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Department of the Treasury Contents
Internal Revenue Service
What’s New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Publication 946
Cat. No. 13081F Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

How To
1. Overview of Depreciation . . . . . . . . . . . . . . . . . . 3
What Property Can Be Depreciated? . . . . . . . . . . . 3
What Property Cannot Be Depreciated? . . . . . . . . . 5

Depreciate
When Does Depreciation Begin and End? . . . . . . . 6
What Method Can You Use To Depreciate
Your Property? . . . . . . . . . . . . . . . . . . . . . . . 7

Property
What Is the Basis of Your Depreciable
Property? . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
How Do You Treat Repairs and
Improvements? . . . . . . . . . . . . . . . . . . . . . . 13
• Section 179 Deduction Do You Have To File Form 4562? . . . . . . . . . . . . . 13
How Do You Correct Depreciation
• Special Depreciation Deductions? . . . . . . . . . . . . . . . . . . . . . . . . . 13

Allowance 2. Electing the Section 179 Deduction . . . . . . . . . . 15
What Property Qualifies? . . . . . . . . . . . . . . . . . . . 15
• MACRS What Property Does Not Qualify? . . . . . . . . . . . . . 17
• Listed Property How Much Can You Deduct? . . . . . . . . . . . . . . . . 18
How Do You Elect the Deduction? . . . . . . . . . . . . 22
When Must You Recapture the Deduction? . . . . . 23
For use in preparing 3. Claiming the Special Depreciation

2009 Returns Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
What Is Qualified Property? . . . . . . . . . . . . . . . . . 24
How Much Can You Deduct? . . . . . . . . . . . . . . . . 33
How Can You Elect Not To Claim an
Allowance? . . . . . . . . . . . . . . . . . . . . . . . . . 33
When Must You Recapture an Allowance? . . . . . . 34
4. Figuring Depreciation Under MACRS . . . . . . . . 34
Which Depreciation System (GDS or ADS)
Applies? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Which Property Class Applies Under GDS? . . . . . 35
What Is the Placed in Service Date? . . . . . . . . . . . 38
What Is the Basis for Depreciation? . . . . . . . . . . . 39
Which Recovery Period Applies? . . . . . . . . . . . . . 39
Which Convention Applies? . . . . . . . . . . . . . . . . . 41
Which Depreciation Method Applies? . . . . . . . . . . 43
How Is the Depreciation Deduction
Figured? . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
How Do You Use General Asset Accounts? . . . . . 54
When Do You Recapture MACRS
Depreciation? . . . . . . . . . . . . . . . . . . . . . . . . 58
5. Additional Rules for Listed Property . . . . . . . . . 59
What Is Listed Property? . . . . . . . . . . . . . . . . . . . 59
Can Employees Claim a Deduction? . . . . . . . . . . . 61
What Is the Business-Use Requirement? . . . . . . . 62
Do the Passenger Automobile Limits Apply? . . . . . 66
What Records Must Be Kept? . . . . . . . . . . . . . . . . 70
How Is Listed Property Information
Reported? . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Get forms and other information
faster and easier by: 6. How To Get Tax Help . . . . . . . . . . . . . . . . . . . . . 73
Internet www.irs.gov Appendix A — MACRS Percentage Table
Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Apr 26, 2010

