Form 4255 Form 4255 Recapture of Investment Credit

2009 Form 4255, Recapture of Investment Credit
Purpose: This is the first circulated draft of the 2009 Form 4255 for your review and
comments. See below for a discussion of the major changes.
TPCC Meeting: None, one but may be arranged if requested.
Prior Version: The December 2006 Form 4255 is available at:
http://www.irs.gov/pub/irs-pdf/f4255.pdf
Other Products: Circulations of draft tax forms, instructions, notices, and
publications are posted at:
http://taxforms.web.irs.gov/Circulations/index.htm
Comments: Please email, fax, call, or mail any comments to me and e-mail the
reviewer at [email protected] July 24, 2009.
Robert B. Chapman
Tax Forms and Publications
SE:W:CAR:MP:T:B:P
Email: [email protected]
Phone: 202-927-9428
Fax: 202-622-3262

Major Changes to the 2009 Form 4255
Pub. L. 111-5 section 1302, adds new section 48C, a new Qualifying Advanced
Energy Project Credit within the investment tax credit. Qualifying Advanced
Energy Project Credit property is therefore subject to recapture under section 50
and on Form 4255.
Properties: Types of properties includes qualifying advanced energy project
credit property.

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I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 4255, PAGE 1 of 2
MARGINS: TOP 13mm (1⁄2 "), CENTER SIDES.
PRINTS: HEAD to HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 203mm (8")
279mm (11")
PERFORATE: NONE
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

4255

Signature

O.K. to print
Revised proofs
requested

OMB No. 1545-0166

Recapture of Investment Credit

Department of the Treasury
Internal Revenue Service

䊳

Attachment
Sequence No.

Attach to your income tax return.

Name(s) as shown on return

Properties

Date

, or qualifying advanced energy
project

December 2009
Form
(Rev. February 2006)

Action

65

Identifying number

Type of property—State whether rehabilitation, energy, reforestation, qualifying advanced coal project, or qualifying gasification project
property. (See the Instructions for Form 3468 for the year the investment credit property was placed in service for definitions.) If rehabilitation
property, also show type of building. If energy property, show type.

A
B
C
D

Original Investment Credit

1
2
3
4
5
6

Computation Steps:
(see Specific Instructions)
Original rate of credit
Cost or other basis
Original credit. Multiply line 2 by the
percentage on line 1
Date property was placed in service
Date property ceased to be qualified
investment credit property
Number of full years between the date on line
4 and the date on line 5

Properties
A

B

C

D

1
2
3
4

/

/

/

/

/

/

/

/

5

/

/

/

/

/

/

/

/

6

Recapture Tax
7
8
9
10
11
12

13

7
Recapture percentage (see instructions)
Tentative recapture tax. Multiply line 3 by the
8
percentage on line 7
Add all the amounts on line 8
Enter the recapture tax from property for which there was an increase in nonqualified nonrecourse
financing (attach separate computation)
Add lines 9 and 10
Portion of original credit (line 3) not used to offset tax in any year, plus any carryback and
carryforward of credits you now can apply to the original credit year because you have freed up
tax liability in the amount of the tax recaptured. Do not enter more than line 11—see instructions
Total increase in tax. Subtract line 12 from line 11. Enter here and on the appropriate line of your
tax return. See section 45K(b)(4) if you claim the nonconventional source fuel credit. Electing large
partnerships, see instructions

General Instructions
Section references are to the Internal
Revenue Code unless otherwise noted.

Purpose of Form
Use Form 4255 to figure the increase in
tax for the recapture of investment credit
claimed.

Who Must Refigure the
Investment Credit
Generally, you must refigure the
investment credit and may have to
recapture all or part of it if any of the
following apply.
● You disposed of investment credit
property before the end of 5 full years after
the property was placed in service
(recapture period).

● You changed the use of the property
before the end of the recapture period so
that it no longer qualifies as investment
credit property.
● The business use of the property
decreased before the end of the recapture
period so that it no longer qualifies (in whole
or in part) as investment credit property.
● Any building to which section 47(d)
applies will no longer be a qualified
rehabilitated building when placed in
service.
● Any property to which section 48(b)
applies will no longer qualify as investment
credit property when placed in service.
● Before the end of the recapture period,
your proportionate interest was reduced by
more than one-third in a partnership, S
corporation, estate, or trust that allocated

For Paperwork Reduction Act Notice, see back of form.
Insert from
attachment

Cat. No. 41488C

9
10
11

12

13

the cost or other basis of property to you
for which you claimed a credit.
● You returned leased property (on which
you claimed a credit) to the lessor before
the end of the recapture period.
● A net increase in the amount of
nonqualified nonrecourse financing
occurred for any property to which section
49(a)(1) applied. For more details, see the
instructions for line 10.
Exceptions to recapture. Recapture of the
investment credit does not apply to the
following.
● A transfer because of the death of the
taxpayer.
● A transfer between spouses or incident
to divorce under section 1041. However, a
later disposition by the transferee is
subject to recapture to the same extent as
Form

4255

12-2009

(Rev. 2-2006)

2
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 4255, PAGE 2 of 2
MARGINS: TOP 13mm (1⁄2 "), CENTER SIDES.
PRINTS: HEAD to HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 203mm (8")
279mm (11")
PERFORATE: NONE
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

12-2009
Form 4255 (Rev. 2-2006)

if the transferor had disposed of the
property at the later date.
● A transfer of an interest in an electing
large partnership.
● A transaction to which section 381(a)
applies (relating to certain acquisitions of
the assets of one corporation by another
corporation).
● A mere change in the form of
conducting a trade or business if:
1. The property is retained as investment
credit property in that trade or business,
and
2. The taxpayer retains a substantial
interest in that trade or business.
A mere change in the form of conducting
a trade or business includes a corporation
that elects to be an S corporation and a
corporation whose S election is revoked or
terminated.
For more details on the recapture rules,
see section 50(a).
Caution: See section 46(g)(4) (as in effect
on November 4, 1990) to figure the
recapture tax if you made a withdrawal
from a capital construction fund set up
under the Merchant Marine Act of 1936 to
pay the principal of any debt incurred in
connection with a vessel on which you
claimed investment credit.

