-S. Unemployment taxes 2011 The “real estate reporting person” could include the buyer's attorney, your attorney, the title or escrow company, a mortgage lender, your broker, the buyer's broker, or the person acquiring the biggest interest in the property. Unemployment taxes 2011   For more information see chapter 4 in Publication 550. Unemployment taxes 2011 Also, see the Instructions for Form 8949. Unemployment taxes 2011 Schedule D and Form 8949 Form 8949. Unemployment taxes 2011   Individuals, corporations, and partnerships, use Form 8949 to report the following. Unemployment taxes 2011    Sales or exchanges of capital assets, including stocks, bonds, etc. Unemployment taxes 2011 , and real estate (if not reported on another form or schedule such as Form 4684, 4797, 6252, 6781, or 8824). Unemployment taxes 2011 Include these transactions even if you did not receive a Form 1099-B or 1099-S. Unemployment taxes 2011 Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit. Unemployment taxes 2011 Nonbusiness bad debts. Unemployment taxes 2011   Individuals, If you are filing a joint return, complete as many copies of Form 8949 as you need to report all of your and your spouse's transactions. Unemployment taxes 2011 You and your spouse may list your transactions on separate forms or you may combine them. Unemployment taxes 2011 However, you must include on your Schedule D the totals from all Forms 8949 for both you and your spouse. Unemployment taxes 2011    Corporations and electing large partnerships also use Form 8949 to report their share of gain or loss from a partnership, S Corporation, estate or trust. Unemployment taxes 2011   Business entities meeting certain criteria, may have an exception to some of the normal requirements for completing Form 8949. Unemployment taxes 2011 See the Instructions for Form 8949. Unemployment taxes 2011 Schedule D. Unemployment taxes 2011    Use Schedule D (Form 1040) to figure the overall gain or loss from transactions reported on Form 8949, and to report certain transactions you do not have to report on Form 8949. Unemployment taxes 2011 Before completing Schedule D, you may have to complete other forms as shown below. Unemployment taxes 2011    Complete all applicable lines of Form 8949 before completing lines 1b, 2, 3, 8b, 9, or 10 of your applicable Schedule D. Unemployment taxes 2011 Enter on Schedule D the combined totals from all your Forms 8949. Unemployment taxes 2011 For a sale, exchange, or involuntary conversion of business property, complete Form 4797 (discussed later). Unemployment taxes 2011 For a like-kind exchange, complete Form 8824. Unemployment taxes 2011 See Reporting the exchange under Like-Kind Exchanges in chapter 1. Unemployment taxes 2011 For an installment sale, complete Form 6252. Unemployment taxes 2011 See Publication 537. Unemployment taxes 2011 For an involuntary conversion due to casualty or theft, complete Form 4684. Unemployment taxes 2011 See Publication 547, Casualties, Disasters, and Thefts. Unemployment taxes 2011 For a disposition of an interest in, or property used in, an activity to which the at-risk rules apply, complete Form 6198, At-Risk Limitations. Unemployment taxes 2011 See Publication 925, Passive Activity and At-Risk Rules. Unemployment taxes 2011 For a disposition of an interest in, or property used in, a passive activity, complete Form 8582, Passive Activity Loss Limitations. Unemployment taxes 2011 See Publication 925. Unemployment taxes 2011 For gains and losses from section 1256 contracts and straddles, complete Form 6781. Unemployment taxes 2011 See Publication 550. Unemployment taxes 2011 Personal-use property. Unemployment taxes 2011   Report gain on the sale or exchange of property held for personal use (such as your home) on Form 8949 and Schedule D (Form 1040), as applicable. Unemployment taxes 2011 Loss from the sale or exchange of property held for personal use is not deductible. Unemployment taxes 2011 But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, report the transaction on Form 8949 and Schedule D, even though the loss is not deductible. Unemployment taxes 2011 See the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949 for information on how to report the transaction. Unemployment taxes 2011 Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. Unemployment taxes 2011 The time you own an asset before disposing of it is the holding period. Unemployment taxes 2011 If you received a Form 1099-B, (or substitute statement) box 1c may help you determine whether the gain or loss is short-term or long-term. Unemployment taxes 2011 If you hold a capital asset 1 year or less, the gain or loss from its disposition is short term. Unemployment taxes 2011 Report it in Part I of Form 8949 and/or Schedule D, as applicable. Unemployment taxes 2011 If you hold a capital asset longer than 1 year, the gain or loss from its disposition is long term. Unemployment taxes 2011 Report it in Part II of Form 8949 and/or Schedule D, as applicable. Unemployment taxes 2011   Table 4-1. Unemployment taxes 2011 Do I Have a Short-Term or Long-Term Gain or Loss? IF you hold the property. Unemployment taxes 2011 . Unemployment taxes 2011 . Unemployment taxes 2011  THEN you have a. Unemployment taxes 2011 . Unemployment taxes 2011 . Unemployment taxes 2011 1 year or less, Short-term capital gain or  loss. Unemployment taxes 2011 More than 1 year, Long-term capital gain or  loss. Unemployment taxes 2011 These distinctions are essential to correctly arrive at your net capital gain or loss. Unemployment taxes 2011 Capital losses are allowed in full against capital gains plus up to $3,000 of ordinary income. Unemployment taxes 2011 See Capital Gains Tax Rates, later. Unemployment taxes 2011 Holding period. Unemployment taxes 2011   To figure if you held property longer than 1 year, start counting on the day following the day you acquired the property. Unemployment taxes 2011 The day you disposed of the property is part of your holding period. Unemployment taxes 2011 Example. Unemployment taxes 2011 If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. Unemployment taxes 2011 If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. Unemployment taxes 2011 Patent property. Unemployment taxes 2011   If you dispose of patent property, you generally are considered to have held the property longer than 1 year, no matter how long you actually held it. Unemployment taxes 2011 For more information, see Patents in chapter 2. Unemployment taxes 2011 Inherited property. Unemployment taxes 2011   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. Unemployment taxes 2011 Installment sale. Unemployment taxes 2011   The gain from an installment sale of an asset qualifying for long-term capital gain treatment in the year of sale continues to be long term in later tax years. Unemployment taxes 2011 If it is short term in the year of sale, it continues to be short term when payments are received in later tax years. Unemployment taxes 2011    The date the installment payment is received determines the capital gains rate that should be applied not the date