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Appendix B — Table of Class Lives and
Recovery Periods . . . . . . . . . . . . . . . . . . . . . . . 104 Introduction
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 This publication explains how you can recover the cost of
business or income-producing property through deduc-
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 tions for depreciation (for example, the special deprecia-
tion allowance and deductions under the Modified
Accelerated Cost Recovery System (MACRS)). It also
What’s New explains how you can elect to take a section 179 deduc-
tion, instead of depreciation deductions, for certain prop-
Increased section 179 deduction dollar limits. The erty, and the additional rules for listed property.
maximum amount you can elect to deduct for most section The depreciation methods discussed in this publi-
179 property you placed in service in 2009 is $250,000 ! cation generally do not apply to property placed in
($285,000 for qualified enterprise zone and renewal com- CAUTION service before 1987. For more information, see
munity property). This limit is reduced by the amount by Publication 534, Depreciating Property Placed in Service
which the cost of the property placed in service during the Before 1987.
tax year exceeds $800,000. See Dollar Limits under How
Much Can You Deduct in chapter 2. Definitions. Many of the terms used in this publication are
defined in the Glossary near the end of the publication.
Depreciation limits on business vehicles. The total Glossary terms used in each discussion under the major
section 179 deduction and depreciation you can deduct for headings are listed before the beginning of each discus-
a passenger automobile (that is not a truck or van) you use sion throughout the publication.
in your business and first placed in service in 2009 is
$2,960, if the special depreciation allowance does not Do you need a different publication? The following ta-
apply. The maximum deduction you can take for a truck or ble shows where you can get more detailed information
van you use in your business and first placed in service in when depreciating certain types of property.
2009 is $3,060, if the special depreciation allowance does
not apply. See Maximum Depreciation Deduction in chap- For information See Publication:
ter 5. on depreciating:
A car 463, Travel, Entertainment, Gift, and
Election to accelerate certain credits in lieu of the
Car Expenses
special depreciation allowance. Generally, a corpora-
tion that did not make a section 168(k)(4) election for its Residential rental 527, Residential Rental Property
first tax year after March 31, 2008, may elect to claim property (Including Rental of Vacation Home)
pre-2006 unused research and minimum tax credits in lieu Office space in 587, Business Use of Your Home
of claiming the special depreciation allowance for exten- your home (Including Use by Daycare Providers)
sion property placed in service before January 1, 2010. In
addition, corporations that made the section 168(k)(4) Farm property 225, Farmer’s Tax Guide
election can elect to not apply section 168(k)(4) to exten-
sion property.
Comments and suggestions. We welcome your com-
For the latest information, see www.irs.gov/formspubs. ments about this publication and your suggestions for
future editions.
You can write to us at the following address:
Reminders Internal Revenue Service
Business Forms and Publications Branch
SE:W:CAR:MP:T:B
Photographs of missing children. The Internal Reve- 1111 Constitution Ave. NW, IR-6526
nue Service is a proud partner with the National Center for Washington, DC 20224
Missing and Exploited Children. Photographs of missing
children selected by the Center may appear in this publica-
tion on pages that would otherwise be blank. You can help We respond to many letters by telephone. Therefore, it
bring these children home by looking at the photographs would be helpful if you would include your daytime phone
and calling 1-800-THE-LOST (1-800-843-5678) if you rec- number, including the area code, in your correspondence.
ognize a child. You can email us at *taxforms@irs.gov. The asterisk
must be included in the address. Please put “Publications
Comment” on the subject line. Although we cannot re-
spond individually to each email, we do appreciate your
feedback and will consider your comments as we revise
our tax products.
Ordering forms and publications. Visit www.irs.gov/
formspubs to download forms and publications, call

Page 2 Publication 946 (2009)

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1-800-829-3676, or write to the National Distribution ❏ Sch C-EZ (Form 1040) Net Profit From Business
Center at the address below.
❏ 2106 Employee Business Expenses
Internal Revenue Service
❏ 2106-EZ Unreimbursed Employee Business
1201 N. Mitsubishi Motorway
Expenses
Bloomington, IL 61705-6613
❏ 3115 Application for Change in Accounting Method
Tax questions. If you have a tax question, visit www. ❏ 4562 Depreciation and Amortization
irs.gov or call 1-800-829-1040. We cannot answer tax
questions sent to either of the addresses listed above. See chapter 6 for information about getting publications
and forms.

What Property Can Be
1. Depreciated?
Overview of Terms you may need to know
(see Glossary):
Depreciation Adjusted basis
Basis
Introduction Commuting
Depreciation is an annual income tax deduction that allows Disposition
you to recover the cost or other basis of certain property
over the time you use the property. It is an allowance for Fair market value
the wear and tear, deterioration, or obsolescence of the Intangible property
property.
This chapter discusses the general rules for depreciat- Listed property
ing property and answers the following questions. Placed in service
• What property can be depreciated? Tangible property
• What property cannot be depreciated? Term interest
• When does depreciation begin and end? Useful life
• What method can you use to depreciate your prop-
erty?
You can depreciate most types of tangible property (except
• What is the basis of your depreciable property? land), such as buildings, machinery, vehicles, furniture,
and equipment. You also can depreciate certain intangible
• How do you treat repairs and improvements?
property, such as patents, copyrights, and computer
• Do you have to file Form 4562? software.
• How do you correct depreciation deductions? To be depreciable, the property must meet all the follow-
ing requirements.
• It must be property you own.
Useful Items
You may want to see: • It must be used in your business or in-
come-producing activity.
Publication • It must have a determinable useful life.
❏ 534 Depreciating Property Placed in Service • It must be expected to last more than one year.
Before 1987
The following discussions provide information about these
❏ 535 Business Expenses requirements.
❏ 538 Accounting Periods and Methods
❏ 551 Basis of Assets Property You Own
Form (and Instructions) To claim depreciation, you usually must be the owner of
the property. You are considered as owning property even
❏ Sch C (Form 1040) Profit or Loss From Business if it is subject to a debt.

