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INCOME YEAR

CALIFORNIA FORM

1999 Corporation Depreciation and Amortization 3885


Attach to Form 100.
Corporation name California corporation number

Part I Depreciation
(a) Description of property (b) Date (c) Cost or (d) Depreciation (e) Method (f) Life (g) Depreciation (h) Additional first
acquired other basis allowed or of figur- or for this year year depreciation
allowable ing de- rate
in earlier years precia-
tion

2 Add the amounts in columns (g) and (h). The combined total of column (h) may not exceed $2,000.
See instructions for line 1, column (h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3 Total. Add the amounts on line 2, columns (g) and (h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4 Total depreciation claimed for federal purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5 Depreciation adjustment. If line 4 is greater than line 3, enter the difference here and on Form 100, Side 1, line 6.
If line 4 is less than line 3, enter the difference here and on Form 100, Side 1, line 15. (If California depreciation
amounts are used on Form 100, no adjustment is necessary.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Part II Amortization
(a) Description of property (b) Date (c) Cost or (d) Amortization allowed (e) R&TC (f) Period or (g) Amortization
acquired other basis or allowable in section percentage for this year
earlier years

2 Total. Add the amounts in column (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2


3 Total amortization claimed for federal purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4 Amortization adjustment. If line 3 is greater than line 2, enter the difference here and on Form 100, Side 1, line 6.
If line 3 is less than line 2, enter the difference here and on Form 100, Side 1, line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
General Information may not exceed 65% of the taxpayer’s taxable use form FTB 3885L, Depreciation and Amortiza-
income, is no longer restricted from exceeding tion – Limited Liability Companies.
In general, California tax law conforms to the 100% of the net income derived from the oil or gas Depreciation and amortization are deductions
Internal Revenue Code (IRC) as of January 1, well property. corporations claim for reasonable exhaustion, wear
1998. However, there are continuing differences and tear, and normal obsolescence of property
between California and federal tax law. California
A Purpose used in a trade or business or held for the
has not conformed to most of the changes made Use this form to figure California depreciation and production of income.
to the IRC by the federal Internal Revenue Service amortization for corporations, and for partnerships
and limited liability companies (LLCs) classified as For purposes of this form, depreciation is used in
(IRS) Restructuring and Reform Act of 1998 connection with tangible property, while amortiza-
(Public Law 105-206) and has not conformed to corporations. S corporations must use Schedule B
(100S). Individuals must use form FTB 3885A, tion is used for intangible assets.
any of the changes made by the Tax and Trade
Relief Extension Act of 1998 (Public Depreciation and Amortization – Individuals. Note: For amortizing the cost of certified pollution
Law 105-277). Fiduciaries and exempt trusts must use form control facilities, use form FTB 3580, Application
FTB 3885F, Depreciation and Amortization – to Amortize Certified Pollution Control Facility.
California law conforms to federal law regarding
Fiduciaries. Partnerships must use form Important differences between federal and
the temporary suspension of income limitations on
FTB 3885P, Depreciation and Amortization – California laws affect the calculation of deprecia-
percentage depletion for production from marginal
Partnerships. LLCs classified as partnerships must tion and amortization. Some of the major
wells. The percentage depletion deduction, which
differences are briefly described, as follows:

388599109 FTB 3885 1999


• California law allows additional first-year year during the first 2/3 of the useful life of the The Guideline Class Life System of depreciation
depreciation under R&TC Section 24356, rather property is not more than the amount that would may be used for certain classes of assets placed in
than IRC Section 179; have resulted from using the declining balance service before 1971.
• California law has not conformed to federal method. The Class Life ADR System of depreciation may be
statutes allowing accelerated depreciation for used for designated classes of assets placed in
property on Indian Reservations; C Period of Depreciation service after 1970.
• California law allows a useful life of five years, Use the following information as a guide to
instead of ten years, for grapevines planted as determine reasonable periods of useful life for E Amortization
replacements for vines subject to Phylloxera or purposes of calculating depreciation. Actual facts California conformed to the 1993 federal Revenue
Pierce’s Disease; and circumstances will determine useful life. Note, Reconciliation Act (Public Law 103-66) for the IRC
• California bank and corporation tax law has not however, that the figures listed below represent the Section 197 amortization of intangibles for income
conformed to the federal special class life for normal periods of useful life for the types of years beginning on or after January 1, 1994.
gas station convenience stores and similar property listed as shown in IRS Rev. Proc. 83-35. Generally, assets that meet the definition under
structures;
• Office furniture, fixtures, machines, IRC Section 197 are amortized on a straight-line
• California has not conformed to federal statutes
and equipment . . . . . . . . . . . . . . . . . . . . . 10 yrs. basis over 15 years. There may be differences in
allowing depreciation under Modified Acceler-
This category includes furniture and fixtures the federal and California amounts for intangible
ated Cost Recovery System (MACRS) for
(that are not structural components of a assets acquired in income years beginning prior to
corporations, except to the extent such
building) and machines and equipment used in January 1, 1994. See R&TC Section 24355.5 for
depreciation is passed through from a
the preparation of paper or data. more information.
partnership or LLC treated as a partnership;
• California has adopted provisions of the federal Examples include: desks; files; safes; typewrit- Amortization of the following assets is governed
Class Life Asset Depreciation Range System ers; accounting, calculating and data processing by California law:
(ADR), which specifies a useful life for various machines; communications equipment; and Bond premiums R&TC 24360 – 24363.5
types of property. However, California law does duplicating and copying equipment. Research expenditures R&TC 24365
not allow the federal provision that enables a Reforestation expenses R&TC 24372.5
• Computers and peripheral Leased property
corporation to choose a depreciation period that
equipment (printers, etc.) . . . . . . . . . . . . . 6 yrs. improvements R&TC 24373
varies from the specified asset guideline system.
• Transportation equipment and Organizational expenditures R&TC 24407 – 24409
Start-up expenses R&TC 24414
B Depreciation Calculation automobiles (including taxis) . . . . . . . . . . 3 yrs.
General-purpose trucks: Other intangible assets may be amortized if it is
Methods Light (unloaded weight less than proved with reasonable accuracy that the asset has
Depreciation methods are defined in R&TC Sections 13,000 lbs.) . . . . . . . . . . . . . . . . . . . . . . . . 4 yrs. an ascertainable value that diminishes over time
24349 through 24354. Depreciation calculation Heavy (unloaded weight 13,000 lbs. and has a limited useful life.
methods, described in R&TC Section 24349, are as or more) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 yrs.
follows: Specific Line Instructions
• Buildings
Straight-Line. The straight-line method divides the Line 1
cost or other basis of property, less its estimated This category includes the structural shell of a
building and all of its integral parts that service Corporations may enter each asset separately or
salvage value, into equal amounts over the estimated group assets into depreciation accounts. Figure
useful life of the property. An asset may not be normal heating, plumbing, air conditioning, fire
prevention and power requirements, and the depreciation separately for each asset or group
depreciated below a reasonable salvage value. of assets. The basis for depreciation is the cost or
equipment such as elevators and escalators.
Declining Balance. Under this method, deprecia- other basis reduced by a reasonable salvage value
tion is greatest in the first year and smaller in each Type of building:
(except when using the declining balance method),
succeeding year. The property must have a useful Apartments . . . . . . . . . . . . . . . . . . . . . . . . 40 yrs.
additional first-year depreciation (if it applies), and
life of at least three years. Salvage value is not Dwellings (including rental
tax credits claimed on depreciable property (where
taken into account in determining the basis of the residences . . . . . . . . . . . . . . . . . . . . . . 45 yrs.
specified). This may cause the California basis to
property, but the property may not be depreciated Office buildings . . . . . . . . . . . . . . . . . . . . 45 yrs.
be different from the federal basis.
below a reasonable salvage value. Warehouses . . . . . . . . . . . . . . . . . . . . . . . 60 yrs.
If the Guideline Class Life System or Class Life
The amount of depreciation for each year is D Depreciation Method to Use ADR System is used, enter the amount, from a
subtracted from the basis of the property and a Corporations may use the straight-line method for schedule showing the computation, on form FTB
uniform rate of up to 200% of the straight-line rate any depreciable property. Before using other 3885, column (g), and identify as such.
is applied to the resulting balance. methods, consider the kind of property, its useful Line 1, Column (h), Additional first-year
For example, the annual depreciation allowances life, whether it is new or used, and the date it was depreciation
for property with an original basis of $100,000 are: acquired. Use the following chart as a general guide Corporations may deduct up to 20% of the cost of
Declining- to determine which method to use: “qualifying property” in the year acquired in
Remaining balance Depreciation Maximum addition to the regular depreciation deduction. The
Year basis rate allowance Property description depreciation method maximum additional first-year depreciation
Real estate acquired 12/31/70 or earlier deduction is $2,000. Corporations must reduce the
First . . . . . . $100,000 20% $20,000 New (useful life 3 yrs. or more) . . . . . 200% Declining balance
Second . . . 80,000 20% 16,000 Used (useful life 3 yrs. or more) . . . . . 150% Declining balance basis used for regular depreciation by the amount
Third . . . . . 64,000 20% 12,800 of additional first-year depreciation claimed.
Real estate acquired 1/1/71 or later
Fourth . . . . 51,200 20% 10,240 Residential Rental: “Qualifying property” is tangible personal property
New . . . . . . . . . . . . . . . . . . . . . . . . . . . 200% Declining balance
Sum-of-the-years-digits method. This method used in business and having a useful life of at least
Used (useful life 20 yrs. or more) . . . 125% Declining balance
may be used whenever the declining balance Used (useful life less than 20 yrs.) . . Straight-line six years. Land, buildings, and structural
method is allowed. The depreciation deduction is Commercial and industrial: components do not qualify. Property converted
New (useful life 3 yrs. or more) . . . . 150% Declining balance* from personal use, acquired by gift, inheritance, or
figured by subtracting the salvage value from the Used . . . . . . . . . . . . . . . . . . . . . . . . . . Straight-line
cost of the property and multiplying the result by a Personal property from related parties also does not qualify.
fraction. The numerator of the fraction is the New (useful life 3 yrs. or more) . . . . . 200% Declining balance* See R&TC Section 24356 and the applicable
number of years remaining in the useful life of the Used (useful life 3 yrs. or more) . . . . . 150% Declining balance
regulations for more information.
property. Therefore, the numerator changes each *Other depreciation methods may be used as long Note: Property described in R&TC Sections
year as the life of the property decreases. The as the total accumulated depreciation at the end of 24356.6, 24356.7, and 24356.8 qualifies for an
denominator of the fraction is the sum of the digits any income year during the first 2/3 of the useful expanded expense election. For more information,
representing the years of useful life. The life of the property is not more than the amount get form FTB 3809, Targeted Tax Area Deduction
denominator remains constant every year. that would have resulted from using the declining and Credit Summary; form FTB 3805Z, Enterprise
Other consistent method. Other depreciation balance method. Zone Deduction and Credit Summary; or form
methods may be used as long as the total FTB 3807, Local Agency Military Base Recovery
accumulated depreciation at the end of any income Area Deduction and Credit Summary.

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