the asset was sold under an installment contract. Unemployment taxes 2011 Nontaxable exchange. Unemployment taxes 2011   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. Unemployment taxes 2011 That is, it begins on the same day as your holding period for the old property. Unemployment taxes 2011 Example. Unemployment taxes 2011 You bought machinery on December 4, 2012. Unemployment taxes 2011 On June 4, 2013, you traded this machinery for other machinery in a nontaxable exchange. Unemployment taxes 2011 On December 5, 2013, you sold the machinery you got in the exchange. Unemployment taxes 2011 Your holding period for this machinery began on December 5, 2012. Unemployment taxes 2011 Therefore, you held it longer than 1 year. Unemployment taxes 2011 Corporate liquidation. Unemployment taxes 2011   The holding period for property you receive in a liquidation generally starts on the day after you receive it if gain or loss is recognized. Unemployment taxes 2011 Profit-sharing plan. Unemployment taxes 2011   The holding period of common stock withdrawn from a qualified contributory profit-sharing plan begins on the day following the day the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in your name. Unemployment taxes 2011 Gift. Unemployment taxes 2011   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. Unemployment taxes 2011 For more information on basis, see Publication 551, Basis of Assets. Unemployment taxes 2011 Real property. Unemployment taxes 2011   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, the day after you took possession of it and assumed the burdens and privileges of ownership. Unemployment taxes 2011   However, taking possession of real property under an option agreement is not enough to start the holding period. Unemployment taxes 2011 The holding period cannot start until there is an actual contract of sale. Unemployment taxes 2011 The holding period of the seller cannot end before that time. Unemployment taxes 2011 Repossession. Unemployment taxes 2011   If you sell real property but keep a security interest in it and then later repossess it, your holding period for a later sale includes the period you held the property before the original sale, as well as the period after the repossession. Unemployment taxes 2011 Your holding period does not include the time between the original sale and the repossession. Unemployment taxes 2011 That is, it does not include the period during which the first buyer held the property. Unemployment taxes 2011 Nonbusiness bad debts. Unemployment taxes 2011   Nonbusiness bad debts are short-term capital losses. Unemployment taxes 2011 For information on nonbusiness bad debts, see chapter 4 of Publication 550. Unemployment taxes 2011    Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. Unemployment taxes 2011 Net short-term capital gain or loss. Unemployment taxes 2011   Combine your short-term capital gains and losses, including your share of short-term capital gains or losses from partnerships, S corporations, and fiduciaries and any short-term capital loss carryover. Unemployment taxes 2011 Do this by adding all your short-term capital gains. Unemployment taxes 2011 Then add all your short-term capital losses. Unemployment taxes 2011 Subtract the lesser total from the other. Unemployment taxes 2011 The result is your net short-term capital gain or loss. Unemployment taxes 2011 Net long-term capital gain or loss. Unemployment taxes 2011   Follow the same steps to combine your long-term capital gains and losses. Unemployment taxes 2011 Include the following items. Unemployment taxes 2011 Net section 1231 gain from Part I, Form 4797, after any adjustment for nonrecaptured section 1231 losses from prior tax years. Unemployment taxes 2011 Capital gain distributions from regulated investment companies (mutual funds) and real estate investment trusts. Unemployment taxes 2011 Your share of long-term capital gains or losses from partnerships, S corporations, and fiduciaries. Unemployment taxes 2011 Any long-term capital loss carryover. Unemployment taxes 2011 The result from combining these items with other long-term capital gains and losses is your net long-term capital gain or loss. Unemployment taxes 2011 Net gain. Unemployment taxes 2011   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. Unemployment taxes 2011 Different tax rates may apply to the part that is a net capital gain. Unemployment taxes 2011 See Capital Gains Tax Rates, later. Unemployment taxes 2011 Net loss. Unemployment taxes 2011   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. Unemployment taxes 2011 But there are limits on how much loss you can deduct and when you can deduct it. Unemployment taxes 2011 See Treatment of Capital Losses, next. Unemployment taxes 2011    Treatment of Capital Losses If your capital losses are more than your capital gains, you can deduct the difference as a capital loss deduction even if you do not have ordinary income to offset it. Unemployment taxes 2011 The yearly limit on the amount of the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). Unemployment taxes 2011 Table 4-2. Unemployment taxes 2011 Holding Period for Different Types of Acquisitions Type of acquisition: When your holding period starts: Stocks and bonds bought on a securities market Day after trading date you bought security. Unemployment taxes 2011 Ends on trading date you sold security. Unemployment taxes 2011 U. Unemployment taxes 2011 S. Unemployment taxes 2011 Treasury notes and bonds If bought at auction, day after notification of bid acceptance. Unemployment taxes 2011 If bought through subscription, day after subscription was submitted. Unemployment taxes 2011 Nontaxable exchanges Day after date you acquired old property. Unemployment taxes 2011 Gift If your basis is giver's adjusted basis, same day as giver's holding period began. Unemployment taxes 2011 If your basis is FMV, day after date of gift. Unemployment taxes 2011 Real property bought Generally, day after date you received title to the property. Unemployment taxes 2011 Real property repossessed Day after date you originally received title to the property, but does not include time between the original sale and date of repossession. Unemployment taxes 2011 Capital loss carryover. Unemployment taxes 2011   Generally, you have a capital loss carryover if either of the following situations applies to you. Unemployment taxes 2011 Your net loss is more than the yearly limit. Unemployment taxes 2011 Your taxable income without your deduction for exemptions is less than zero. Unemployment taxes 2011 If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carryover to 2014. Unemployment taxes 2011 Example. Unemployment taxes 2011 Bob and Gloria Sampson sold property in 2013. Unemployment taxes 2011 The sale resulted in a capital loss of $7,000. Unemployment taxes 2011 The Sampsons had no other capital transactions. Unemployment taxes 2011 On their joint 2013 return, the Sampsons deduct $3,000, the yearly limit. Unemployment taxes 2011 They had taxable income of $2,000. Unemployment taxes 2011 The unused part of