Chapter 1 Overview of Depreciation Page 3

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Example 1. You made a down payment to purchase a. Multiply your cost per share by the total number of
rental property and assumed the previous owner’s mort- outstanding shares, including any shares held by
gage. You own the property and you can depreciate it. the corporation.
b. Add to the amount figured in (a) any mortgage
Example 2. You bought a new van that you will use only
debt on the property on the date you bought the
for your courier business. You will be making payments on
stock.
the van over the next 5 years. You own the van and you
can depreciate it. c. Subtract from the amount figured in (b) any mort-
gage debt that is not for the depreciable real prop-
Leased property. You can depreciate leased property erty, such as the part for the land.
only if you retain the incidents of ownership in the property
(explained below). This means you bear the burden of 2. Subtract from the amount figured in (1) any deprecia-
exhaustion of the capital investment in the property. There- tion for space owned by the corporation that can be
fore, if you lease property from someone to use in your rented but cannot be lived in by tenant-stockholders.
trade or business or for the production of income, you 3. Divide the number of your shares of stock by the
generally cannot depreciate its cost because you do not total number of outstanding shares, including any
retain the incidents of ownership. You can, however, de- shares held by the corporation.
preciate any capital improvements you make to the prop-
erty. See How Do You Treat Repairs and Improvements 4. Multiply the result of (2) by the percentage you fig-
later in this chapter and Additions and Improvements ured in (3). This is your depreciation on the stock.
under Which Recovery Period Applies in chapter 4. Your depreciation deduction for the year cannot be
If you lease property to someone, you generally can more than the part of your adjusted basis in the stock of the
depreciate its cost even if the lessee (the person leasing corporation that is allocable to your business or in-
from you) has agreed to preserve, replace, renew, and come-producing property. You must also reduce your de-
maintain the property. However, if the lease provides that preciation deduction if only a portion of the property is used
the lessee is to maintain the property and return to you the in a business or for the production of income.
same property or its equivalent in value at the expiration of
the lease in as good condition and value as when leased, Example. You figure your share of the cooperative
you cannot depreciate the cost of the property. housing corporation’s depreciation to be $30,000. Your
Incidents of ownership. Incidents of ownership in adjusted basis in the stock of the corporation is $50,000.
property include the following. You use one half of your apartment solely for business
purposes. Your depreciation deduction for the stock for the
• The legal title to the property. year cannot be more than $25,000 (1/2 of $50,000).
• The legal obligation to pay for the property. Change to business use. If you change your coopera-
• The responsibility to pay maintenance and operating tive apartment to business use, figure your allowable de-
expenses. preciation as explained earlier. The basis of all the
depreciable real property owned by the cooperative hous-
• The duty to pay any taxes on the property. ing corporation is the smaller of the following amounts.
• The risk of loss if the property is destroyed, con- • The fair market value of the property on the date you
demned, or diminished in value through obsoles- change your apartment to business use. This is con-
cence or exhaustion. sidered to be the same as the corporation’s adjusted
basis minus straight line depreciation, unless this
Life tenant. Generally, if you hold business or investment value is unrealistic.
property as a life tenant, you can depreciate it as if you • The corporation’s adjusted basis in the property on
were the absolute owner of the property. However, see that date. Do not subtract depreciation when figuring
Certain term interests in property under Excepted Prop- the corporation’s adjusted basis.
erty, later.
If you bought the stock after its first offering, the corpora-
Cooperative apartments. If you are a tenant-stockholder tion’s adjusted basis in the property is the amount figured
in a cooperative housing corporation and use your cooper- in (1), above. The fair market value of the property is
ative apartment in your business or for the production of considered to be the same as the corporation’s adjusted
income, you can depreciate your stock in the corporation, basis figured in this way minus straight line depreciation,
even though the corporation owns the apartment. unless the value is unrealistic.
Figure your depreciation deduction as follows. For a discussion of fair market value and adjusted basis,
see Publication 551.
1. Figure the depreciation for all the depreciable real
property owned by the corporation in which you have
a proprietary lease or right of tenancy. If you bought
your cooperative stock after its first offering, figure
the depreciable basis of this property as follows.

