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Instructions for Form 4562-FYTo be used only by taxpayers whose fiscal year begins in 2007 and
13:14 - 25-MAR-2008
ends in 2008.
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Cumulative Changes for 2007
2007
Department of the Treasury
Internal Revenue Service
Instructions for Form
4562-FY
Depreciation and Amortization (Including Information on Listed Property)
Section references are to the Internal
Revenue Code unless otherwise noted.
Who Must File
Definitions
What’s New
Except as otherwise noted, complete and
file Form 4562-FY if you are claiming any
of the following:
• Depreciation for property placed in
service during the fiscal tax year
beginning in 2007 and ending in 2008.
• Special depreciation allowance for
property placed in service after December
31, 2007.
• A section 179 expense deduction
(which may include a carryover from a
previous year).
• Depreciation on any vehicle or other
listed property (regardless of when it was
placed in service).
• A deduction for any vehicle reported on
a form other than Schedule C (Form
1040), Profit or Loss From Business, or
Schedule C-EZ (Form 1040), Net Profit
From Business.
• Any depreciation on a corporate
income tax return (other than Form
1120S).
• Amortization of costs that begins during
the fiscal tax year beginning in 2007 and
ending in 2008.
Depreciation
• New Form 4562-FY reflects changes
made by the Economic Stimulus Act of
2008. It is to be used by those entities
whose tax year begins in 2007 and ends
in 2008 (that is, a fiscal year), and want to
claim an additional first-year depreciation
allowance for qualified property placed in
service after December 31, 2007. See the
instructions for lines 14 and 25 for more
information.
• For tax years beginning in 2007, the
maximum section 179 expense deduction
is $125,000 ($160,000 for qualified
enterprise zone and renewal community
property). This limit is reduced by the
amount by which the cost of section 179
property placed in service during the tax
year exceeds $500,000. For qualified
section 179 Gulf Opportunity Zone (GO
Zone) property, the maximum deduction
is higher than the deduction for most
section 179 property. See the instructions
for Part I.
• A 50% special allowance is available
for qualified cellulosic biomass ethanol
plant property placed in service after
December 20, 2006. See the instructions
for line 14 on page 4.
• A qualified motorsports entertainment
complex placed in service after December
31, 2007, will not be treated as 7-year
property. See the instructions for line 19,
column (a).
• Qualified leasehold improvement
property and qualified restaurant property
placed in service after December 31,
2007, will not be treated as 15-year
property under MACRS. See the
instructions for line 19, column (a).
• The accelerated depreciation of
property on an Indian reservation will not
apply to property placed in service after
December 31, 2007. See the instructions
for line 19, column (d).
General Instructions
Purpose of Form
Use Form 4562-FY to:
• Claim your deduction for depreciation
and amortization,
• Make the election under section 179 to
expense certain property, and
• Provide information on the business/
investment use of automobiles and other
listed property.
If you are an employee deducting
job-related vehicle expenses using either
the standard mileage rate or actual
expenses, use Form 2106, Employee
Business Expenses, or Form 2106-EZ,
Unreimbursed Employee Business
Expenses, for this purpose.
File a separate Form 4562-FY for each
business or activity on your return for
which Form 4562-FY is required. If you
need more space, attach additional
sheets. However, complete only one Part
I in its entirety when computing your
section 179 expense deduction. See the
instructions for line 12 on page 3.
Additional Information
For more information about depreciation
and amortization (including information on
listed property) see the following.
• Pub. 463, Travel, Entertainment, Gift,
and Car Expenses.
• Pub. 534, Depreciating Property Placed
in Service Before 1987.
• Pub. 535, Business Expenses.
• Pub. 553, Highlights of 2007 Tax
Changes.
• Pub. 551, Basis of Assets.
• Pub. 946, How To Depreciate Property.
Cat. No. 51342Z
Depreciation is the annual deduction that
allows you to recover the cost or other
basis of your business or investment
property over a certain number of years.
Depreciation starts when you first use the
property in your business or for the
production of income. It ends when you
either take the property out of service,
deduct all your depreciable cost or basis,
or no longer use the property in your
business or for the production of income.
Generally, you can depreciate:
• Tangible property such as buildings,
machinery, vehicles, furniture, and
equipment; and
• Intangible property such as patents,
copyrights, and computer software.
Exception. You cannot depreciate land.
Section 179 Property
Section 179 property is property that you
acquire by purchase for use in the active
conduct of your trade or business, and is
one of the following.
• Tangible personal property.
• Other tangible property (except
buildings and their structural components)
used as:
1. An integral part of manufacturing,
production, or extraction or of furnishing
transportation, communications,
electricity, gas, water, or sewage disposal
services;
2. A research facility used in
connection with any of the activities in (1)
above; or
3. A facility used in connection with
any of the activities in (1) above for the
bulk storage of fungible commodities.
• Single purpose agricultural (livestock)
or horticultural structures.
• Storage facilities (except buildings and
their structural components) used in
connection with distributing petroleum or
any primary product of petroleum.
• Off-the-shelf computer software.
Section 179 property does not include
the following.
• Property held for investment (section
212 property).
• Property used mainly outside the
United States (except for property
described in section 168(g)(4)).
• Property used mainly to furnish lodging
or in connection with the furnishing of
lodging (except as provided in section
50(b)(2)).
Page 2 of 17
Instructions for Form 4562-FYTo be used only by taxpayers whose fiscal year begins in 2007 and
13:14 - 25-MAR-2008
ends in 2008.
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
• Property used by a tax-exempt
organization (other than a section 521
farmers’ cooperative) unless the property
is used mainly in a taxable unrelated
trade or business.
• Property used by a governmental unit
or foreign person or entity (except for
property used under a lease with a term
of less than 6 months).
• Air conditioning or heating units.
See the instructions for Part I and Pub.
946.
Amortization
Amortization is similar to the straight line
method of depreciation in that an annual
deduction is allowed to recover certain
costs over a fixed time period. You can
amortize such items as the costs of
starting a business, goodwill, and certain
other intangibles. See the instructions for
Part VI.
Listed Property
Listed property generally includes the
following.
• Passenger automobiles weighing 6,000
pounds or less. See Limits for passenger
automobiles on page 9.
• Any other property used for
transportation if the nature of the property
lends itself to personal use, such as
motorcycles, pick-up trucks, sport utility
vehicles, etc.
• Any property used for entertainment or
recreational purposes (such as
photographic, phonographic,
communication, and video recording
equipment).
• Cellular telephones (or other similar
telecommunications equipment).
• Computers or peripheral equipment.
Exception. Listed property does not
include:
1. Photographic, phonographic,
communication, or video equipment used
exclusively in a taxpayer’s trade or
business or at the taxpayer’s regular
business establishment;
2. Any computer or peripheral
equipment used exclusively at a regular
business establishment and owned or
leased by the person operating the
establishment; or
3. An ambulance, hearse, or vehicle
used for transporting persons or property
for compensation or hire.
For purposes of the exceptions above,
a portion of the taxpayer’s home is
treated as a regular business
establishment only if that portion meets
the requirements for deducting expenses
attributable to the business use of a
home. However, for any property listed in
(1) above, the regular business
establishment of an employee is his or
her employer’s regular business
establishment.
Commuting
Generally, “commuting” is defined as
travel between your home and a work
location. However, travel that meets any
of the following conditions is not
commuting.
• You have at least one regular work
location away from your home and the
travel is to a temporary work location in
the same trade or business, regardless of
the distance. Generally, a temporary work
location is one where your employment is
expected to last 1 year or less. See Pub.
463 for details.
• The travel is to a temporary work
location outside the metropolitan area
where you live and normally work.
• Your home is your principal place of
business for purposes of deducting
expenses for business use of your home
and the travel is to another work location
in the same trade or business, regardless
of whether that location is regular or
temporary and regardless of distance.
Alternative Minimum Tax
(AMT)
Depreciation may be an adjustment for
the AMT. However, no adjustment applies
in several instances. See Form 4626,
Alternative Minimum Tax — Corporations;
Form 6251, Alternative Minimum Tax —
Individuals; Schedule I of Form 1041,
U.S. Income Tax Return for Estates and
Trusts; and the related instructions.
Recordkeeping
Except for Part V (relating to listed
property), the IRS does not require you to
submit detailed information with your
return on the depreciation of assets
placed in service in previous tax years.
However, the information needed to
compute your depreciation deduction
(basis, method, etc.) must be part of your
permanent records.
You may use the depreciation
TIP worksheet on page 15 to assist
you in maintaining depreciation
records. However, the worksheet is
designed only for federal income tax
purposes. You may need to keep
additional records for accounting and
state income tax purposes.
Specific Instructions
Part I. Election To Expense
Certain Property Under
Section 179
Note. An estate or trust cannot make
this election.
You can elect to expense part or all of
the cost of section 179 property (defined
on page 1) that you placed in service
during the tax year and used
predominantly (more than 50%) in your
trade or business.
However, for taxpayers other than a
corporation, this election does not apply
to any section 179 property you
purchased and leased to others unless:
• You manufactured or produced the
property or
• The term of the lease is less than 50%
of the property’s class life and, for the first
12 months after the property is
transferred to the lessee, the deductions
-2-
related to the property allowed to you as
trade or business expenses (except rents
and reimbursed amounts) are more than
15% of the rental income from the
property.
Election. You must make the election on
Form 4562-FY filed with either:
• The original return you file for the tax
year the property was placed in service
(whether or not you file your return on
time) or
• An amended return filed within the time
prescribed by law for the applicable tax
year. The election made on an amended
return must specify the item of section
179 property to which the election applies
and the part of the cost of each such item
to be taken into account. The amended
return must also include any resulting
adjustments to taxable income.
Revocation. The election (or any
specification made in the election) can be
revoked without obtaining IRS approval
by filing an amended return. The
amended return must be filed within the
time prescribed by law for the applicable
tax year. The amended return must
include any resulting adjustments to
taxable income or to the tax liability (for
example, allowable depreciation in that
tax year for the item of section 179
property which the revocation pertains).
For more information and examples, see
Regulations section 1.179-5.
Once made, the revocation is
irrevocable.
If you elect to expense section
179 property, you must reduce the
CAUTION amount on which you figure your
depreciation or amortization deduction
(including any special depreciation
allowance) by the section 179 expense
deduction.
!
Line 1
Generally, the maximum section 179
deduction is $125,000 for fiscal tax years
beginning in 2007 and ending in 2008.
Note. For fiscal tax years beginning in
2008, the maximum section 179
deduction will be $250,000.
For an enterprise zone business or a
renewal community business, the
maximum deduction is increased by the
smaller of:
• $35,000 or
• The cost of section 179 property that is
also qualified empowerment zone
property or qualified renewal property
(including such property placed in service
by your spouse, even if you are filing a
separate return).
For qualified section 179 GO Zone
property, the maximum deduction is
increased by the smaller of:
• $100,000 or
• The cost of qualified section 179 GO
Zone property placed in service before
December 31, 2007. (This date is
extended to December 31, 2008, for
nonresidential real property and
residential rental property.)