the loss, $4,000 ($7,000 − $3,000), is carried over to 2014. Unemployment taxes 2011 If the Sampsons' capital loss had been $2,000, it would not have been more than the yearly limit. Unemployment taxes 2011 Their capital loss deduction would have been $2,000. Unemployment taxes 2011 They would have no carryover to 2014. Unemployment taxes 2011 Short-term and long-term losses. Unemployment taxes 2011   When you carry over a loss, it retains its original character as either long term or short term. Unemployment taxes 2011 A short-term loss you carry over to the next tax year is added to short-term losses occurring in that year. Unemployment taxes 2011 A long-term loss you carry over to the next tax year is added to long-term losses occurring in that year. Unemployment taxes 2011 A long-term capital loss you carry over to the next year reduces that year's long-term gains before its short-term gains. Unemployment taxes 2011   If you have both short-term and long-term losses, your short-term losses are used first against your allowable capital loss deduction. Unemployment taxes 2011 If, after using your short-term losses, you have not reached the limit on the capital loss deduction, use your long-term losses until you reach the limit. Unemployment taxes 2011 To figure your capital loss carryover from 2013 to 2014 use the Capital Loss Carryover Worksheet in the 2013 Instructions for Schedule D (Form 1040). Unemployment taxes 2011 Joint and separate returns. Unemployment taxes 2011   On a joint return, the capital gains and losses of spouses are figured as the gains and losses of an individual. Unemployment taxes 2011 If you are married and filing a separate return, your yearly capital loss deduction is limited to $1,500. Unemployment taxes 2011 Neither you nor your spouse can deduct any part of the other's loss. Unemployment taxes 2011   If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. Unemployment taxes 2011 However, if you and your spouse once filed jointly and are now filing separately, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss. Unemployment taxes 2011 Death of taxpayer. Unemployment taxes 2011   Capital losses cannot be carried over after a taxpayer's death. Unemployment taxes 2011 They are deductible only on the final income tax return filed on the decedent's behalf. Unemployment taxes 2011 The yearly limit discussed earlier still applies in this situation. Unemployment taxes 2011 Even if the loss is greater than the limit, the decedent's estate cannot deduct the difference or carry it over to following years. Unemployment taxes 2011 Corporations. Unemployment taxes 2011   A corporation can deduct capital losses only up to the amount of its capital gains. Unemployment taxes 2011 In other words, if a corporation has a net capital loss, it cannot be deducted in the current tax year. Unemployment taxes 2011 It must be carried to other tax years and deducted from capital gains occurring in those years. Unemployment taxes 2011 For more information, see Publication 542. Unemployment taxes 2011 Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. Unemployment taxes 2011 These lower rates are called the maximum capital gains rates. Unemployment taxes 2011 The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. Unemployment taxes 2011 For 2013, the maximum tax rates for individuals are 0%, 15%, 20%, 25%, and 28%. Unemployment taxes 2011 Also, individuals, use the Qualified Dividends and Capital Gain Worksheet in the Instructions for Form 1040, or the Schedule D Tax Computation Worksheet in the Instructions for Schedule D (Form 1040) (whichever applies) to figure your tax if you have qualified dividends or net capital gain. Unemployment taxes 2011 For more information, see chapter 4 of Publication 550. Unemployment taxes 2011 Also see the Instructions for Schedule D (Form 1040). Unemployment taxes 2011 Unrecaptured section 1250 gain. Unemployment taxes 2011   Generally, this is the part of any long-term capital gain on section 1250 property (real property) that is due to depreciation. Unemployment taxes 2011 Unrecaptured section 1250 gain cannot be more than the net section 1231 gain or include any gain otherwise treated as ordinary income. Unemployment taxes 2011 Use the worksheet in the Schedule D instructions to figure your unrecaptured section 1250 gain. Unemployment taxes 2011 For more information about section 1250 property and net section 1231 gain, see chapter 3. Unemployment taxes 2011 Form 4797 Use Form 4797 to report: The sale or exchange of: Property used in your trade or business; Depreciable and amortizable property; Oil, gas, geothermal, or other mineral properties; and Section 126 property. Unemployment taxes 2011 The involuntary conversion (from other than casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. Unemployment taxes 2011 The disposition of noncapital assets (other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business). Unemployment taxes 2011 The disposition of capital assets not reported on Schedule D. Unemployment taxes 2011 The gain or loss (including any related recapture) for partners and S corporation shareholders from certain section 179 property dispositions by partnerships (other than electing large partnerships) and S corporations. Unemployment taxes 2011 The computation of recapture amounts under sections 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less. Unemployment taxes 2011 Gains or losses treated as ordinary gains or losses, if you are a trader in securities or commodities and made a mark-to-market election under Internal Revenue Code section 475(f). Unemployment taxes 2011 You can use Form 4797 with Form 1040, 1065, 1120, or 1120S. Unemployment taxes 2011 Section 1231 gains and losses. Unemployment taxes 2011   Show any section 1231 gains and losses in Part I. Unemployment taxes 2011 Carry a net gain to Schedule D (Form 1040) as a long-term capital gain. Unemployment taxes 2011 Carry a net loss to Part II of Form 4797 as an ordinary loss. Unemployment taxes 2011   If you had any nonrecaptured net section 1231 losses from the preceding 5 tax years, reduce your net gain by those losses and report the amount of the reduction as an ordinary gain in Part II. Unemployment taxes 2011 Report any remaining gain on Schedule D (Form 1040). Unemployment taxes 2011 See Section 1231 Gains and Losses in chapter 3. Unemployment taxes 2011 Ordinary gains and losses. Unemployment taxes 2011   Show any ordinary gains and losses in Part II. Unemployment taxes 2011 This includes a net loss or a recapture of losses from prior years figured in Part I of Form 4797. Unemployment taxes 2011 It also includes ordinary gain figured in Part III. Unemployment taxes 2011 Mark-to-market election. Unemployment taxes 2011   If you made a mark-to-market election, you should report all gains and losses from trading as ordinary gains and losses in Part II of Form 4797, instead of as capital gains and losses on Form 8949 and Schedule D (Form 1040). Unemployment taxes 2011 See the Instructions for Form 4797. Unemployment taxes 2011 Also see Special Rules for Traders in Securities, in chapter 4 of Publication 550. Unemployment taxes 2011 Ordinary income from depreciation. Unemployment taxes 2011   Figure the ordinary income from depreciation on personal property and additional depreciation on real property (as discussed in chapter 3) in Part III. Unemployment taxes 2011 Carry the ordinary income to Part II of Form 4797 as an ordinary gain. Unemployment taxes 2011 Carry any remaining gain to Part I as section 1231 gain, unless it is from a casualty or theft. Unemployment taxes 2011 Carry any remaining gain from a casualty or theft to Form 4684. Unemployment taxes 2011 Prev  Up  Next   Home   More Online Publications