Basis Adjustment on
Recapture
For property subject to investment credit
recapture, increase the property’s basis as
follows.
● For qualified rehabilitation expenditures,
increase the basis by 100% of the
recapture tax (or adjustment to carrybacks
and carryovers).
● For energy property or qualified timber
property, increase the basis by 50% of the
recapture tax (or adjustment to carrybacks
and carryovers).
If you are a partner or S corporation
shareholder, the adjusted basis of your
interest in the partnership or stock in the
S corporation is adjusted to take into
account the adjustment made to the basis
of property held by the partnership or
S corporation.

Specific Instructions
Note: Do not figure the recapture tax on
lines 1 through 9 if there is an increase in
nonqualified nonrecourse financing related
to certain at-risk property. Figure the
recapture tax for these properties on
separate schedules and enter the recapture
tax on line 10. Include any unused credit
for these properties on line 12.
Partnerships, S corporations, estates,
and trusts. For a partnership (other than
an electing large partnership),
S corporation, estate, or trust that
allocated any or all of the investment credit
to its partners, shareholders, or
beneficiaries, provide the information they

Page

need to refigure the credit. See Regulations
sections 1.47-4, 1.47-5, and 1.47-6. For an
electing large partnership, the recapture
tax is paid by the partnership.
Partners, shareholders, and
beneficiaries. If your Schedule K-1 shows
recapture of investment credit claimed in
an earlier year, you will need your copy of
the original Form 3468 to complete lines 1
through 6 of this Form 4255.
Lines A through D. Describe the property
for which you must refigure the credit.
Complete lines 1 through 8 for each
property on which you are refiguring the
credit. Use a separate column for each
item. If you need more columns, use
additional Forms 4255 or other schedules
that include all the information shown on
Form 4255. Enter the total from all the
separate sheets on line 9.
Line 1. Enter the rate you used to figure
the original credit from the Form 3468 that
you filed.
Line 2. Enter the cost or other basis that
you used to figure the original credit.
Line 4. Enter the month, day, and year that
the property was available for service.
Line 5. Generally, this will be the date you
disposed of the property. For more details,
see Regulations section 1.47-1(c).
Line 6. Do not enter partial years. If the
property was held less than 12 months,
enter zero.
Line 7. Enter the recapture percentage
from the following table.
IF the number of full
years on line 6 of
Form 4255 is . . .

0
1
2
3
4
5 or more

THEN the recapture
percentage is . . .

100
80
60
40
20
0

Line 9. If you have used more than one
Form 4255, or separate sheets to list
additional items on which you figured an
increase in tax, write to the left of the entry
space “Tax from attached” and the total
tax from the separate sheets. Include the
amount in the total for line 9.
Line 10. For certain taxpayers, the basis or
cost of property is limited to the amount
the taxpayer is at risk for the property at
year end. The basis or cost must be
reduced by the amount of any
“nonqualified nonrecourse financing”
related to the property at year end. If there
is an increase in nonqualified nonrecourse
financing, recapture may be required. See
section 49(b) for details. Attach a separate
schedule to figure the recapture tax and
enter the total tax on line 10.
Line 12. If you did not use all the credit
you originally figured, either in the year you
figured it or in a carryback or carryforward
year, you do not have to recapture the
amount of the credit you did not use. In
refiguring the credit for the original credit
year, be sure to include any carryforwards
Printed on recycled paper

2

from previous years, plus any carrybacks
arising within the 3 (or 1) tax years after
the original credit year that are now
allowed because the recapture and
recomputation of the original credit made
available some additional tax liability in that
year. See Regulations section 1.47-1(d)
and Rev. Rul. 72-221, 1972-1 C.B. 15, for
details.
Special rule for electing large
partnerships. Enter zero on line 12. An
electing large partnership is treated as
having used all prior year credits.
Figure the unused portion on a separate
sheet and enter it on this line. Do not enter
more than the recapture tax on line 11.
Note. Be sure to adjust your current
unused credit to reflect any unused portion
of the original credit that was entered on
line 12 of this form.
Line 13. Special rule for electing large
partnerships. Subtract the current year
credit, if any, shown on Form 3468, from
the amount on line 11. Enter the result (but
not less than zero) on line 13 and on the
tax line of Form 1065-B.
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 the OMB control number
1545-0074 and is included in the estimates
shown in the instructions for their individual
income tax return. The estimated burden
for all other taxpayers who file this form is
shown below.
Recordkeeping
6 hr., 27 min.
Learning about the
law or the form
1 hr., 35 min.
Preparing, copying,
assembling, and sending
the form to the IRS
1 hr., 46 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.

Inset on page 1:
What’s New
The types of properties subject to recapture now include qualifying advanced energy
project property.