If applicable, cross out the preprinted
entry on line 1 and enter in the right
margin the larger amount. For more
Page 3 of 17
Instructions for Form 4562-FYTo be used only by taxpayers whose fiscal year begins in 2007 and
13:14 - 25-MAR-2008
ends in 2008.
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
information, including definitions of
qualified empowerment zone property
and qualified renewal property, see Pub.
954, Tax Incentives for Distressed
Communities. For more information,
including definitions of qualified GO Zone
property and qualified section 179 GO
Zone property, see Pub. 946.
For purposes of the increased
section 179 expense deduction,
CAUTION qualified section 179 GO Zone
property that is located in an
empowerment zone (or a renewal
community) is treated as qualified
empowerment zone property (or qualified
renewable property) only if you elect not
to treat the property as qualified section
179 GO Zone property.
Recapture rule. If any qualified
empowerment zone property (or qualified
renewal property) placed in service during
the current year ceases to be used in an
empowerment zone (or a renewal
community) by an enterprise zone
business (or a renewal community
business) in a later year, the benefit of the
increased section 179 expense deduction
must be reported as “other income” on
your return. Similar rules apply to
qualified Liberty Zone property that
ceases to be used in the Liberty Zone and
to qualified section 179 GO Zone property
that ceases to be used in the GO Zone.
!
Line 2
Enter the cost of all section 179 property
placed in service during the fiscal tax
year. Also include the cost of the
following.
• Any listed property from Part V.
• Any property placed in service by your
spouse, even if you are filing a separate
return.
• 50% of the cost of section 179 property
that is also qualified empowerment zone
property or qualified renewal property.
Line 3
The amount of section 179 property for
which you can make the election is limited
to the maximum dollar amount on line 1.
In most cases, this amount is reduced if
the cost of all section 179 property placed
in service during the year is more than
$500,000.
However, if you placed qualified
section 179 GO Zone property in service
during the tax year, the amount of
property for which you can make the
election is reduced if the cost of all
section 179 property placed in service
during the year exceeds $500,000
increased by the smaller of:
• $600,000 or
• The cost of qualified section 179 GO
Zone property placed in service during
the tax year.
If applicable, cross out the preprinted
entry on line 3 and enter in the right
margin the higher amount.
For a partnership (other than an
electing large partnership) these
limitations apply to the partnership and
each partner. For an electing large
partnership, the limitations apply only to
the partnership. For an S corporation,
these limitations apply to the S
corporation and each shareholder. For a
controlled group, all component members
are treated as one taxpayer.
Line 5
If line 5 is zero, you cannot elect to
expense any section 179 property. In this
case, skip lines 6 through 11, enter zero
on line 12, and enter the carryover of any
disallowed deduction from 2006 on line
13.
If you are married filing separately, you
and your spouse must allocate the dollar
limitation for the tax year. To do so,
multiply the total limitation that you would
otherwise enter on line 5 by 50%, unless
you both elect a different allocation. If you
both elect a different allocation, multiply
the total limitation by the percentage
elected. The sum of the percentages you
and your spouse elect must equal 100%.
Do not enter on line 5 more than your
share of the total dollar limitation.
Line 6
Do not include any listed property on line
6. Enter the elected section 179 cost of
listed property in column (i) of line 26.
Column (a) — Description of property.
Enter a brief description of the property
you elect to expense (e.g., truck, office
furniture, etc.).
Column (b) — Cost (business use
only). Enter the cost of the property. If
you acquired the property through a
trade-in, do not include any carryover
basis of the property traded in. Include
only the excess of the cost of the property
over the value of the property traded in.
Column (c) — Elected cost. Enter the
amount you elect to expense. You do not
have to expense the entire cost of the
property. You can depreciate the amount
you do not expense. See the line 19 and
line 20 instructions.
To report your share of a section 179
expense deduction from a partnership or
an S corporation, write “from Schedule
K-1 (Form 1065)” or “from Schedule K-1
(Form 1120S)” across columns (a) and
(b).
Line 10
The carryover of disallowed deduction
from 2006 is the amount of section 179
property, if any, you elected to expense in
previous years that was not allowed as a
deduction because of the business
income limitation. If you filed Form 4562
for 2006, enter the amount from line 13 of
your 2006 Form 4562.
Line 11
The total cost you can deduct is limited to
your taxable income from the active
conduct of a trade or business during the
year. You are considered to actively
conduct a trade or business only if you
meaningfully participate in its
management or operations. A mere
passive investor is not considered to
actively conduct a trade or business.
Note. If you have to apply another Code
section that has a limitation based on
taxable income, see Pub. 946 for rules on
how to apply the business income
-3-
limitation for the section 179 expense
deduction.
Individuals. Enter the smaller of line 5
or the total taxable income from any trade
or business you actively conducted,
computed without regard to any section
179 expense deduction, the deduction for
one-half of self-employment taxes under
section 164(f), or any net operating loss
deduction. Also include all wages,
salaries, tips, and other compensation
you earned as an employee (from Form
1040, line 7). Do not reduce this amount
by unreimbursed employee business
expenses. If you are married filing a joint
return, combine the total taxable incomes
for you and your spouse.
Partnerships. Enter the smaller of line 5
or the partnership’s total items of income
and expense described in section 702(a)
from any trade or business the
partnership actively conducted (other than
credits, tax-exempt income, the section
179 expense deduction, and guaranteed
payments under section 707(c)).
S corporations. Enter the smaller of line
5 or the corporation’s total items of
income and expense described in section
1366(a) from any trade or business the
corporation actively conducted (other than
credits, tax-exempt income, the section
179 expense deduction, and the
deduction for compensation paid to the
corporation’s shareholder-employees).
Corporations other than S
corporations. Enter the smaller of line 5
or the corporation’s taxable income
before the section 179 expense
deduction, net operating loss deduction,
and special deductions (excluding items
not derived from a trade or business
actively conducted by the corporation).
Line 12
The limitations on lines 5 and 11 apply to
the taxpayer, and not to each separate
business or activity. Therefore, if you
have more than one business or activity,
you may allocate your allowable section
179 expense deduction among them.
To do so, write “Summary” at the top
of Part I of the separate Form 4562 you
are completing for the total amounts from
all businesses or activities. Do not
complete the rest of that form. On line 12
of the Form 4562 you prepare for each
separate business or activity, enter the
amount allocated to the business or
activity from the “Summary.” No other
entry is required in Part I of the separate
Form 4562 prepared for each business or
activity.
Part II. Special
Depreciation Allowance
and Other Depreciation
Line 14
For qualified property (defined below)
placed in service during the fiscal tax year
beginning in 2007 and ending in 2008,
you may be able to take an additional
50% (or 30%, if applicable) special
depreciation allowance. The special
allowance applies only for the first year
Page 4 of 17
Instructions for Form 4562-FYTo be used only by taxpayers whose fiscal year begins in 2007 and
13:14 - 25-MAR-2008
ends in 2008.
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
the property is placed in service. The
allowance is an additional deduction you
can take after any section 179 expense
deduction and before you figure regular
depreciation under MACRS.
Qualified property. You can take the
special allowance for qualified New York
Liberty Zone (Liberty Zone) property
(other than qualified Liberty Zone
leasehold improvement property),
qualified GO Zone property, and qualified
cellulosic biomass ethanol plant property,
and certain qualified property placed in
service in 2008.
Qualified New York Liberty Zone
(Liberty Zone) property. Qualified
Liberty Zone property is nonresidential
real property or residential rental property.
The following rules also apply.
• The 30% special depreciation
allowance applies to qualified Liberty
Zone property.
• You must have acquired qualified
Liberty Zone property by purchase after
September 10, 2001. If a binding contract
to acquire the property existed before
September 11, 2001, the property does
not qualify.
• Qualified Liberty Zone property must be
placed in service before January 1, 2010.
• The original use of the property within
the Liberty Zone must begin with you.
• Substantially all (80% or more) of the
use of the property must be in the Liberty
Zone in the active conduct of your trade
or business.
• For property you sold and leased back
or for self-constructed property special
rules apply. See section 1400L(b)(2)(D).
Qualified GO Zone property.
Qualified GO Zone property is:
• Tangible property depreciated under
MACRS with a recovery period of 20
years or less,
• Water utility property (see 25-year
property on page 6),
• Computer software defined in and
depreciated under section 167(f)(1),
• Qualified leasehold improvement
property,
• Nonresidential real property, or
• Residential rental property.
The following rules also apply.
• The 50% special allowance applies to
qualified GO Zone property.
• You must have acquired qualified GO
Zone property by purchase after August
27, 2005. If a binding contract to acquire
the property existed before August 28,
2005, the property does not qualify.
• Qualified GO Zone property must be
placed in service before January 1, 2008,
unless it is nonresidential real property or
residential rental property.
• The original use of the property within
the GO Zone must begin with you.
• Substantially all (80% or more) of the
use of the property must be in the GO
Zone in the active conduct of your trade
or business.
• For property you sold and leased back
or for self-constructed property special
rules apply. See section 1400N(d)(3).
Qualified cellulosic biomass ethanol
plant property. Qualified cellulosic
biomass ethanol plant property is property
used solely in the U.S. to produce
cellulosic biomass ethanol. Cellulosic
biomass ethanol is ethanol produced by
enzymatic hydrolysis of any
lignocellulosic or hemicellulosic matter
that is available on a renewable or
recurring basis. For example,
lignocellulosic or hemicellulosic matter
that is available on a renewable or
recurring basis includes bagasse (from
sugar cane), corn stalks, and switchgrass.
The 50% special allowance applies to
qualified cellulosic biomass ethanol plant
property. The property must also meet the
following requirements.
• The original use of the property must
begin with you after December 20, 2006.
• You must have acquired the property
by purchase after December 20, 2006. If
a binding contract to acquire the property
existed before December 21, 2006, the
property does not qualify.
• The property must be placed in service
for use in your trade or business or for the
production of income before January 1,
2013.
• For property you sold and leased back
or for self-constructed property special
rules apply. See section 168(l)(5).
Certain qualified property placed in
service after December 31, 2007.
Certain qualified property (defined below)
placed in service after December 31,
2007, is eligible for a 50% special
depreciation allowance under the
Economic Stimulus Act of 2008.
Qualified property includes the
following:
• Tangible property depreciated under
the modified accelerated cost recovery
system (MACRS) with a recovery period
of 20 years or less.
• Water utility property.
• Off-the-shelf computer software.
• Qualified leasehold improvement
property.
Qualified property must also meet all
of the following tests:
• You must have acquired qualified
property by purchase after December 31,
2007, and before January 1, 2009. If a
binding contract to acquire the property
existed before January 1, 2008, the
property does not qualify.
• Qualified property must be placed in
service after December 31, 2007, and
before January 1, 2009 (before January
1, 2010, for certain transportation
property and certain property with a long
production period).
• The original use of the property must
begin with you after December 31, 2007.
See sections 168(k), 168(l), 1400L(b),
and 1400N(d). Also, see Pub. 946.