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The Unemployment Taxes 2011

Unemployment taxes 2011 Depreciation Table of Contents Introduction Special Depreciation AllowanceQualified Property Election Not To Claim the Allowance Rules for Returns Filed Before June 1, 2002 Passenger Automobiles New York Liberty Zone BenefitsSpecial Liberty Zone Depreciation Allowance Increased Section 179 Deduction Liberty Zone Leasehold Improvement Property If you depreciate business property that you acquired and placed in service after September 10, 2001, new law contains provisions that may affect your depreciation deduction for that property. Unemployment taxes 2011 Publication 946, How To Depreciate Property, contains information on depreciation. Unemployment taxes 2011 However, Publication 946 does not contain the new provisions because it was printed before the law was enacted. Unemployment taxes 2011 The new provisions are in the Supplement to Publication 946, which is reprinted below. Unemployment taxes 2011 Supplement to Publication 946 How To Depreciate Property   Introduction After Publication 946 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. Unemployment taxes 2011 The new law made several changes in the tax rules explained in the publication. Unemployment taxes 2011 Some of the changes apply to property placed in service during 2001. Unemployment taxes 2011 This supplemental publication describes those changes and explains what you should do if you are affected by them. Unemployment taxes 2011 The situations and examples in Publication 946 do not reflect any of the changes made by the Job Creation and Worker Assistance Act of 2002. Unemployment taxes 2011 The new law contains the following provisions. Unemployment taxes 2011 30% depreciation deductions (special depreciation allowance and special New York Liberty Zone (Liberty Zone) depreciation allowance) for the year qualified property is placed in service after September 10, 2001. Unemployment taxes 2011 An increased dollar limit on the section 179 deduction for qualified Liberty Zone property purchased after September 10, 2001. Unemployment taxes 2011 A shorter recovery period for qualified Liberty Zone leasehold improvement property placed in service after September 10, 2001. Unemployment taxes 2011 An increase in the maximum depreciation deduction for 2001 for a qualified passenger automobile placed in service after September 10, 2001. Unemployment taxes 2011 If you believe you qualify for an increased deduction under any of these new rules, you must file the revised 2001 Form 4562 (dated March 2002) for 2001 calendar or fiscal years and 2000 fiscal years ending after September 10, 2001. Unemployment taxes 2011 If you have already filed a tax return, this supplemental publication explains how to claim these benefits and how to elect not to claim the special depreciation allowance or special Liberty Zone depreciation allowance. Unemployment taxes 2011 See Table 2 at the end of the supplement for an overview of the rules that apply if you filed your return before June 1, 2002. Unemployment taxes 2011 Special Depreciation Allowance You can take a special depreciation allowance for qualified property you place in service after September 10, 2001. Unemployment taxes 2011 The allowance is an additional deduction of 30% of the property's depreciable basis. Unemployment taxes 2011 To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. Unemployment taxes 2011 See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. Unemployment taxes 2011 The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. Unemployment taxes 2011 There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Unemployment taxes 2011 In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. Unemployment taxes 2011 Example 1. Unemployment taxes 2011 On November 1, 2001, you bought and placed in service in your business qualified property that cost $100,000. Unemployment taxes 2011 You did not elect to claim a section 179 deduction. Unemployment taxes 2011 You can deduct 30% of the cost ($30,000) as a special depreciation allowance for 2001. Unemployment taxes 2011 You use the remaining $70,000 of cost to figure your regular depreciation deduction for 2001 and later years. Unemployment taxes 2011 Example 2. Unemployment taxes 2011 The facts are the same as in Example 1, except that you choose to deduct $24,000 of the property's cost as a section 179 deduction. Unemployment taxes 2011 You use the remaining $76,000 of cost to figure your special depreciation allowance of $22,800 ($76,000 × 30%). Unemployment taxes 2011 You use the remaining $53,200 of cost to figure your regular depreciation deduction for 2001 and later years. Unemployment taxes 2011 Qualified Property To qualify for the special depreciation allowance, your property must meet the following requirements. Unemployment taxes 2011 It is new property of one of the following types. Unemployment taxes 2011 Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. Unemployment taxes 2011 See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. Unemployment taxes 2011 Water utility property. Unemployment taxes 2011 See 25-year property on page 22 in Publication 946. Unemployment taxes 2011 Computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. Unemployment taxes 2011 (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Unemployment taxes 2011 ) Qualified leasehold improvement property (defined later). Unemployment taxes 2011 It meets the following tests (explained later under Tests To Be Met). Unemployment taxes 2011 Acquisition date test. Unemployment taxes 2011 Placed in service date test. Unemployment taxes 2011 Original use test. Unemployment taxes 2011 It is not excepted property (explained later under Excepted Property). Unemployment taxes 2011 Qualified leasehold improvement property. Unemployment taxes 2011    Generally, this is any improvement to an interior part of a building that is nonresidential real property, provided all of the following requirements are met. Unemployment taxes 2011 The improvement is made under or pursuant to a lease by the lessee (or any sublessee) or the lessor of that part of the building. Unemployment taxes 2011 That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. Unemployment taxes 2011 The improvement is placed in service more than 3 years after the date the building was first placed in service. Unemployment taxes 2011   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. Unemployment