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Property Used in Your Business or If Maple buys cars at wholesale prices, leases them for
a short time, and then sells them at retail prices or in sales
Income-Producing Activity in which a dealer’s profit is intended, the cars are treated
To claim depreciation on property, you must use it in your as inventory and are not depreciable property. In this
business or income-producing activity. If you use property situation, the cars are held primarily for sale to customers
to produce income (investment use), the income must be in the ordinary course of business.
taxable. You cannot depreciate property that you use Containers. Generally, containers for the products you
solely for personal activities. sell are part of inventory and you cannot depreciate them.
However, you can depreciate containers used to ship your
Partial business or investment use. If you use property products if they have a life longer than one year and meet
for business or investment purposes and for personal the following requirements.
purposes, you can deduct depreciation based only on the
business or investment use. For example, you cannot
• They qualify as property used in your business.
deduct depreciation on a car used only for commuting, • Title to the containers does not pass to the buyer.
personal shopping trips, family vacations, driving children
to and from school, or similar activities. To determine if these requirements are met, consider
the following questions.
You must keep records showing the business,
investment, and personal use of your property. • Does your sales contract, sales invoice, or other
RECORDS For more information on the records you must type of order acknowledgment indicate whether you
keep for listed property, such as a car, see What Records have retained title?
Must Be Kept in chapter 5.
• Does your invoice treat the containers as separate
Although you can combine business and invest- items?
! ment use of property when figuring depreciation
deductions, do not treat investment use as quali-
• Do any of your records state your basis in the con-
CAUTION
tainers?
fied business use when determining whether the busi-
ness-use requirement for listed property is met. For
information about qualified business use of listed property,
see What Is the Business-Use Requirement in chapter 5. Property Having a Determinable
Useful Life
Office in the home. If you use part of your home as an
office, you may be able to deduct depreciation on that part To be depreciable, your property must have a determina-
based on its business use. For information about depreci- ble useful life. This means that it must be something that
ating your home office, see Publication 587. wears out, decays, gets used up, becomes obsolete, or
loses its value from natural causes.
Inventory. You cannot depreciate inventory because it is
not held for use in your business. Inventory is any property Property Lasting More Than One Year
you hold primarily for sale to customers in the ordinary
course of your business. To be depreciable, property must have a useful life that
If you are a rent-to-own dealer, you may be able to treat extends substantially beyond the year you place it in serv-
certain property held in your business as depreciable prop- ice.
erty rather than as inventory. See Rent-to-own dealer
under Which Property Class Applies Under GDS in Example. You maintain a library for use in your profes-
chapter 4. sion. You can depreciate it. However, if you buy technical
In some cases, it is not clear whether property is held for books, journals, or information services for use in your
sale (inventory) or for use in your business. If it is unclear, business that have a useful life of one year or less, you
examine carefully all the facts in the operation of the cannot depreciate them. Instead, you deduct their cost as
particular business. The following example shows how a a business expense.
careful examination of the facts in two similar situations
results in different conclusions.

Example. Maple Corporation is in the business of leas-
What Property Cannot Be
ing cars. At the end of their useful lives, when the cars are Depreciated?
no longer profitable to lease, Maple sells them. Maple does
not have a showroom, used car lot, or individuals to sell the Terms you may need to know
cars. Instead, it sells them through wholesalers or by (see Glossary):
similar arrangements in which a dealer’s profit is not in-
tended or considered. Maple can depreciate the leased Amortization
cars because the cars are not held primarily for sale to
Basis
customers in the ordinary course of business, but are
leased. Goodwill