Exceptions. Qualified property does
not include:
• Listed property used 50% or less in a
qualified business use (as defined in the
instructions for lines 26 and 27),
• Any property required to be
depreciated under the alternative
depreciation system (ADS) (that is, not
property for which you elected to use
ADS),
• Qualified Liberty Zone leasehold
improvement property,
-4-
• Property placed in service and
disposed of in the same tax year,
• Property converted from business or
income-producing use to personal use in
the same tax year it is acquired, or
• Property for which you elected not to
claim any special allowance.
Qualified GO Zone property also does
not include:
• Any tax-exempt bond financed property
under section 103,
• Any qualified revitalization building for
which you have elected to deduct
expenditures under section 1400I, or
• Any property described in section
1400N(p)(3).
In addition, qualified cellulosic biomass
plant property does not include the
following:
• Any tax-exempt bond financed property
under section 103.
• Any property for which a deduction was
taken under section 179C for certain
qualified refinery property.
See Pub. 946 for additional information.
How to figure the allowance. Figure
the special allowance by multiplying the
depreciable basis of the property by 50%
(or 30%, if applicable).
To figure the depreciable basis,
subtract from the business/investment
portion of the cost or other basis of the
property any credits and deductions
allocable to the property. The following
are examples of some credits and
deductions that reduce the depreciable
basis.
• Section 179 expense deduction.
• Deduction for removal of barriers to the
disabled and the elderly.
• Disabled access credit.
• Enhanced oil recovery credit.
• Credit for employer-provided childcare
facilities and services.
• Basis adjustment to investment credit
property under section 50(c).
For additional credits and deductions that
affect the depreciable basis, see section
1016. Also, see Pub. 946.
Note. If you acquired qualified property
through a like-kind exchange or
involuntary conversion, the carryover
basis and any excess basis of the
acquired property is eligible for the
special depreciation allowance. See
Regulations section 1.168(k)-1(f)(5).
If you take the 30% or 50%
special allowance, you must
CAUTION reduce the amount on which you
figure your regular depreciation or
amortization deduction by the amount
deducted. Also, you will not have any
AMT adjustment for the property if the
depreciable basis of the property for the
AMT is the same as for the regular tax.
Election out. You can elect, for any
class of property, to not deduct any
special allowance for all such property in
such class placed in service during the
tax year.
To make an election, attach a
statement to your timely filed return
(including extensions) indicating the class
of property for which you are making the
!
Page 5 of 17
Instructions for Form 4562-FYTo be used only by taxpayers whose fiscal year begins in 2007 and
13:14 - 25-MAR-2008
ends in 2008.
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
election and that, for such class you are
not to claim any special allowance.
The election must be made separately
by each person owning qualified property
(for example, by the partnership, by the S
corporation, or by the common parent of a
consolidated group).
If you timely filed your return without
making an election, you can still make the
election by filing an amended return
within 6 months of the due date of the
return (excluding extensions). Write “Filed
pursuant to section 301.9100-2” on the
amended return.
Once made, the election cannot be
revoked without IRS consent.
Note. If you elect not to have any special
allowance apply, the property may be
subject to an AMT adjustment for
depreciation.
Recapture. When you dispose of
property for which you claimed a special
depreciation allowance, any gain on the
disposition is generally recaptured
(included in income) as ordinary income
up to the amount of the special
depreciation allowance you deducted. If
qualified GO Zone property ceases to be
qualified GO Zone property or if qualified
cellulosic biomass plant property ceases
to be qualified cellulosic biomass plant
property in any year after the year you
claim the special depreciation allowance,
the excess benefit you received from
claiming the special allowance must be
recaptured as ordinary income. For more
information on depreciation recapture,
see Pub. 946.
Line 15
Report on this line depreciation for
property that you elect to depreciate
under the unit-of-production method or
any other method not based on a term of
years (other than the retirementreplacement-betterment method).
Attach a separate sheet showing:
• A description of the property and the
depreciation method you elect that
excludes the property from MACRS or the
Accelerated Cost Recovery System
(ACRS); and
• The depreciable basis (cost or other
basis reduced, if applicable, by salvage
value, any section 179 expense
deduction, deduction for removal of
barriers to the disabled and the elderly,
disabled access credit, enhanced oil
recovery credit, credit for
employer-provided childcare facilities and
services, any special depreciation
allowance, and any other applicable
deduction or credit).
For additional credits and deductions
that may affect the depreciable basis, see
section 1016. Also, see section 50(c) to
determine the basis adjustment for
investment credit property.
Line 16
Enter the total depreciation you are
claiming for the following types of
property (except listed property and
property subject to a section 168(f)(1)
election).
• ACRS property (pre-1987 rules). See
Pub. 534.
• Property placed in service before 1981.
• Certain public utility property which
does not meet certain normalization
requirements.
• Certain property acquired from related
persons.
• Property acquired in certain
nonrecognition transactions.
• Certain sound recordings, movies, and
videotapes.
• Property depreciated under the income
forecast method. The use of the income
forecast method is limited to motion
picture films, videotapes, sound
recordings, copyrights, books, and
patents.
If you use the income forecast method
for any property placed in service after
September 13, 1995, you may owe
interest or be entitled to a refund for the
3rd and 10th tax years beginning after the
tax year the property was placed in
service. For details, see Form 8866,
Interest Computation Under the
Look-Back Method for Property
Depreciated Under the Income Forecast
Method.
For property placed in service in the
current tax year, you can either include
certain participations and residuals in the
adjusted basis of the property or deduct
these amounts when paid. See section
167(g)(7). You cannot use this method to
depreciate any amortizable section 197
intangible. See page 11 of the instructions
for more details on section 197
intangibles.
You can elect to amortize all
applicable expenses paid or incurred in
the current year in creating or acquiring
musical compositions or copyrights to
musical compositions placed in service
during the tax year. If you make the
election, amortize the expenses ratably
over a 5-year period beginning with the
month the property is placed in service.
See section 167(g)(8). This election does
not apply to the following:
1. Expenses that are qualified creative
expenses under section 263A(h);
2. Property to which a simplified
procedure established under section
263A(j) applies;
3. Property that is an amortizable
section 197 intangible; or
4. Expenses that would not be
allowable as a deduction.
• Intangible property, other than section
197 intangibles, including:
1. Computer software. Use the
straight line method over 36 months. A
longer period may apply to software
leased under a lease agreement entered
into after March 12, 2004, to a tax-exempt
organization, governmental unit, or
foreign person or entity (other than a
partnership). See section 167(f)(1)(C).
If you elect the section 179
expense deduction or take the
CAUTION special depreciation allowance for
qualified computer software, you must
reduce the amount on which you figure
!
-5-
your regular depreciation deduction by
the amount deducted.
2. Any right to receive tangible
property or services under a contract or
granted by a governmental unit (not
acquired as part of a business).
3. Any interest in a patent or copyright
not acquired as part of a business.
4. Residential mortgage servicing
rights. Use the straight line method over
108 months.
5. Other intangible assets with a
limited useful life that cannot be estimated
with reasonable accuracy. Generally, use
the straight line method over 15 years.
See Regulations section 1.167(a)-3(b) for
details and exceptions.
Prior years’ depreciation, plus
current year’s depreciation, can
CAUTION never exceed the depreciable
basis of the property.
!
Part III. MACRS
Depreciation
The term “Modified Accelerated Cost
Recovery System” (MACRS) includes the
General Depreciation System and the
Alternative Depreciation System.
Generally, MACRS is used to depreciate
any tangible property placed in service
after 1986. However, MACRS does not
apply to films, videotapes, and sound
recordings. For more details and
exceptions, see Pub. 946.
Section A
Line 17
For tangible property placed in service in
tax years beginning before 2007 and
depreciated under MACRS, enter the
deductions for the current year. To figure
the deductions, see the instructions for
line 19, column (g).
Line 18
To simplify the computation of MACRS
depreciation, you can elect to group
assets into one or more general asset
accounts. The assets in each general
asset account are depreciated as a single
asset.
Each general asset account must
include only assets that were placed in
service during the same tax year with the
same asset class (if any), depreciation
method, recovery period, and convention.
However, an asset cannot be included in
a general asset account if the asset is
used both for personal purposes and
business/investment purposes.
When an asset in an account is
disposed of, the amount realized
generally must be recognized as ordinary
income. The unadjusted depreciable
basis and depreciation reserve of the
general asset account are not affected as
a result of a disposition.
Special rules apply to passenger
automobiles, assets generating foreign
source income, assets converted to
personal use, certain asset dispositions,
and like-kind exchanges or involuntary
conversions of property in a general asset
account. For more details, see
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13:14 - 25-MAR-2008
ends in 2008.
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Regulations section 1.168(i)-1 and
Regulations section 1.168(i)-1.
To make the election, check the box
on line 18. You must make the election on
your return filed no later than the due date
(including extensions) for the tax year in
which the assets included in the general
asset account were placed in service.
Once made, the election is irrevocable
and applies to the tax year for which the
election is made and all later tax years.
For more information on depreciating
property in a general asset account, see
Pub. 946.
Section B
Property acquired in a like-kind
exchange or involuntary conversion.
Generally, you must depreciate the
carryover basis of property you acquire in
a like-kind exchange or involuntary
conversion during the current tax year
over the remaining recovery period of the
property exchanged or involuntarily
converted. Use the same depreciation
method and convention that was used for
the exchanged or involuntarily converted
property. Treat any excess basis as newly
placed in service property. Figure
depreciation separately for the carryover
basis and the excess basis, if any.
These rules apply only to acquired
property with the same or a shorter
recovery period or the same or a more
accelerated depreciation method than the
property exchanged or involuntarily
converted. For additional rules, see
Regulations section 1.168(i)-6(c) and
Pub. 946.
Election out. Instead of using the
above rules, you can elect, for
depreciation purposes, to treat the
adjusted basis of the exchanged property
as if it was disposed of at the time of the
exchange or involuntary conversion.
Generally, treat the carryover basis and
excess basis, if any, for the acquired
property as if placed in service on the
date you acquired it. The depreciable
basis of the new property is the adjusted
basis of the exchanged or involuntarily
converted property plus any additional
amount paid for it. See Regulations
section 1.168(i)-6(i).
To make the election, figure the
depreciation deduction for the new
property in Part III. For listed property,
use Part V. Attach a statement indicating
“Election made under section 1.168-6(i)”
for each property involved in the
exchange or involuntary conversion. The
election must be made separately by
each person acquiring replacement
property (for example, by the partnership,
by the S corporation, or by the common
parent of a consolidated group). The
election must be made on your timely
filed return (including extensions). Once
made, the election cannot be revoked
without IRS consent.
If you trade in a vehicle used for
employee business use, complete
CAUTION Form 2106, Part II, Section D,
instead of Form 4562, to “elect out” of
Regulations section 1.168(i)-6. If you do
!
not “elect out,” you must use Form 4562
instead of Form 2106. See the
Instructions for Form 2106.