taxes 2011 The enlargement of the building. Unemployment taxes 2011 Any elevator or escalator. Unemployment taxes 2011 Any structural component benefiting a common area. Unemployment taxes 2011 The internal structural framework of the building. Unemployment taxes 2011   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. Unemployment taxes 2011 However, a binding commitment between related persons is not treated as a lease. Unemployment taxes 2011 Related persons. Unemployment taxes 2011   For this purpose, the following are related persons. Unemployment taxes 2011 Members of an affiliated group. Unemployment taxes 2011 The persons listed in items (1) through (9) under Related persons on page 8 of Publication 946 (except that “80% or more” should be substituted for “more than 10%” each place it appears). Unemployment taxes 2011 An executor and a beneficiary of the same estate. Unemployment taxes 2011 Tests To Be Met To qualify for the special depreciation allowance, the property must meet all of the following tests. Unemployment taxes 2011 Acquisition date test. Unemployment taxes 2011    Generally, you must have acquired the property either: After September 10, 2001, and before September 11, 2004, but only if no written binding contract for the acquisition was in effect before September 11, 2001, or Pursuant to a written binding contract entered into after September 10, 2001, and before September 11, 2004. Unemployment taxes 2011   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001, and before September 11, 2004. Unemployment taxes 2011 Placed in service date test. Unemployment taxes 2011   Generally, the property must be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. Unemployment taxes 2011   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. Unemployment taxes 2011 Original use test. Unemployment taxes 2011   The original use of the property must have begun with you after September 10, 2001. Unemployment taxes 2011 “Original use” means the first use to which the property is put, whether or not by you. Unemployment taxes 2011 Additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test. Unemployment taxes 2011 Excepted Property The following property does not qualify for the special depreciation allowance. Unemployment taxes 2011 Property used by any person before September 11, 2001. Unemployment taxes 2011 Property required to be depreciated using ADS. Unemployment taxes 2011 This includes listed property used 50% or less in a qualified business use. Unemployment taxes 2011 Qualified New York Liberty Zone leasehold improvement property (defined next). Unemployment taxes 2011 Qualified New York Liberty Zone leasehold improvement property. Unemployment taxes 2011   This is any qualified leasehold improvement property (as defined earlier) if all of the following requirements are met. Unemployment taxes 2011 The improvement is to a building located in the New York Liberty Zone (defined later under New York Liberty Zone Benefits). Unemployment taxes 2011 The improvement is placed in service after September 10, 2001, and before January 1, 2007. Unemployment taxes 2011 No written binding contract for the improvement was in effect before September 11, 2001. Unemployment taxes 2011 Election Not To Claim the Allowance You can elect not to claim the special depreciation allowance for qualified property. Unemployment taxes 2011 If you make this election for any property, it applies to all property in the same property class placed in service during the year. Unemployment taxes 2011 To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. Unemployment taxes 2011 When to make election. Unemployment taxes 2011   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. Unemployment taxes 2011   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). Unemployment taxes 2011 Attach the election statement to the amended return. Unemployment taxes 2011 At the top of the election statement, write “Filed pursuant to section 301. Unemployment taxes 2011 9100–2. Unemployment taxes 2011 ” Revoking an election. Unemployment taxes 2011   Once you elect not to deduct the special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Unemployment taxes 2011 A request to revoke the election is subject to a user fee. Unemployment taxes 2011 Rules for Returns Filed Before June 1, 2002 The following rules apply if you placed qualified property in service after September 10, 2001, and filed your return before June 1, 2002. Unemployment taxes 2011 The rules apply to returns for the following years. Unemployment taxes 2011 2000 fiscal years that end after September 10, 2001. Unemployment taxes 2011 2001 calendar and fiscal years. Unemployment taxes 2011 Claiming the allowance. Unemployment taxes 2011   If you did not claim the allowance on your return and did not make the election not to claim the allowance, you can do either of the following to claim the allowance. Unemployment taxes 2011 File an amended return by the due date (not including extensions) of your return for the year following the year the property was placed in service. Unemployment taxes 2011 Write “Filed Pursuant to Rev. Unemployment taxes 2011 Proc. Unemployment taxes 2011 2002–33” at the top of the amended return. Unemployment taxes 2011 File Form 3115, Application for Change in Accounting Method, with your return for the year following the year the property was placed in service. Unemployment taxes 2011 Your return must be filed by the due date (including extensions). Unemployment taxes 2011 Write “Automatic Change Filed Under Rev. Unemployment taxes 2011 Proc. Unemployment taxes 2011 2002–33” on the appropriate line of Form 3115. Unemployment taxes 2011 You must also file a copy (with signature) of the completed Form 3115 with the IRS National Office no later than when you file the original with your return. Unemployment taxes 2011 For more information about filing Form 3115, including the address to send it to, see Revenue Procedure 2002–9, Revenue Procedure 2002–19, and Revenue Procedure 2002–33. Unemployment taxes 2011 Example 1. Unemployment taxes 2011 You are an individual and you use the calendar year. Unemployment taxes 2011 You placed qualified property in service for your business in December 2001. Unemployment taxes 2011 You filed your 2001 income tax return before April 15, 2002. Unemployment taxes 2011 You did not claim the special depreciation allowance for the property and did not make the election not to claim the allowance. Unemployment taxes 2011 You can claim the special allowance by filing an amended 2001 return by April 15, 2003, with “Filed Pursuant to Rev. Unemployment taxes 2011 Proc. Unemployment taxes 2011 2002–33” at the top of the amended return. Unemployment taxes 2011 You must file an amended return by April 15, 2003, even if you get an extension of time to file your 2002 tax return. Unemployment taxes 2011 Example 2. Unemployment taxes 2011 The facts concerning your 2001 return are the same as in Example 1. Unemployment taxes 2011 In addition, you got an automatic 4-month extension of time (to August 15, 2003) to