Chapter 1 Overview of Depreciation Page 5

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Intangible property July 27, 1989, for any period during which the remainder
interest is held, directly or indirectly, by a person related to
Remainder interest
you. A term interest in property means a life interest in
Term interest property, an interest in property for a term of years, or an
income interest in a trust.
Certain property cannot be depreciated. This includes land Related persons. For a description of related persons,
and certain excepted property. see Related persons on page 8. For this purpose, how-
ever, treat as related persons only the relationships listed
in items (1) through (10) of that discussion and substitute
Land “50%” for “10%” each place it appears.
You cannot depreciate the cost of land because land does Basis adjustments. If you would be allowed a depreci-
not wear out, become obsolete, or get used up. The cost of ation deduction for a term interest in property except that
land generally includes the cost of clearing, grading, plant- the holder of the remainder interest is related to you, you
ing, and landscaping. generally must reduce your basis in the term interest by
Although you cannot depreciate land, you can depreci- any depreciation or amortization not allowed.
ate certain land preparation costs, such as landscaping If you hold the remainder interest, you generally must
costs, incurred in preparing land for business use. These increase your basis in that interest by the depreciation not
costs must be so closely associated with other depreciable allowed to the term interest holder. However, do not in-
property that you can determine a life for them along with crease your basis for depreciation not allowed for periods
the life of the associated property. during which either of the following situations applies.
Example. You constructed a new building for use in • The term interest is held by an organization exempt
your business and paid for grading, clearing, seeding, and from tax.
planting bushes and trees. Some of the bushes and trees • The term interest is held by a nonresident alien indi-
were planted right next to the building, while others were vidual or foreign corporation, and the income from
planted around the outer border of the lot. If you replace the term interest is not effectively connected with the
the building, you would have to destroy the bushes and
conduct of a trade or business in the United States.
trees right next to it. These bushes and trees are closely
associated with the building, so they have a determinable
Exceptions. The above rules do not apply to the holder
useful life. Therefore, you can depreciate them. Add your
of a term interest in property acquired by gift, bequest, or
other land preparation costs to the basis of your land
inheritance. They also do not apply to the holder of divi-
because they have no determinable life and you cannot
dend rights that were separated from any stripped pre-
depreciate them.
ferred stock if the rights were purchased after April 30,
1993, or to a person whose basis in the stock is determined
Excepted Property by reference to the basis in the hands of the purchaser.
Even if the requirements explained in the preceding dis-
cussions are met, you cannot depreciate the following
property. When Does Depreciation
• Property placed in service and disposed of in the Begin and End?
same year. Determining when property is placed in
service is explained later. Terms you may need to know
• Equipment used to build capital improvements. You (see Glossary):
must add otherwise allowable depreciation on the
Basis
equipment during the period of construction to the
basis of your improvements. See Uniform Capitaliza- Exchange
tion Rules in Publication 551.
Placed in service
• Section 197 intangibles. You must amortize these
costs. Section 197 intangibles are discussed in detail
in Chapter 8 of Publication 535. Intangible property, You begin to depreciate your property when you place it in
such as certain computer software, that is not sec- service for use in your trade or business or for the produc-
tion 197 intangible property, can be depreciated if it tion of income. You stop depreciating property either when
meets certain requirements. See Intangible Property you have fully recovered your cost or other basis or when
on page 9. you retire it from service, whichever happens first.
• Certain term interests.
Placed in Service
Certain term interests in property. You cannot depreci- You place property in service when it is ready and avail-
ate a term interest in property created or acquired after able for a specific use, whether in a business activity, an