Lines 19a Through 19i
Use lines 19a through 19i only for assets
placed in service during the tax year
beginning in 2007 and depreciated under
the General Depreciation System (GDS),
except for automobiles and other listed
property (which are reported in Part V).
Column (a) — Classification of
property. Sort the property you acquired
and placed in service during the tax year
beginning in 2007 according to its
classification (3-year property, 5-year
property, etc.) as shown in column (a) of
lines 19a through 19i. The classifications
for some property are shown below. For
property not shown, see Determining the
classification below.
3-year property includes:
• A race horse that is more than 2 years
old at the time it is placed in service.
• Any horse (other than a race horse)
that is more than 12 years old at the time
it is placed in service.
• Any qualified rent-to-own property (as
defined in section 168(i)(14)).
5-year property includes:
• Automobiles.
• Light general purpose trucks.
• Typewriters, calculators, copiers, and
duplicating equipment.
• Any semi-conductor manufacturing
equipment.
• Any computer or peripheral equipment.
• Any section 1245 property used in
connection with research and
experimentation.
• Certain energy property specified in
section 168(e)(3)(B)(vi).
• Appliances, carpets, furniture, etc.,
used in a rental real estate activity.
7-year property includes:
• Office furniture and equipment.
• Railroad track.
• Any motorsports entertainment
complex (as defined in section 168(i)(15))
placed in service before January 1, 2008.
• Any natural gas gathering line (as
defined in section 168(i)(17)) placed in
service after April 11, 2005, the original
use of which begins with you after April
11, 2005, and is not under
self-construction or subject to a binding
contract in existence before April 12,
2005. Also, no AMT adjustment is
required.
• Any property that does not have a class
life and is not otherwise classified.
10-year property includes:
• Vessels, barges, tugs, and similar
water transportation equipment.
• Any single purpose agricultural or
horticultural structure (see section
168(i)(13)).
• Any tree or vine bearing fruit or nuts.
15-year property includes:
• Any municipal wastewater treatment
plant.
• Any telephone distribution plant and
comparable equipment used for 2-way
exchange of voice and data
communications.
-6-
• Any section 1250 property that is a
retail motor fuels outlet (whether or not
food or other convenience items are sold
there).
• Any qualified leasehold improvement
property placed in service before January
1, 2008.
• Any qualified restaurant property
placed in service before January 1, 2008.
• Initial clearing and grading land
improvements for gas utility property.
• Certain electric transmission property
specified in section 168(e)(3)(E)(vii)
placed in service after April 11, 2005, the
original use of which begins with you after
April 11, 2005, and is not under
self-construction or subject to a binding
contract in existence before April 12,
2005.
• Any natural gas distribution line placed
in service after April 11, 2005, the original
use of which begins with you after April
11, 2005, and is not under
self-construction or subject to a binding
contract in existence before April 12,
2005.
20-year property includes:
• Farm buildings (other than single
purpose agricultural or horticultural
structures).
• Municipal sewers not classified as
25-year property.
• Initial clearing and grading land
improvements for electric utility
transmission and distribution plants.
25-year property is water utility
property, which is:
• Property that is an integral part of the
gathering, treatment, or commercial
distribution of water that, without regard to
this classification, would be 20-year
property.
• Municipal sewers. This classification
does not apply to property placed in
service under a binding contract in effect
at all times since June 9, 1996.
Residential rental property is a
building in which 80% or more of the total
rent is from dwelling units.
Nonresidential real property is any
real property that is neither residential
rental property nor property with a class
life of less than 27.5 years.
50-year property includes any
improvements necessary to construct or
improve a roadbed or right-of-way for
railroad track that qualifies as a railroad
grading or tunnel bore under section
168(e)(4).
There is no separate line to report
50-year property. Therefore, attach a
statement showing the same information
as required in columns (a) through (g).
Include the deduction in the line 22 “Total”
and write “See attachment” in the bottom
margin of the form.
Determining the classification. If your
depreciable property is not listed above,
determine the classification as follows.
1. Find the property’s class life. See
the Table of Class Lives and Recovery
Periods in Pub. 946.
2. Use the following table to find the
classification in column (b) that
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ends in 2008.
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corresponds to the class life of the
property in column (a).
(a)
Class life (in years)
(See Pub. 946)
4 or less . . . . . . . . . . . . . .
More than 4 but less than 10
10 or more but less than 16
16 or more but less than 20
20 or more but less than 25
25 or more . . . . . . . . . . . .
(b)
Classification
3-year property
5-year property
7-year property
10-year property
15-year property
20-year property
Column (b) — Month and year placed
in service. For lines 19h and 19i, enter
the month and year you placed the
property in service. If you converted
property held for personal use to use in a
trade or business or for the production of
income, treat the property as being
placed in service on the conversion date.
Column (c) — Basis for depreciation
(business/investment use only). To
find the basis for depreciation, multiply
the cost or other basis of the property by
the percentage of business/investment
use. From that result, subtract any credits
and deductions allocable to the property.
The following are examples of some
credits and deductions that reduce the
basis for depreciation.
• Section 179 expense deduction.
• Deduction under section 179C for
certain qualified refinery property.
• Deduction under section 179D for
certain energy efficient commercial
building property.
• Deduction for removal of barriers to the
disabled and the elderly.
• Disabled access credit.
• Enhanced oil recovery credit.
• Credit for alternative fuel vehicle
refueling property.
• Credit for employer-provided childcare
facilities and services.
• Any special depreciation allowance
included on line 14.
• Any basis adjustment for investment
credit property. See section 50(c).
For additional credits and deductions
that affect the depreciable basis, see
section 1016 and Pub. 946.
Column (d) — Recovery period.
Determine the recovery period from the
following table, unless you acquired
qualified Indian reservation property
placed in service before January 1, 2008.
See Pub. 946 for more information on the
recovery period for MACRS property.
Recovery Period for Most Property
Classification
3-year property . . . . . . . . .
5-year property . . . . . . . . .
7-year property . . . . . . . . .
10-year property . . . . . . . .
15-year property . . . . . . . .
20-year property . . . . . . . .
25-year property . . . . . . . .
Residential rental property . .
Nonresidential real property .
Railroad gradings and tunnel
bores . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
Recovery
period
3 yrs.
5 yrs.
7 yrs.
10 yrs.
15 yrs.
20 yrs.
25 yrs.
27.5 yrs.
39 yrs.
...
50 yrs.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Column (e) — Convention. The
applicable convention determines the
portion of the tax year for which
depreciation is allowable during a year
property is either placed in service or
disposed of. There are three types of
conventions. To select the correct
convention, you must know the type of
property and when you placed the
property in service.
Half-year convention. This
convention applies to all property reported
on lines 19a through 19g, unless the
mid-quarter convention applies. It does
not apply to residential rental property,
nonresidential real property, and railroad
gradings and tunnel bores. It treats all
property placed in service (or disposed of)
during any tax year as placed in service
(or disposed of) on the midpoint of that
tax year. Enter “HY” in column (e).
Mid-quarter convention. If the total
depreciable bases (before any special
depreciation allowance) of MACRS
property placed in service during the last
3 months of your tax year exceed 40% of
the total depreciable bases of MACRS
property placed in service during the
entire tax year, the mid-quarter, instead of
the half-year, convention generally
applies.
In determining whether the mid-quarter
convention applies, do not take into
account the following.
• Property that is being depreciated
under a method other than MACRS.
• Any residential rental property,
nonresidential real property, or railroad
gradings and tunnel bores.
• Property that is placed in service and
disposed of within the same tax year.
The mid-quarter convention treats all
property placed in service (or disposed of)
during any quarter as placed in service
(or disposed of) on the midpoint of that
quarter. However, no depreciation is
allowed under this convention for property
that is placed in service and disposed of
within the same tax year. Enter “MQ” in
column (e).
Mid-month convention. This
convention applies only to residential
rental property (line 19h), nonresidential
real property (line 19i), and railroad
gradings and tunnel bores. It treats all
property placed in service (or disposed of)
during any month as placed in service (or
disposed of) on the midpoint of that
month. Enter “MM” in column (e).
Column (f) — Method. Applicable
depreciation methods are prescribed for
each classification of property as follows.
However, you can make an irrevocable
election to use the straight line method for
all property within a classification that is
placed in service during the tax year.
Enter “200 DB” for 200% declining
balance, “150 DB” for 150% declining
balance, or “S/L” for straight line.
• 3-, 5-, 7-, and 10-year property.
Generally, the applicable method is the
200% declining balance method,
switching to the straight line method in the
first tax year that the straight line rate
exceeds the declining balance rate.
-7-
Note. The straight line method is the
only applicable method for trees and
vines bearing fruit or nuts.
For 3-, 5-, 7-, or 10-year property
eligible for the 200% declining balance
method, you can make an irrevocable
election to use the 150% declining
balance method, switching to the straight
line method in the first tax year that the
straight line rate exceeds the declining
balance rate. The election applies to all
property within the classification for which
it is made and that was placed in service
during the tax year. You will not have an
AMT adjustment for any property included
under this election.
• 15- and 20-year property (not
including qualified leasehold
improvement or qualified restaurant
property) and property used in a
farming business. The applicable
method is the 150% declining balance
method, switching to the straight line
method in the first tax year that the
straight line rate exceeds the declining
balance rate.
• Water utility property, residential
rental property, nonresidential real
property, qualified leasehold
improvement property, qualified
restaurant property, or any railroad
grading or tunnel bore. The only
applicable method is the straight line
method.
Column (g) — Depreciation deduction.
To figure the depreciation deduction, you
may use optional Tables A through E,
which begin on page 13. Multiply column
(c) by the applicable rate from the
appropriate table. See Pub. 946 for
complete tables. If you disposed of the
property during the current tax year,
multiply the result by the applicable
decimal amount from the tables in Step 3
below. Or, you may compute the
deduction yourself by completing the
following steps.
Step 1. Determine the depreciation
rate as follows.
• If you are using the 200% or 150%
declining balance method in column (f),
divide the declining balance rate (use
2.00 for 200 DB or 1.50 for 150 DB) by
the number of years in the recovery
period in column (d). For example, for
property depreciated using the 200 DB
method over a recovery period of 5 years,
divide 2.00 by 5 for a rate of 40%. You
must switch to the straight line rate in the
first year that the straight line rate
exceeds the declining balance rate.
• If you are using the straight line
method, divide 1.00 by the remaining
number of years in the recovery period as
of the beginning of the tax year (but not
less than one). For example, if there are
61/2 years remaining in the recovery
period as of the beginning of the year,
divide 1.00 by 6.5 for a rate of 15.38%.
Step 2. Multiply the percentage rate
determined in Step 1 by the property’s
unrecovered basis (basis for depreciation
(as defined in column (c)) reduced by all
prior years’ depreciation).
Step 3. For property placed in service
or disposed of during the current tax year,
Page 8 of 17
Instructions for Form 4562-FYTo be used only by taxpayers whose fiscal year begins in 2007 and
13:14 - 25-MAR-2008
ends in 2008.
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
multiply the result from Step 2 by the
applicable decimal amount from the
tables below (based on the convention
shown in column (e)).
make this election separately for each
property.