file your 2002 return. Unemployment taxes 2011 You can claim the special allowance by filing a Form 3115 (with “Filed Pursuant to Rev. Unemployment taxes 2011 Proc. Unemployment taxes 2011 2002–33” on the appropriate line) with your 2002 return by August 15, 2003. Unemployment taxes 2011 You must also file a copy of this Form 3115 with the IRS National Office no later than when you file your 2002 return. Unemployment taxes 2011 Electing not to claim the allowance. Unemployment taxes 2011   Generally, you have elected not to claim the special depreciation allowance for a class of property if you: Filed your return timely (including extensions) for the year you placed qualified property in service and indicated on a statement with the return that you are not claiming the allowance, or Filed your return timely and filed an amended return within 6 months of the due date of the original return (not including extensions) and indicated on a statement with the amended return that you are not claiming the allowance. Unemployment taxes 2011 The statement must indicate that you are not deducting the special depreciation allowance and the class of property to which the election applies. Unemployment taxes 2011 The statement can be either attached to or written on the return. Unemployment taxes 2011 You can, for example, write “not deducting 30%” on Form 4562. Unemployment taxes 2011 Deemed election. Unemployment taxes 2011   If you have not followed either of the procedures described above to elect not to claim the allowance, you may still be treated as making the election. Unemployment taxes 2011 You will be treated as making the election if you meet both of the following conditions. Unemployment taxes 2011 You filed your return for the year you placed the property in service and claimed depreciation, but not the special allowance, for any class of property. Unemployment taxes 2011 You do not file an amended return or a Form 3115 within the time prescribed for claiming the special allowance. Unemployment taxes 2011 See Claiming the allowance, earlier. Unemployment taxes 2011 Passenger Automobiles The limit on your depreciation deduction (including any section 179 deduction) for any passenger automobile that is qualified property (defined earlier) placed in service after September 10, 2001, and for which you claim the special depreciation allowance is increased. Unemployment taxes 2011 Generally, the limit is increased from $3,060 to $7,660. Unemployment taxes 2011 However, if the automobile is a qualified electric car, the limit is increased from $9,280 to $23,080 ($22,980 if placed in service in 2002). Unemployment taxes 2011 Table 1 shows the maximum deduction amounts for 2001. Unemployment taxes 2011 Table 1. Unemployment taxes 2011 Maximum Deduction for 2001 Qualified Vehicle Placed in Service Before Sept. Unemployment taxes 2011 11 Placed in Service After Sept. Unemployment taxes 2011 10 Passenger automobile $3,060 $7,660 Electric car 9,280 23,080 1 1$22,980 if you place an electric car in service in 2002. Unemployment taxes 2011 Election not to claim the allowance. Unemployment taxes 2011   The increased maximum depreciation deduction does not apply if you elected not to claim the special depreciation allowance as explained earlier under Election Not To Claim the Allowance and Rules for Returns Filed Before June 1, 2002. Unemployment taxes 2011 New York Liberty Zone Benefits Several benefits are available for property you place in service in the New York Liberty Zone (Liberty Zone). Unemployment taxes 2011 They include a special depreciation allowance for the year you place the property in service, an increased section 179 deduction, and the classification of certain leasehold improvement property as 5-year property. Unemployment taxes 2011 Area defined. Unemployment taxes 2011   The New York Liberty Zone is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway) in the Borough of Manhattan in the City of New York, New York. Unemployment taxes 2011 Special Liberty Zone Depreciation Allowance You can take a special depreciation allowance for qualified Liberty Zone property you place in service after September 10, 2001. Unemployment taxes 2011 The allowance is an additional deduction of 30% of the property's depreciable basis. Unemployment taxes 2011 To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. Unemployment taxes 2011 See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. Unemployment taxes 2011 The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. Unemployment taxes 2011 There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Unemployment taxes 2011 In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. Unemployment taxes 2011 You cannot claim the special Liberty Zone depreciation allowance for property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. Unemployment taxes 2011 Qualified property is eligible for only one special depreciation allowance. Unemployment taxes 2011 Example 1. Unemployment taxes 2011 On November 1, 2001, you bought and placed in service in your business, which is in the Liberty Zone, qualified Liberty Zone property that cost $200,000. Unemployment taxes 2011 You did not elect to claim a section 179 deduction. Unemployment taxes 2011 You can deduct 30% of the cost ($60,000) as a special Liberty Zone depreciation allowance for 2001. Unemployment taxes 2011 You use the remaining $140,000 of cost to figure your regular depreciation deduction for 2001 and later years. Unemployment taxes 2011 Example 2. Unemployment taxes 2011 The facts are the same as in Example 1, except that you choose to deduct $59,000 of the property's cost as a section 179 deduction. Unemployment taxes 2011 (See Increased Section 179 Deduction, later, for information concerning how this section 179 deduction amount is figured). Unemployment taxes 2011 You use the remaining $141,000 of cost to figure your special Liberty Zone depreciation allowance of $42,300 ($141,000 × 30%). Unemployment taxes 2011 You use the remaining $98,700 of cost to figure your regular depreciation deduction for 2001 and later years. Unemployment taxes 2011 Qualified Liberty Zone Property For a 2001 calendar or fiscal year and a 2000 fiscal year that ends after September 10, 2001, property qualifies for the special Liberty Zone depreciation allowance if it meets the following requirements. Unemployment taxes 2011 It is one of the following types of property. Unemployment taxes 2011 Used property depreciated under MACRS with a recovery period of 20 years or less. Unemployment taxes 2011 See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. Unemployment taxes 2011 Used water utility property. Unemployment taxes 2011 See 25-year property on page 22 in Publication 946. Unemployment taxes 2011 Used computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. Unemployment taxes 2011 (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Unemployment taxes 2011 ) Certain nonresidential real property and residential rental property (defined later). Unemployment taxes 2011 It meets the following tests (explained later under Tests to be