Page 6 Chapter 1 Overview of Depreciation

However. See What Is the Basis of Your Depreciable Property. MACRS is You stop depreciating property when you have fully recov. been ready and available for use when it was delivered. income-producing activity. • You convert the property to personal use. You retire property from service when you business. If the machine had following events. For example. You stop depreciating property when you retire it from service. discussed in chapter 4. use as residential rental property. ered your cost or other basis. The house is considered placed in service in July when it was • The property is destroyed. Adjusted basis Basis Conversion to business use. continue to deduct depreciation on the machine. it is in service when it is ready and available for its specific use. you placed the home in service when you began using it as your home. However. Example 3. began to advertise it for rent in the local newspaper. • You transfer the property to a supplies or scrap ac- pairs and had it ready for rent on July 5. It is from use in the production of income because of any of the considered placed in service this year. You place the property in service on the date of the change. then you can begin Fiduciary to depreciate it at the time of the change. was not actually used until this year. If you place property in Convention service in a personal activity. Although its specific use was personal and Placed in service no depreciation was allowable. ready and available for rent. Grantor Intangible property Example. Even if you are not using the property. or a per. you cannot claim deprecia- tion. The installation of the lifting equip- ment was completed and James accepted delivery of the Terms you may need to know modified truck on January 10 of this year. He bought a truck last year that had to be modified to lift materials to Depreciate Your Property? second-story levels. the date it was ready and available to perform the function for which it was bought. She made several re. James Elm is a building contractor who What Method Can You Use To specializes in constructing office buildings. On April 6.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. Chapter 1 Overview of Depreciation Page 7 . it would be considered placed in service last year even if it • You sell or exchange the property. Donald Steep bought a machine for his other basis. a tax-exempt activity. The truck was (see Glossary): placed in service on January 10. deductions equal your cost or investment in the property. even if you have not fully recovered its cost or Example 1. You bought a home and used it as your personal home several years before you converted it to Nonresidential real property rental property. She can begin to depreciate it in July. The machine was delivered last year. permanently withdraw it from use in a trade or business or it was not installed and operational until this year. later. if you change the property’s use to use in a Exchange business or income-producing activity. she count. You can Related persons begin to claim depreciation in the year you converted it to Residential rental property rental property because its use changed to an in- come-producing use at that time. Retired From Service sonal activity. if you stop Straight line method using a machine because there is a temporary lack of a Unit-of-production method market for a product made with that machine. You recover your basis when You cannot use MACRS to depreciate the following your section 179 and allowed or allowable depreciation property. At that time. • Property you placed in service before 1987. Salvage value Section 1245 property Idle Property Section 1250 property Continue to claim a deduction for depreciation on property Standard mileage rate used in your business or for the production of income even if it is temporarily idle (not in use). Sue Thorn bought a house to • You abandon the property. Example 2. Useful life Cost or Other Basis Fully Recovered You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most property. MUST be removed before printing.Page 7 of 120 of Publication 946 15:26 .

the property must be depreciated under the methods discussed in Publication 534. earlier. a. lated persons. son). if MACRS was elected). Residential rental property or nonresidential real otherwise qualifies for MACRS depreciation. Before 1987 • You or someone related to you owned the property You cannot use MACRS for property you placed in service in 1986. The user of the property did not change. the deduction under the Accelerated Cost provements under Which Recovery Period Applies in Recovery System (ACRS) is more than the deduc- chapter 4. 1986. you do not treat it as owned in 1986. service. child. Property that was MACRS property in the hands of acquired and placed in service after 1986 if any of the the person from whom you acquired it because of (2) situations described below apply. erty in 1986. Use of real property changed. property (section 1245 property) in any of the following 2. 3. Two corporations that are members of the same con- trolled group. If you cannot use above. involuntary conversion. • You acquired the property in a like-kind exchange. service until 1987. before 1987 (except property you placed in service after • You lease the property to a person who owned the July 31. 1. information about improvements. Related persons. Therefore. The property was not MACRS property in the hands of the person from whom you acquired it The following discussions describe the property listed because of (2) or (3) above. later and Additions and Im. the following are re- For the following discussions. tion under MACRS using the half-year convention. • Films. You must treat an im- provement made after 1986 to property you placed in Exceptions. of the value of the outstanding stock is directly or Page 8 Chapter 1 Overview of Depreciation . You acquired the property from a person who owned it in 1986 and as part of the transaction the user of 4. Real property. For a discussion of when property is placed in service. ried-over part of the basis. and • Property you elected to exclude from MACRS. rectly owns more than 10% of the value of the out- standing stock of that corporation. brother. or repossession of property you or someone related to you owned in 1986. 4. ! CAUTION erty as owned before you placed it in service. MACRS. Improvements made after 1986. You lease the property to a person (or someone related to this person) who owned or used the prop- • Intangible property. For information on how to figure depreciation under Property Owned or Used in 1986 ACRS. You generally must use MACRS applies only to that part of your basis in the MACRS to depreciate real property that you acquired for acquired property that represents cash paid or unlike personal use before 1987 and changed to business or property given up. An individual and a member of his or her family. half-sister. If you owned property in 1986 but did not place it in 1. MUST be removed before printing. video tapes. above and explain what depreciation method should be used. parent. For this purpose. b. see How Do You Treat 2. half-brother. You cannot use MACRS for personal dant. Property placed in property in 1986 (or someone related to that per- service before 1987 must be depreciated under the meth.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. ancestor. and recordings. • Certain property owned or used in 1986. 2. You may not be able to use MACRS for property you 3. The rules above do not apply to the follow- service before 1987 as separate depreciable property. and lineal descen- Personal property. sister.Page 8 of 120 of Publication 946 15:26 . You acquired the property in a transaction in which: • Certain corporate or partnership property acquired in a nontaxable transfer. You generally cannot use MACRS for real property (section 1250 property) in any of the following Property You Placed in Service situations. It does not apply to the car- income-producing use after 1986. Any property if. including only a spouse. ods discussed in Publication 534. you can depreciate that improvement as sepa- rate property under MACRS if it is the type of property that 1. A corporation and an individual who directly or indi- situations. For more property. see Publication 534. ing. 3. in the first tax year it is placed in Repairs and Improvements. see When Does Depreciation Begin and End. You or someone related to you owned or used the property in 1986. A trust fiduciary and a corporation if more than 10% the property did not change. do not treat prop.