Column (a) — Classification of
property. Use the following rules to
determine the classification of the
Half-year (HY) convention . . . . . . . . . . 0.5
property under ADS.
Mid-quarter (MQ) convention
Under ADS, the depreciation
deduction for most property is based on
Placed in service
(or disposed of)
Placed
Disposed the property’s class life. See section
168(g)(3) for special rules for determining
during the:
in service
of
1st quarter . . . . . . .
0.875
0.125 the class life for certain property. See
2nd quarter . . . . . . .
0.625
0.375 Pub. 946 for information on recovery
3rd quarter . . . . . . .
0.375
0.625 periods for ADS and the Table of Class
4th quarter . . . . . . .
0.125
0.875 Lives and Recovery Periods.
Use line 20a for all property
depreciated under ADS, except property
Mid-month (MM) convention
that does not have a class life, residential
Placed in service
(or disposed of)
Placed
Disposed rental and nonresidential real property,
water utility property, and railroad
during the:
in service
of
1st month . . . . . . .
0.9583
0.0417 gradings and tunnel bores. Use line 20b
2nd month . . . . . .
0.8750
0.1250 for property that does not have a class
3rd month . . . . . . .
0.7917
0.2083 life. Use line 20c for residential rental and
4th month . . . . . . .
0.7083
0.2917 nonresidential real property.
5th month . . . . . . .
0.6250
0.3750
Water utility property and railroad
6th month . . . . . . .
0.5417
0.4583 gradings and tunnel bores. These
7th month . . . . . . .
0.4583
0.5417 assets are 50-year property under ADS.
8th month . . . . . . .
0.3750
0.6250 There is no separate line to report
9th month . . . . . . .
0.2917
0.7083 50-year property. Therefore, attach a
10th month . . . . . .
0.2083
0.7917 statement showing the same information
11th month . . . . . .
0.1250
0.8750 required in columns (a) through (g).
12th month . . . . . .
0.0417
0.9583 Include the deduction in the line 22 “Total”
and write “See attachment” in the bottom
margin of the form.
Short tax years. See Pub. 946 for
Column (b) — Month and year placed
rules on how to compute the depreciation
deduction for property placed in service in in service. For 40-year property, enter
the month and year placed in service or
a short tax year.
converted to use in a trade or business or
for the production of income.
Section C
Column (c) — Basis for depreciation
(business/investment use only). See
Lines 20a Through 20c
the instructions for line 19, column (c).
Complete lines 20a through 20c for
Column (d) — Recovery period. On
assets, other than automobiles and other
line 20a, enter the property’s class life.
listed property, placed in service only
during the tax year beginning in 2007 and
Column (e) — Convention. Under
depreciated under the Alternative
ADS, the applicable conventions are the
Depreciation System (ADS). Report on
same as those used under GDS. See the
line 17 MACRS depreciation on assets
instructions for line 19, column (e).
placed in service in prior years.
Column (g) — Depreciation deduction.
Figure the depreciation deduction in the
Under ADS, use the applicable
same manner as under GDS, except use
depreciation method, the applicable
the straight line method over the ADS
recovery period, and the applicable
recovery period and use the applicable
convention to compute depreciation.
convention.
The following types of property must
MACRS recapture. If you later dispose
be depreciated under ADS.
of property you depreciated using
• Tangible property used predominantly
MACRS, any gain on the disposition is
outside the United States.
generally recaptured (included in income)
• Tax-exempt use property.
as ordinary income up to the amount of
• Tax-exempt bond financed property.
the depreciation previously allowed or
• Imported property covered by an
allowable for the property. Depreciation,
executive order of the President of the
for this purpose, includes any of the
United States.
following deductions taken during the
• Property used predominantly in a
2007 tax year.
farming business and placed in service
• Any section 179 expense deduction
during any tax year in which you made an
claimed on the property,
election under section 263A(d)(3) not to
• Any special depreciation allowance
have the uniform capitalization rules of
available for the property (unless you
section 263A apply.
elected not to claim it),
Instead of depreciating property under
• Any deduction under section 179B for
GDS (line 19), you can make an
capital costs incurred in complying with
irrevocable election with respect to any
Environmental Protection Agency sulfur
classification of property for any tax year
regulations,
to use ADS. For residential rental and
• Any deduction under section 179C for
nonresidential real property, you can
certain qualified refinery property, and
-8-
• Any deduction under section 179D for
certain energy efficient commercial
building property.
There is no recapture for residential
rental and nonresidential real property,
unless that property is qualified property
for which you claimed a special
depreciation allowance (discussed
earlier). For more information on
depreciation recapture, see Pub. 946.
Part IV. Summary
Line 22
A partnership (other than an electing
large partnership) or S corporation does
not include any section 179 expense
deduction (line 12) on this line. Instead,
any section 179 expense deduction is
passed through separately to the partners
and shareholders on the appropriate line
of their Schedules K-1.
Line 23
If you are subject to the uniform
capitalization rules of section 263A, enter
the increase in basis from costs you must
capitalize. For a detailed discussion of
who is subject to these rules, which costs
must be capitalized, and allocation of
costs among activities, see Regulations
section 1.263A-1.
Part V. Listed Property
If you claim the standard mileage rate,
actual vehicle expenses (including
depreciation), or depreciation on other
listed property, you must provide the
information requested in Part V,
regardless of the tax year the property
was placed in service. However, if you file
Form 2106, 2106-EZ, or Schedule C-EZ
(Form 1040), report this information on
that form and not in Part V. 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.
Section A
The section 179 expense
deduction should be computed
CAUTION before calculating any special
depreciation allowance and/or regular
depreciation deduction. See the
instructions for line 26, column (i).
Listed property used 50% or less in a
qualified business use (as defined in the
instructions for lines 26 and 27 below)
does not qualify for the section 179
expense deduction or special
depreciation allowance.
!
Line 25
If you placed in service certain qualified
property after December 31, 2007, or
qualified GO Zone property during the
fiscal year beginning in 2007 and ending
in 2008, you may be able to deduct an
additional special depreciation allowance.
See the instructions for line 14 for the
definition of qualified property and how to
figure the deduction. This special
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ends in 2008.
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depreciation allowance is included in the
overall limit on depreciation and section
179 expense deduction for passenger
automobiles. See the tables on page 10
for limitations on cars and trucks placed in
service during calendar year 2008. Enter
on line 25 your total special depreciation
allowance for all qualified listed property.
Lines 26 and 27
Use line 26 to figure depreciation for
property used more than 50% in a
qualified business use. Use line 27 to
figure the depreciation for property used
50% or less in a qualified business use.
Also see Limits for passenger
automobiles on page 9.
If you acquired the property
through a trade-in, special rules
CAUTION apply for determining the basis,
recovery period, depreciation method,
and convention. For more details, see
Property acquired in a like-kind exchange
or involuntary conversion on page 5. Also,
see Regulations section 1.168(i)-6(d)(3).
Qualified business use. To determine
whether to use line 26 or line 27 to report
your listed property, you must first
determine the percentage of qualified
business use for each property.
Generally, a qualified business use is any
use in your trade or business. However, it
does not include any of the following.
• Investment use.
• Leasing the property to a 5% owner or
related person.
• The use of the property as
compensation for services performed by a
5% owner or related person.
• The use of the property as
compensation for services performed by
any person (who is not a 5% owner or
related person), unless an amount is
included in that person’s income for the
use of the property and, if required,
income tax was withheld on that amount.
Determine your percentage of qualified
business use similar to the method used
to figure the business/investment use
percentage in column (c). Your
percentage of qualified business use may
be smaller than the business/investment
use percentage.
For more information, including the
definition of a 5% owner and related
person and exceptions, see Pub. 946.
Listed property recapture. If you used
listed property more than 50% in a
qualified business use in the year you
placed the property in service, and used it
50% or less in a later year, you may have
to include part of the depreciation
deducted as income. Use Form 4797,
Sales of Business Property, to figure the
recapture amount.
Column (a) — Type of property. List
on a property-by-property basis all your
listed property in the following order.
1. Automobiles and other vehicles.
2. Other listed property (computers
and peripheral equipment, etc.).
!
In column (a), list the make and model
of automobiles, and give a general
description of other listed property.
If you have more than five vehicles
used 100% for business/investment
purposes, you may group them by tax
year. Otherwise, list each vehicle
separately.
Column (b) — Date placed in service.
Enter the date the property was placed in
service. If property held for personal use
is converted to business/investment use,
treat the property as placed in service on
the date of conversion.
Column (c) — Business/investment
use percentage. Enter the percentage
of business/investment use. For
automobiles and other vehicles,
determine this percentage by dividing the
number of miles the vehicle is driven for
trade or business purposes or for the
production of income during the year (not
to include any commuting mileage) by the
total number of miles the vehicle is driven
for all purposes. Treat vehicles used by
employees as being used 100% for
business/investment purposes if the value
of personal use is included in the
employees’ gross income, or the
employees reimburse the employer for
the personal use.
Employers who report the amount of
personal use of the vehicle in the
employee’s gross income, and withhold
the appropriate taxes, should enter
“100%” for the percentage of business/
investment use. For more information,
see Pub. 463.
For other listed property (such as
computers or video equipment), allocate
the use based on the most appropriate
unit of time the property is actually used
(rather than merely being available for
use).
If during the tax year you convert
property used solely for personal
purposes to business/investment use (or
vice versa), figure the percentage of
business/investment use only for the
number of months you use the property in
your business or for the production of
income. Multiply that percentage by the
number of months you use the property in
your business or for the production of
income, and divide the result by 12.
Column (d) — Cost or other basis.
Enter the property’s actual cost (including
sales tax) or other basis (unadjusted for
prior years’ depreciation). If you traded in
old property, see Property acquired in a
like-kind exchange or involuntary
conversion on page 5.
For a vehicle, reduce your basis by
any qualified electric vehicle credit you
claimed, for property placed in service
before January 1, 2007, or by any
alternative motor vehicle credit allowed.
If you converted the property from
personal use to business/investment use,
your basis for depreciation is the smaller
of the property’s adjusted basis or its fair
market value on the date of conversion.
Column (e) — Basis for depreciation
(business/investment use only).
Multiply column (d) by the percentage in
column (c). From that result, subtract any
section 179 expense deduction, any
special depreciation allowance, any credit
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for employer-provided childcare facilities
and services, and half of any investment
credit claimed before 1986 (unless you
claimed the reduced credit). For
automobiles and other listed property
placed in service after 1985 (i.e.,
transition property), reduce the
depreciable basis by the entire
investment credit.
Column (f) — Recovery period. Enter
the recovery period. For property placed
in service after 1986 and used more than
50% in a qualified business use, use the
table in the instructions for line 19,
column (d). For property placed in service
after 1986 and used 50% or less in a
qualified business use, depreciate the
property using the straight line method
over its ADS recovery period. The ADS
recovery period is 5 years for automobiles
and computers.
Column (g) — Method/convention.