met). Unemployment taxes 2011 Acquisition date test. Unemployment taxes 2011 Placed in service date test. Unemployment taxes 2011 Substantial use test. Unemployment taxes 2011 Original use test. Unemployment taxes 2011 It is not excepted property (explained later under Excepted property). Unemployment taxes 2011 Nonresidential real property and residential rental property. Unemployment taxes 2011   This property is qualifying property only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the terrorist attack of September 11, 2001. Unemployment taxes 2011 Property is treated as replacing destroyed or condemned property if, as part of an integrated plan, such property replaces real property included in a continuous area that includes real property destroyed or condemned. Unemployment taxes 2011   For these purposes, real property is considered destroyed (or condemned) only if an entire building or structure was destroyed (or condemned) as a result of the terrorist attack. Unemployment taxes 2011 Otherwise, the property is considered damaged real property. Unemployment taxes 2011 For example, if certain structural components of a building (such as walls, floors, or plumbing fixtures) are damaged or destroyed as a result of the terrorist attack, but the building is not destroyed (or condemned), then only costs related to replacing the damaged or destroyed structural components qualify for the special Liberty Zone depreciation allowance. Unemployment taxes 2011 Tests to be met. Unemployment taxes 2011   To qualify for the special Liberty Zone depreciation allowance, your property must meet all of the following tests. Unemployment taxes 2011 Acquisition date test. Unemployment taxes 2011   You must have acquired the property by purchase after September 10, 2001, and there must not have been a binding written contract for the acquisition in effect before September 11, 2001. Unemployment taxes 2011   For information on the acquisition of property by purchase, see Property Acquired by Purchase on page 15 of Publication 946. Unemployment taxes 2011   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001. Unemployment taxes 2011 Placed in service date test. Unemployment taxes 2011   Generally, the property must be placed in service for use in your trade or business or for the production of income before January 1, 2007 (January 1, 2010, in the case of qualifying nonresidential real property and residential rental property). Unemployment taxes 2011   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. Unemployment taxes 2011 Substantial use test. Unemployment taxes 2011   Substantially all use of the property must be in the Liberty Zone and in the active conduct of your trade or business in the Liberty Zone. Unemployment taxes 2011 Original use test. Unemployment taxes 2011   The original use of the property in the Liberty Zone must have begun with you after September 10, 2001. Unemployment taxes 2011   Used property can be qualified Liberty Zone property if it has not previously been used within the Liberty Zone. Unemployment taxes 2011 Also, additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test if the original use of the property in the Liberty Zone began with you. Unemployment taxes 2011 Excepted property. Unemployment taxes 2011   The following property does not qualify for the special Liberty Zone depreciation allowance. Unemployment taxes 2011 Property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. Unemployment taxes 2011 Property required to be depreciated using ADS. Unemployment taxes 2011 This includes listed property used 50% or less in a qualified business use. Unemployment taxes 2011 Qualified New York Liberty Zone leasehold improvement property (defined earlier in Excepted Property under Special Depreciation Allowance). Unemployment taxes 2011 Example. Unemployment taxes 2011 In December 2001, you bought and placed in service in your business in the Liberty Zone the following property. Unemployment taxes 2011 New office furniture with a MACRS recovery period of 7 years. Unemployment taxes 2011 A used computer with a MACRS recovery period of 5 years. Unemployment taxes 2011 The computer had not previously been used within the Liberty Zone. Unemployment taxes 2011 Because the office furniture is new property, it qualifies for the special depreciation allowance, but not the special Liberty Zone depreciation allowance. Unemployment taxes 2011 Because the computer is used property that had not previously been used in the Liberty Zone, it qualifies for the special Liberty Zone depreciation allowance, but not the special depreciation allowance. Unemployment taxes 2011 Election Not To Claim the Liberty Zone Allowance You can elect not to claim the special Liberty Zone depreciation allowance for qualified property. Unemployment taxes 2011 If you make this election for any property, it applies to all property in the same property class placed in service during the year. Unemployment taxes 2011 To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. Unemployment taxes 2011 When to make the election. Unemployment taxes 2011   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. Unemployment taxes 2011   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). Unemployment taxes 2011 Attach the election statement to the amended return. Unemployment taxes 2011 At the top of the election statement, write “Filed pursuant to section 301. Unemployment taxes 2011 9100–2. Unemployment taxes 2011 ” Revoking an election. Unemployment taxes 2011   Once you elect not to deduct the special Liberty Zone depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Unemployment taxes 2011 A request to revoke the election is subject to a user fee. Unemployment taxes 2011 Returns filed before June 1, 2002. Unemployment taxes 2011   The rules that apply to the special depreciation allowance discussed earlier in Rules for Returns Filed Before June 1, 2002 under Special Depreciation Allowance also apply to the special Liberty Zone depreciation allowance. Unemployment taxes 2011 Increased Section 179 Deduction Under section 179 of the Internal Revenue Code, you can choose to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Unemployment taxes 2011 For tax years beginning in 2000, that limit was $20,000. Unemployment taxes 2011 For tax years beginning in 2001 and 2002, that limit is generally $24,000. Unemployment taxes 2011 If the cost of qualifying section 179 property placed in service in a year is over $200,000, you must reduce the dollar limit (but not below zero) by the amount of the cost over $200,000. Unemployment taxes 2011 Increased Dollar Limit The dollar limit on the section 179 deduction is increased for certain property placed in service in the Liberty Zone. Unemployment taxes 2011 The increase is the smaller of the following amounts. Unemployment taxes 2011 $35,000. Unemployment taxes 2011 The cost of section 179 property that is qualified Liberty Zone property placed in service during the year. Unemployment taxes 2011 If you use the revised 2001 Form 4562 (dated March 2002) for a tax year beginning in 2000, you must reduce