Enter the method and convention used to
figure your depreciation deduction. See
the instructions for line 19, columns (e)
and (f). Write “200 DB,” “150 DB,” or “S/
L,” for the depreciation method, and “HY,”
“MM,” or “MQ,” for half-year, mid-month,
or mid-quarter conventions, respectively.
For property placed in service before
1987, write “PRE” if you used the
prescribed percentages under ACRS. If
you elected an alternate percentage,
enter “S/L.”
Column (h) — Depreciation deduction.
See Limits for passenger automobiles,
below, before entering an amount in
column (h).
For property used more than 50% in a
qualified business use (line 26) and
placed in service after 1986, figure
column (h) by following the instructions
for line 19, column (g). If placed in service
before 1987, multiply column (e) by the
applicable percentage given in Pub. 534
for ACRS property. If the recovery period
for an automobile ended before your tax
year beginning in 2007, enter your
unrecovered basis, if any, in column (h).
For property used 50% or less in a
qualified business use (line 27) and
placed in service after 1986, figure
column (h) by dividing the amount in
column (e) by the amount in column (f).
Use the same conventions as discussed
in the instructions for line 19, column (e).
The amount in column (h) cannot exceed
the property’s unrecovered basis. If the
recovery period for an automobile ended
before your tax year beginning in 2007,
enter your unrecovered basis, if any, in
column (h).
For property placed in service before
1987 that was disposed of during the
year, enter zero.
Limits for passenger automobiles.
The depreciation deduction, including
section 179 expense deduction, for
passenger automobiles is limited. For any
passenger automobile (including an
electric passenger automobile) you list on
line 26 or line 27, the total of columns (h)
and (i) on line 26 or 27 and column (h) on
line 25 for that automobile cannot exceed
the applicable limit shown in Table 1, 2, 3,
or 4. If the business/investment use
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percentage in column (c) for the
automobile is less than 100%, you must
reduce the applicable limit to an amount
equal to the limit multiplied by that
percentage. For example, for an
automobile (other than a truck or van)
placed in service in 2007 that is used
60% for business/investment, the limit is
$1,776 ($2,960 x 60%).
Definitions. For purposes of the
limits for passenger automobiles, the
following apply.
• Passenger automobiles are 4-wheeled
vehicles manufactured primarily for use
on public roads that are rated at 6,000
pounds unloaded gross vehicle weight or
less (for a truck or van, gross vehicle
weight is substituted for unloaded gross
vehicle weight).
• Electric passenger automobiles are
vehicles produced by an original
equipment manufacturer and designed to
run primarily on electricity, placed in
service after August 5, 1997, and before
January 1, 2007.
Exception. The following vehicles are
not considered passenger automobiles.
• An ambulance, hearse, or combination
ambulance-hearse used in your trade or
business.
• A vehicle used in your trade or
business of transporting persons or
property for compensation or hire.
• Any truck or van placed in service after
July 6, 2003, that is a qualified
nonpersonal use vehicle. A truck or van is
a qualified nonpersonal use vehicle only if
it has been specially modified with the
result that it is not likely to be used more
than a de minimis amount for personal
purposes. For example, a van that has
only a front bench for seating, in which
permanent shelving has been installed,
that constantly carries merchandise or
equipment, and that has been specially
painted with advertising or the company’s
name, is a vehicle not likely to be used
more than a de minimis amount for
personal purposes.
Exception for leasehold property.
The business use requirement and the
limits for passenger automobiles
generally do not apply to passenger
automobiles leased or held by anyone
regularly engaged in the business of
leasing passenger automobiles.
For a detailed discussion on
passenger automobiles, including leased
automobiles, see Pub. 463.
Table 1 — Limits for Passenger
Automobiles Placed in Service Before
2004 (excluding electric passenger
automobiles placed in service after
August 5, 1997)
IF you placed your
automobile in service:
THEN the
limit on your
depreciation
and section 179
expense
deduction is:
June 19 — Dec. 31, 1984
$6,000
Jan. 1 — Apr. 2, 1985
$6,200
Apr. 3, 1985 — Dec. 31, 1986
$4,800
Jan. 1, 1987 — Dec. 31, 1990
$1,475
Jan. 1, 1991 — Dec. 31, 1992
$1,575
Jan. 1, 1993 — Dec. 31, 1994
$1,675
Jan. 1, 1995 — Dec. 31, 2003
$1,775
Table 2 — Limits for Passenger
Automobiles Placed in Service After
2003 (excluding trucks and vans placed in
service after 2002 and electric passenger
automobiles placed in service before
January 1, 2007)
AND the
number of
tax years in
which this
automobile
has been in
service is:
THEN the
limit on your
depreciation
and section
179 expense
deduction is:
Jan. 1 — Dec. 31,
2004
4 or more
$1,675
Jan. 1 — Dec. 31,
2005
3
$2,850
4
$1,675
Jan. 1 — Dec. 31,
2006
2
$4,800
3
$2,850
Jan. 1 — Dec. 31,
2007
1
$3,060
2
$4,900
1
$2,960
IF you placed
your automobile
in service:
Jan. 1 — Dec. 31,
2008
Note. For taxpayers who elect to take an
additional 50% depreciation for vehicles
placed in service during the 2008
calendar year, increase the amount in
Tables 2 and 3 for the 2008 calendar year
by $8,000. For example, a taxpayer who
places a passenger automobile in service
during the 2008 calendar year can take a
total depreciation deduction of $10,960.
That is, $2,960 for the 1st year (Table 2),
plus a bonus depreciation of $8,000, for a
total depreciation deduction of $10,960
for calendar year 2008.
Table 3 — Limits for Trucks and Vans
Placed in Service After 2002
IF you placed
your truck or van
in service:
AND the
number of
tax years in
which this
truck or van
has been in
service is:
THEN the
limit on your
depreciation
and section
179 expense
deduction is:
Jan. 1 — Dec. 31,
2003
4 or more
$1,975
Jan. 1 — Dec. 31,
2004
4 or more
$1,875
Jan. 1 — Dec. 31,
2005
3
$3,150
4
$1,875
Jan. 1 — Dec. 31,
2006
2
$5,200
3
$3,150
Jan. 1 — Dec. 31,
2007
1
$3,260
2
$5,200
Jan. 1 — Dec. 31,
2008
1
$3,160
Note. For a truck or van placed in
service during the 2008 calendar year,
you are allowed $3,160 for the 1st year
(Table 3) plus a bonus depreciation of
$8,000, for a total depreciation amount of
$11,160 for calendar year 2008. See
Revenue Procedure 2008-22 for more
information about depreciation limitations
for calendar year 2008.
Table 4 — Limits for Electric Passenger
Automobiles Placed in Service After
August 5, 1997 and before January 1,
2007
AND the
number of
tax years in
which this
automobile
has been in
service is:
THEN the
limit on your
depreciation
and section
179 expense
deduction is:
Aug. 6, 1997 —
Dec. 31, 1998
4 or more
$5,425
Jan. 1, 1999 —
Dec. 31, 2002
4 or more
$5,325
Jan. 1 — Dec. 31,
2003
4 or more
$5,225
Jan. 1 — Dec. 31,
2004
4 or more
$5,125
Jan. 1 — Dec. 31,
2005
3
$8,450
4
$5,125
Jan. 1 — Dec. 31,
2006
2
$14,400
3
$8,650
IF you placed
your electric
automobile in
service:
Column (i) — Elected section 179 cost.
Enter the amount you elect to expense
for section 179 property used more than
50% in a qualified business use (subject
to the limits for passenger automobiles).
Refer to the instructions for Part I to
determine if the property qualifies under
section 179.
You cannot elect to expense more
than $25,000 of the cost of any sport
utility vehicle (SUV) and certain other
vehicles placed in service during the tax
year. This rule applies to any 4-wheeled
vehicle primarily designed or used to
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carry passengers over public streets,
roads, or highways, that is rated at more
than 6,000 pounds gross vehicle weight
and not more than 14,000 pounds gross
vehicle weight. However, the $25,000
limit does not apply to any vehicle:
• Designed to seat more than nine
persons behind the driver’s seat,
• Equipped with a cargo area (either
open or enclosed by a cap) of at least six
feet in interior length that is not readily
accessible directly from the passenger
compartment, or
• That has an integral enclosure fully
enclosing the driver compartment and
load carrying device, does not have
seating rearward of the driver’s seat, and
has no body section protruding more than
30 inches ahead of the leading edge of
the windshield.
Recapture of section 179 expense
deduction. If you used listed property
more than 50% in a qualified business
use in the year you placed the property in
service and used it 50% or less in a later
year, you may have to recapture in the
later year part of the section 179 expense
deduction. Use Form 4797 to figure the
recapture amount.
Section B
Except as noted below, you must
complete lines 30 through 36 for each
vehicle identified in Section A. Employees
must provide their employers with the
information requested on lines 30 through
36 for each automobile or vehicle
provided for their use.
Exception. Employers are not required
to complete lines 30 through 36 for
vehicles used by employees who are not
more than 5% owners or related persons
and for which the question on line 37, 38,
39, 40, or 41 is answered “Yes.”
Section C
Employers providing vehicles to their
employees satisfy the employer’s
substantiation requirements under section
274(d) by maintaining a written policy
statement that:
• Prohibits personal use including
commuting or
• Prohibits personal use except for
commuting.
An employee does not need to keep a
separate set of records for any vehicle
that satisfies these written policy
statement rules.
For both written policy statements,
there must be evidence that would enable
the IRS to determine whether use of the
vehicle meets the conditions stated
below.
Line 37
A policy statement that prohibits personal
use (including commuting) must meet all
of the following conditions.
• The employer owns or leases the
vehicle and provides it to one or more
employees for use in the employer’s trade
or business.
• When the vehicle is not used in the
employer’s trade or business, it is kept on
the employer’s business premises, unless
it is temporarily located elsewhere (e.g.,
for maintenance or because of a
mechanical failure).
• No employee using the vehicle lives at
the employer’s business premises.
• No employee may use the vehicle for
personal purposes, other than de minimis
personal use (e.g., a stop for lunch
between two business deliveries).
• Except for de minimis use, the
employer reasonably believes that no
employee uses the vehicle for any
personal purpose.
Line 38
A policy statement that prohibits personal
use (except for commuting) is not
available if the commuting employee is an
officer, director, or 1% or more owner.
This policy must meet all of the following
conditions.
• The employer owns or leases the
vehicle and provides it to one or more
employees for use in the employer’s trade
or business, and it is used in the
employer’s trade or business.
• For bona fide noncompensatory
business reasons, the employer requires
the employee to commute to and/or from
work in the vehicle.
• The employer establishes a written
policy under which the employee may not
use the vehicle for personal purposes,
other than commuting or de minimis
personal use (e.g., a stop for a personal
errand between a business delivery and
the employee’s home).
• Except for de minimis use, the
employer reasonably believes that the
employee does not use the vehicle for
any personal purpose other than
commuting.
• The employer accounts for the
commuting use by including an
appropriate amount in the employee’s
gross income.