the section 179 dollar limit to $20,000 before adding the additional amount for qualified property. Unemployment taxes 2011 Qualified property. Unemployment taxes 2011   To qualify for the increased section 179 deduction, your property must be section 179 property that is either: Qualified Liberty Zone property, or Property that would be qualified Liberty Zone property except that it is eligible for the special depreciation allowance. Unemployment taxes 2011 Qualified Liberty Zone property is explained earlier in Qualified Liberty Zone Property under Special Liberty Zone Depreciation Allowance. Unemployment taxes 2011 Property eligible for the special depreciation allowance is explained earlier in Qualified Property under Special Depreciation Allowance. Unemployment taxes 2011 For information on the requirements that must be met for property to qualify for the section 179 deduction, see What Property Qualifies? on page 14 of Publication 946. Unemployment taxes 2011 Example 1. Unemployment taxes 2011 In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $25,000. Unemployment taxes 2011 Because this cost is less than $35,000, the dollar limit on the section 179 deduction is increased by $25,000 to $49,000 ($24,000 + $25,000). Unemployment taxes 2011 Example 2. Unemployment taxes 2011 In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $75,000. Unemployment taxes 2011 Because $35,000 is less than the cost of the property you place in service, the dollar limit on the section 179 deduction you can claim is increased by $35,000 to $59,000 ($24,000 + $35,000). Unemployment taxes 2011 Reduced Dollar Limit Generally, you must reduce the dollar limit for a year by the cost of qualifying section 179 property placed in service in the year that is more than $200,000. Unemployment taxes 2011 However, if the cost of your Liberty Zone property exceeds $200,000, you take into account only 50% (instead of 100%) of the cost of qualified property placed in service in a year. Unemployment taxes 2011 Example. Unemployment taxes 2011 In 2002, you place in service in your business, which is in the Liberty Zone, qualified property costing $460,000. Unemployment taxes 2011 Your increased dollar limit is $59,000 ($35,000 + $24,000). Unemployment taxes 2011 Because 50% of the cost of the property you place in service ($230,000) is $30,000 more than $200,000, you must reduce your $59,000 dollar limit to $29,000 ($59,000 - $30,000). Unemployment taxes 2011 Recapture Rules Rules similar to those explained on page 20 of Publication 946 under When Must You Recapture the Deduction? apply with respect to any qualified property you stop using in the Liberty Zone. Unemployment taxes 2011 Returns Filed Before June 1, 2002 If you filed a return before June 1, 2002, and did not deduct the increased section 179 amount for qualified property placed in service after September 10, 2001, you can deduct the increased amount by filing an amended return by the due date (not including extensions) of the return for the year after the year the property was placed in service. Unemployment taxes 2011 This rule applies to returns for the following years. Unemployment taxes 2011 2000 fiscal years that end after September 10, 2001. Unemployment taxes 2011 2001 calendar and fiscal years. Unemployment taxes 2011 On the amended return, write “Filed Pursuant to Rev. Unemployment taxes 2011 Proc. Unemployment taxes 2011 2002–33. Unemployment taxes 2011 ” Liberty Zone Leasehold Improvement Property Qualified Liberty Zone leasehold improvement property (described earlier in Qualified Property under Special Depreciation Allowance) is 5-year property. Unemployment taxes 2011 This means that it is depreciated over a recovery period of 5 years. Unemployment taxes 2011 For information about recovery periods, see Which Recovery Period Applies? on page 23 of Publication 946. Unemployment taxes 2011 The straight-line method must be used with respect to qualified Liberty Zone leasehold improvement property. Unemployment taxes 2011 Under ADS, the recovery period for qualified Liberty Zone leasehold improvement property is 9 years. Unemployment taxes 2011 Returns Filed Before June 1, 2002 If you filed either of the following returns before June 1, 2002, and did not depreciate qualified Liberty Zone leasehold improvement property placed in service during the tax year as 5-year property using the straight line method, you should file an amended return before you file your return for the year after the year the property was placed in service. Unemployment taxes 2011 Your 2000 fiscal year return (for a 2000 fiscal year that ends after September 10, 2001). Unemployment taxes 2011 Your 2001 calendar or fiscal year return. Unemployment taxes 2011 On the amended return, write “Filed Pursuant to Rev. Unemployment taxes 2011 Proc. Unemployment taxes 2011 2002–33. Unemployment taxes 2011 ” Table 2. Unemployment taxes 2011 Rules for Returns Filed Before June 1, 2002 Note:This chart highlights the rules for returns affected by the Job Creation and Worker Assistance Act of 2002 that were filed before June 1, 2002, without accounting for any of the new benefits under the law. Unemployment taxes 2011 See the text for definitions and examples. Unemployment taxes 2011 Do not rely on this chart alone. Unemployment taxes 2011 IF you want to. Unemployment taxes 2011 . Unemployment taxes 2011 . Unemployment taxes 2011 THEN you. Unemployment taxes 2011 . Unemployment taxes 2011 . Unemployment taxes 2011 BY. Unemployment taxes 2011 . Unemployment taxes 2011 . Unemployment taxes 2011 claim the special depreciation allowance or special Liberty Zone depreciation allowance • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service, or • must file Form 3115, Application for Change in Accounting Method, with your return for the year after the year the property was placed in service • the due date (including extensions) of your return for the year after the year the property was placed in service, and • must file a copy of your completed Form 3115 with the IRS National Office • the date you file the original Form 3115 with your return for the year after the year the property was placed in service. Unemployment taxes 2011 elect not to claim the special depreciation allowance or the special Liberty Zone depreciation allowance 1 • must have filed your return timely for the year the property was placed in service, and   • must file an amended return stating you are not claiming the allowance • the date that is 6 months after the due date of the original return (not including extensions). Unemployment taxes 2011 deduct the increased section 179 amount • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service. Unemployment taxes 2011 use a 5-year recovery period for depreciating qualified Liberty Zone leasehold improvement property • should file an amended return • the date you file your return for the year after the year the property was placed in service. Unemployment taxes 2011 1See also Deemed election under Rules for Returns Filed Before June 1, 2002, earlier. 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