Line 40
An employer that provides more than five
vehicles to its employees who are not 5%
owners or related persons need not
complete Section B for such vehicles.
Instead, the employer must obtain the
information from its employees and retain
the information received.
Line 41
An automobile meets the requirements for
qualified demonstration use if the
employer maintains a written policy
statement that:
• Prohibits its use by individuals other
than full-time automobile salespersons,
• Prohibits its use for personal vacation
trips,
• Prohibits storage of personal
possessions in the automobile, and
• Limits the total mileage outside the
salesperson’s normal working hours.
Part VI. Amortization
Each year you can deduct part of certain
capital costs over a fixed period.
If you amortize property, the part
you amortize does not qualify for
CAUTION the section 179 expense
deduction or for depreciation.
!
-11-
Attach any information the Code and
regulations may require to make a valid
election. See the applicable Code section,
regulations, and Pub. 535 for more
information.
Line 42
Complete line 42 only for those costs you
amortize for which the amortization period
begins during your tax year beginning in
2007.
Column (a) — Description of costs.
Describe the costs you are amortizing.
You can amortize the following.
Geological and geophysical
expenditures (section 167(h)). You
must amortize geological and geophysical
expenses paid or incurred in connection
with the exploration or development of oil
and gas within the U.S. ratably over a
24-month period (a 5-year period in the
case of a major integrated oil company for
costs paid or incurred after May 17, 2006)
beginning on the mid-point of the tax year
in which the expenses were paid or
incurred. See section 167(h).
Pollution control facilities (section
169). You can elect to amortize the cost
of a certified pollution control facility over
a 60-month period (84 months for certain
atmospheric pollution control facilities
placed in service after April 11, 2005).
See section 169 and the related
regulations for details and information
required in making the election. See Pub.
535 for more information.
You can deduct a special
depreciation allowance on a
CAUTION certified pollution control facility
that is qualified property. However, you
must reduce the amount on which you
figure your amortization deduction by any
special allowance allowed or allowable,
whichever is greater.
Also, a corporation must reduce its
amortizable basis of a pollution control
facility by 20% before figuring the
amortization deduction.
Certain bond premiums (section
171). For individuals reporting
amortization of bond premium for bonds
acquired before October 23, 1986, do not
report the deduction here. See the
instructions for Schedule A (Form 1040),
line 28.
For taxpayers (other than
corporations) claiming a deduction for
amortization of bond premium for bonds
acquired after October 22, 1986, but
before January 1, 1988, the deduction is
treated as interest expense and is subject
to the investment interest limitations. Use
Form 4952, Investment Interest Expense
Deduction, to compute the allowable
deduction.
For taxable bonds acquired after 1987,
you can elect to amortize the bond
premium over the life of the bond. See
section 171 and Regulations section
1.171-4 for more information. Individuals,
also see Pub. 550, Investment Income
and Expenses.
Research and experimental
expenditures (section 174). You can
elect to either amortize your research and
!
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experimental costs, deduct them as
current business expenses, or write them
off over a 10-year period. If you elect to
amortize these costs, deduct them in
equal amounts over 60 months or more.
For more information, see Pub. 535.
The cost of acquiring a lease
(section 178). Amortize these costs over
the term of the lease. For more
information, see Pub. 535.
Qualified forestation and
reforestation costs (section 194). You
can elect to deduct a limited amount of
qualifying reforestation costs paid or
incurred during the tax year for each
qualified timber property. You can elect to
amortize the qualifying costs that are not
deducted currently over an 84-month
period. There is no limit on the amount of
your amortization deduction for
reforestation costs paid or incurred during
the tax year.
If you are otherwise required to file
Form T (Timber), Forest Activities
Schedule, you can make the election to
amortize qualifying reforestation costs by
completing Part IV of the form. See the
instructions for Form T for more
information.
See Pub. 535 for more information on
amortizing reforestation costs.
Partnerships and S corporations, also see
the instructions for line 44.
Qualified revitalization expenditures
(section 1400l). These amounts are
certain capital expenditures that relate to
a qualified revitalization building located
in an area designated as a renewal
community. The amount of qualified
revitalization expenditures cannot exceed
the commercial revitalization expenditure
amount allocated to the qualified
revitalization building by the commercial
revitalization agency for the state in which
the building is located.
You can elect to either: (a) deduct
one-half of the expenditures for the year
the building is placed in service; or (b)
amortize all such expenditures ratably
over the 120-month period beginning with
the month the building is placed in
service. Report any amortization on line
42. Report any deductions on the
applicable “Other Deductions” or “Other
Expenses” line of your return. This
deduction is treated as depreciation for
purposes of basis adjustments and
ordinary income recapture upon
disposition.
Optional write-off of certain tax
preferences over the period specified
in section 59(e). You can elect to
amortize certain tax preference items
over an optional period. If you make this
election, there is no AMT adjustment for
these expenditures. The applicable
expenditures and the optional recovery
periods are as follows:
• Circulation expenditures (section 173)
— 3 years,
• Intangible drilling and development
costs (section 263(c)) — 60 months, and
• Research and experimental
expenditures (section 174(a)), mining
exploration and development costs
(sections 616(a) and 617(a)) — 10 years.
For information on making the election,
see Regulations section 1.59-1. Also see
Pub. 535.
Certain section 197 intangibles.
The following costs must be amortized
over 15 years (180 months) starting with
the later of (a) the month the intangibles
were acquired or (b) the month the trade
or business or activity engaged in for the
production of income begins:
• Goodwill;
• Going concern value;
• Workforce in place;
• Business books and records, operating
systems, or any other information base;
• A patent, copyright, formula, process,
design, pattern, know-how, format, or
similar item;
• A customer-based intangible (e.g.,
composition of market or market share);
• A supplier-based intangible;
• A license, permit, or other right granted
by a governmental unit;
• A covenant not to compete entered into
in connection with the acquisition of a
business; and
• A franchise, trademark, or trade name
(including renewals).
A longer period may apply to section
197 intangibles leased under a lease
agreement entered into after March 12,
2004, to a tax-exempt organization,
governmental unit, or foreign person or
entity (other than a partnership). See
section 197(f)(10).
A section 197 intangible is treated
as depreciable property used in
CAUTION your trade or business. When you
dispose of a section 197 intangible, any
gain on the disposition, up to the amount
of allowable amortization, is recaptured
as ordinary income. If multiple section
197 intangibles are disposed of in a single
transaction or a series of related
transactions, calculate the recapture as if
all of the section 197 intangibles were a
single asset. This rule does not apply to
section 197 intangibles disposed of for
which the fair market value exceeds the
adjusted basis.
For more details on section 197
intangibles, see Pub. 535.
Start-up and organizational costs.
You can elect to amortize the following
costs for setting up your business.
• Business start-up costs (section 195).
• Organizational costs for a corporation
(section 248).
• Organizational costs for a partnership
(section 709).
For costs paid or incurred before
October 23, 2004, you can elect an
amortization period of 60 months or more.
For costs paid or incurred after October
22, 2004, you can elect to deduct a
limited amount of start-up or
organizational costs. The costs that are
not deducted currently can be amortized
ratably over a 180-month period. The
amortization period starts with the month
you begin business operations.
Attach the statement required by the
appropriate Code section and related
regulations. If you have both start-up and
organizational costs, attach a separate
!
-12-
statement for each type of cost. See Pub.
535 for more details.
The statements required to make the
elections must be attached to Form 4562
and filed by the due date, including
extensions, of your return for the year in
which the active trade or business begins.
If you timely filed that return without
making the election, you can still make
the election on an amended return filed
within 6 months of the due date,
excluding extensions, of that return. Write
“Filed pursuant to section 301.9100-2” on
the amended return.
Creative property costs. These are
costs paid or incurred to acquire and
develop screenplays, scripts, story
outlines, motion picture production rights
to books and plays, and other similar
properties for purposes of potential future
film development, production, and
exploitation. You may be able to amortize
creative property costs for properties not
set for production within 3 years of the
first capitalized transaction. These costs
are amortized ratably over a 15-year
period under the rules of Rev. Proc.
2004-36, 2004-24 I.R.B. 1063.
Column (b) — Date amortization
begins. Enter the date the amortization
period begins under the applicable Code
section.
Column (c) — Amortizable amount.
Enter the total amount you are amortizing.
See the applicable Code section for limits
on the amortizable amount.
Column (d) — Code section. Enter the
Code section under which you amortize
the costs. For examples, see the Code
sections referenced in the instructions for
line 42, column (a), above.
Column (f) — Amortization for this
year. Compute the amortization
deduction by:
1. Dividing the amount in column (c)
by the number of months over which the
costs are to be amortized and multiplying
the result by the number of months in the
amortization period included in your tax
year beginning in 2007 or
2. Multiplying the amount in column
(c) by the percentage in column (e).
Line 43
If you are reporting the amortization of
costs that began before your 2007 tax
year and you are not required to file Form
4562 for any other reason, do not file
Form 4562. Report the amortization
directly on the “Other Deductions” or
“Other Expenses” line of your return.
Line 44
Report the total amortization, including
the allowable portion of forestation or
reforestation amortization, on the
applicable “Other Deductions” or “Other
Expenses” line of your return. For more
details, including limitations that apply,
see Pub. 535. Partnerships (other than
electing large partnerships) and S
corporations, report the amortizable basis
of any forestation or reforestation
expenses for which amortization is
elected and the year in which the
amortization begins as a separately
Page 13 of 17
Instructions for Form 4562-FYTo be used only by taxpayers whose fiscal year begins in 2007
13:14 - 25-MAR-2008
and ends in 2008.
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
stated item on Schedules K and K-1
(Form 1065 or 1120S). See the
instructions for Schedule K (Form 1065 or
1120S) for more details on how to report.
Paperwork Reduction Act Notice. We
ask for the information on this form to
carry out the Internal Revenue laws of the
United States. You are required to give us
the information. We need it to ensure that
you are complying with these laws and to
allow us to figure and collect the right
amount of tax.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records relating
to a form or its instructions must be
retained as long as their contents may
become material in the administration of
any Internal Revenue law. Generally, tax
returns and return information are
confidential, as required by section 6103.
The time needed to complete and file
this form will vary depending on individual
circumstances. The estimated burden for
individual taxpayers filing this form is
approved under OMB control number
1545-0074 and is included in the
estimates shown in the instructions for
-13-
their individual income tax return. The
estimated burden for all other taxpayers
who file this form is shown below.
Recordkeeping, 38 hr., 29 min.;
Learning about the law or the form, 4
hr., 16 min.; Preparing and sending the
form to the IRS, 5 hr., 5 min.
If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler,
we would be happy to hear from you. See
the instructions for the tax return with
which this form is filed.
Page 14 of 17
Instructions for Form 4562-FYTo be used only by taxpayers whose fiscal year begins in 2007
13:14 - 25-MAR-2008
and ends in 2008.
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Table A—General Depreciation System
Method: 200% declining balance switching to straight line
Convention: Half-year
If the recovery period is:
Year
3 years
5 years
7 years
10 years
1
33.33%
20.00%
14.29%
10.00%
2
44.45%
32.00%
24.49%
18.00%
3
14.81%
19.20%
17.49%
14.40%
4
7.41%
11.52%
12.49%
11.52%
5
11.52%
8.93%
9.22%
6
5.76%
8.92%
7.37%
7
8.93%
6.55%
8
4.46%
6.55%
9
6.56%
10
6.55%
11
3.28%
Table B—General and Alternative Depreciation System
Method: 150% declining balance switching to straight line
Convention: Half-year
If the recovery period is:
Year
5 years
7 years
10 years
12 years
15 years
1
15.00%
10.71%
7.50%
6.25%
5.00%
3.750%
2
25.50%
19.13%
13.88%
11.72%
9.50%
7.219%
3
17.85%
15.03%
11.79%
10.25%
8.55%
6.677%
4
16.66%
12.25%
10.02%
8.97%
7.70%
6.177%
5
16.66%
12.25%
8.74%
7.85%
6.93%
5.713%
6
8.33%
12.25%
8.74%
7.33%
6.23%
5.285%
20 years
7
12.25%
8.74%
7.33%
5.90%
4.888%
8
6.13%
8.74%
7.33%
5.90%
4.522%
9
8.74%
7.33%
5.91%
4.462%
10
8.74%
7.33%
5.90%
4.461%
11
4.37%
7.32%
5.91%
4.462%
12
7.33%
5.90%
4.461%
13
3.66%
5.91%
4.462%
14
5.90%
4.461%
15
5.91%
4.462%
16
2.95%
4.461%
17
4.462%
18
4.461%
19
4.462%
20
4.461%
21
4.462%
-14-
Page 15 of 17
Instructions for Form 4562-FYTo be used only by taxpayers whose fiscal year begins in 2007
13:14 - 25-MAR-2008
and ends in 2008.
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Table C—General Depreciation System
Method: Straight line
Convention: Mid-month
Recovery period: 27.5 years
The month in the 1st recovery year the property is placed in service:
Year
1
1
2
3
4
5
6
7
8
9
10
11
12
3.485%
3.182%
2.879%
2.576%
2.273%
1.970%
1.667%
1.364%
1.061%
0.758%
0.455%
0.152%
2–9
3.636%
3.636%
3.636%
3.636%
3.636%
3.636%
3.636%
3.636%
3.636%
3.636%
3.636%
3.636%
10,12,14,16,18, 20,22
3.637%
3.637%
3.637%
3.637%
3.637%
3.637%
3.636%
3.636%
3.636%
3.636%
3.636%
3.636%
11,13,15,17,19, 21
3.636%
3.636%
3.636%
3.636%
3.636%
3.636%
3.637%
3.637%
3.637%
3.637%
3.637%
3.637%
Table D—General Depreciation System
Method: Straight line
Convention: Mid-month
Recovery period: 31.5 years
The month in the 1st recovery year the property is placed in service:
Year
1
2
3
4
5
6
7
8
9
10
11
12
13,15,17,19, 21,23
3.174%
3.175%
3.174%
3.175%
3.174%
3.175%
3.174%
3.175%
3.174%
3.175%
3.174%
3.175%
14,16,18, 20, 22,24
3.175%
3.174%
3.175%
3.174%
3.175%
3.174%
3.175%
3.174%
3.175%
3.174%
3.175%
3.174%
Table E—General Depreciation System
Method: Straight line
Convention: Mid-month
Recovery period: 39 years
The month in the 1st recovery year the property is placed in service:
Year
1
2
3
4
5
6
7
8
9
10
11
12
1
2.461%
2.247%
2.033%
1.819%
1.605%
1.391%
1.177%
0.963%
0.749%
0.535%
0.321%
0.107%
2–39
2.564%
2.564%
2.564%
2.564%
2.564%
2.564%
2.564%
2.564%
2.564%
2.564%
2.564%
2.564%
-15-
Description of Property
Date
Placed in
Service
Cost or
Other
Basis
Business/
Investment
Use %
Section
179
Deduction
and
Special
Allowance
Depreciation Prior
Years
Basis for
Depreciation
Depreciation Worksheet (Keep for your records.)
Method/
Convention
Recovery
Period
Rate or
Table
%
Depreciation
Deduction
Page 16 of 17
and ends in 2008.
Instructions for Form 4562-FYTo be used only by taxpayers whose fiscal year begins in 2007
13:14 - 25-MAR-2008
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
-16-
Page 17 of 17
Instructions for Form 4562-FYTo be used only by taxpayers whose fiscal year begins in 2007
13:14 - 25-MAR-2008
and ends in 2008.
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Index
A
Alternative Depreciation
System:
Basis for depreciation . . . . 8
Classification of
property . . . . . . . . . . . . . . . . 8
Conventions . . . . . . . . . . . . . . 8
Depreciation
deduction . . . . . . . . . . . . . . 8
Placed in service date . . . . 8
Recovery period . . . . . . . . . . 8
Alternative minimum tax . . . . 2
Amortization . . . . . . . . . . . . . . . 11
Amortizable amount . . . . . 12
Amortization
deduction . . . . . . . . . . . . . 12
Amortization of costs from
prior year . . . . . . . . . . . . . 12
Amortization of costs in
current year . . . . . . . . . . . 11
Applicable code
section . . . . . . . . . . . . . . . . 12
Certain bond
premiums . . . . . . . . . . . . . 11
Cost of acquiring a
lease . . . . . . . . . . . . . . . . . . 12
Creative property
costs . . . . . . . . . . . . . . . . . . 12
Date amortization
begins . . . . . . . . . . . . . . . . 12
Description of costs . . . . . 11
Forestation and
reforestation costs . . . . . 12
Geological and geophysical
expenditures . . . . . . . . . . 11
Optional section 59(e)
write-off . . . . . . . . . . . . . . . 12
Pollution control
facilities . . . . . . . . . . . . . . . 11
Research and experimental
expenditures . . . . . . . . . . 11
Revitalization
expenditures . . . . . . . . . . 12
Section 197
intangibles . . . . . . . . . . . . 12
Start-up and organizational
costs . . . . . . . . . . . . . . . . . . 12
C
Conventions:
Half-year . . . . . . . . . . . . . . . . . 7
Mid-month . . . . . . . . . . . . . . . . 7
Mid-quarter . . . . . . . . . . . . . . . 7
D
Definitions . . . . . . . . . . . . . . . . . . 1
Amortization . . . . . . . . . . . . . . 2
Commuting . . . . . . . . . . . . . . . 2
Depreciation . . . . . . . . . . . . . . 1
Listed property . . . . . . . . . . . 2
Section 179 property . . . . . 1
Depreciation:
Accelerated Cost Recovery
System (ACRS) . . . . . . . . 5
Assets placed in service in
prior year . . . . . . . . . . . . . . 5
General asset
accounts . . . . . . . . . . . . . . . 5
Income forecast
method . . . . . . . . . . . . . . . . 5
Intangible property . . . . . . . . 5
Listed property . . . . . . . . . . . 8
Modified Accelerated Cost
Recovery System
(MACRS) . . . . . . . . . . . . . . 5
Alternative Depreciation
System . . . . . . . . . . . . . . 8
General Depreciation
System . . . . . . . . . . . . . . 6
Involuntary
conversion . . . . . . . . . . . 6
Like-kind exchange . . . . . 6
Other . . . . . . . . . . . . . . . . . . . . . 5
Depreciation methods:
Declining balance . . . . . . . . 7
Straight line . . . . . . . . . . . . . . 7
E
Election out:
Involuntary
conversion . . . . . . . . . . . . . 6
Like-kind exchange . . . . . . . 6
Special depreciation
allowance . . . . . . . . . . . . . . 4
G
General Depreciation System:
Basis for depreciation . . . . 7
Classification of
property . . . . . . . . . . . . . . . . 6
Conventions . . . . . . . . . . . . . . 7
Depreciation
deduction . . . . . . . . . . . . . . 7
Determining the
classification . . . . . . . . . . . 6
Placed in service date . . . . 7
Recovery period . . . . . . . . . . 7
I
Involuntary conversion . . . . . . 6
L
Like-kind exchange . . . . . . . . . 6
Listed property:
Basis for depreciation . . . . 9
Convention . . . . . . . . . . . . . . . 9
Cost or other basis . . . . . . . 9
Depreciation
deduction . . . . . . . . . . . . . . 9
Information on vehicle
use . . . . . . . . . . . . . . . . . . . 11
Method . . . . . . . . . . . . . . . . . . . 9
Passenger automobile
limits . . . . . . . . . . . . . . . . . . . 9
Definitions . . . . . . . . . . . . 10
Exception . . . . . . . . . . . . . 10
Leasehold property
exception . . . . . . . . . . . 10
Tables . . . . . . . . . . . . . . . . 10
Percentage of business or
investment use . . . . . . . . . 9
Placed in service date . . . . 9
Qualified business
use . . . . . . . . . . . . . . . . . . . . 9
Questions for employers on
vehicle use . . . . . . . . . . . . 11
Recapture of section 179
expense
deduction . . . . . . . . . . . . . 11
Recovery period . . . . . . . . . . 9
Section 179 expense
deduction . . . . . . . . . . . . . 10
Special depreciation
allowance . . . . . . . . . . . . . . 8
Type of property . . . . . . . . . . 9
R
Recapture:
Listed property . . . . . . . 9, 11
MACRS depreciation . . . . . 8
-17-
Section 179 expense
deduction . . . . . . . . . . 3, 11
Special depreciation
allowance . . . . . . . . . . . . . . 5
Recordkeeping . . . . . . . . . . . . . 2
S
Section 179 expense
deduction . . . . . . . . . . . . . . . . 2
Carryover of disallowed
deduction . . . . . . . . . . . . . . 3
Election . . . . . . . . . . . . . . . . . . 2
Limitations:
Maximum
deduction . . . . . . . . . . . . 2
Sport utility vehicle
(SUV) . . . . . . . . . . . . . . . 10
Taxable income . . . . . . . . 3
Threshold cost of
property . . . . . . . . . . . . . 3
Listed property . . . . . . . . . . 10
Recapture . . . . . . . . . . . . 3, 11
Revocation . . . . . . . . . . . . . . . 2
Special depreciation
allowance . . . . . . . . . . . . . . . . 3
Election out . . . . . . . . . . . . . . 4
Figuring the
allowance . . . . . . . . . . . . . . 4
Listed property . . . . . . . . . . . 8
Qualified property . . . . . . . . 4
Recapture . . . . . . . . . . . . . . . . 5
U
Uniform capitalization
rules . . . . . . . . . . . . . . . . . . . . . 8
Unit-of-production
method . . . . . . . . . . . . . . . . . . . 5
W
Where to find additional
information . . . . . . . . . . . . . . . 1
Who must file . . . . . . . . . . . . . . . 1
■
| File Type | application/pdf |
| File Title | Revising Tax Products |
| Author | Michael Ecker |
| File Modified | 2008-03-31 |
| File Created | 2007-12-10 |