The related person and a person who is engaged in Straight Line Method trades or businesses under common control. apply the following rules. To determine whether a person directly or indi- Example. if any. terest. within 12 months. This gives you your yearly depreciation deduction. of any trust. or (3). A corporation and a partnership if the same persons person considered to be the owner of the same stock own both of the following. if you can depreciate intangible property. For this rule. partnership. this applies only to shareholders who directly or year. Stock or a partnership interest directly or indirectly and no salvage value. (2) or (3) is not treated as owned by that individual for reapplying either rule (2) or (3) to make another 9. However. a ual’s partner. if the 3. To figure your deduction. and the fiducia. Two S corporations.100 that rectly owns any of the outstanding stock of a corporation or an interest in a partnership. if the same persons own more that person. is not a section 197 intangible. the individual’s family. nership interest directly or indirectly owned by or for 6. and the fiduciary and ben. The acquire the property. a terminating part. you can choose to depreciate certain intangible prop- erty under the income forecast method (discussed later). ries and beneficiaries of two different trusts. you usually use the straight line method of depreciation. See section 52(a) and 52(b) of the Internal Revenue This method lets you deduct the same amount of deprecia- Code. stock or a rectly controls the organization. for he multiplies $300 by 9/12 to get his deduction of $225 for a partnership interest owned by or for a C corpora. He trust is considered owned proportionately by or for its only used the patent for 9 months during the first year. causing the termination. He depreciates the patent under the straight line method. 4. ! CAUTION a section 197 intangible or that otherwise does not meet all the requirements discussed earlier 12. Intangible Property b. Chapter 1 Overview of Depreciation Page 9 . and an S corporation and a person under rule (1) is treated as actually owned by regular corporation. How- 10. so shareholders.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. salvage When to determine relationship. A partnership and a person who directly or indirectly owns more than 10% of the capital or profits interest You cannot depreciate intangible property that is in the partnership. or partnership interest. More than 10% of the capital or profits interest in the partnership. The fiduciaries of two different trusts. Two partnerships. tion each year over the useful life of the property. or years to get his $300 yearly depreciation deduction. if the same persons directly or under What Property Can Be Depreciated. indirectly owned by or for the trust or grantor of the indirectly own 5% or more of the value of the stock of trust. partners. or beneficiaries. An individual who owns. In April. using a 17-year useful life 1. nership is one that sells or exchanges. ever. 5. Subtract whether you are related to another person at the time you the salvage value. He divides the $5. Generally. and estimated useful life of your property. Unless there is a big change in adjusted basis or useful life. the first year. stock or a partnership interest than 10% of the value of the outstanding stock of considered to be owned by an individual under rule each corporation. MUST be removed before printing. If. Next year. Frank bought a patent for $5. partnership interest considered to be owned by a 8. balance is the total depreciation you can take over the A partnership acquiring property from a terminating useful life of the property. indirectly own more than 10% of the capital or profits interest in each. you must prorate your Constructive ownership of stock or partnership in. any stock in a corporation is considered to own the 7. first determine the adjusted basis. depreciation deduction for the number of months in use. You must determine value. 11. in the first year. However. Frank can deduct $300 for the full tion.100 basis by 17 owned by or for a corporation. The grantor and fiduciary. For purposes of rules (1). from the adjusted basis.Page 9 of 120 of Publication 946 15:26 . except by applying rule (2). An individual is considered to own the stock or part- eficiary. More than 10% of the value of the outstanding stock of the corporation. this amount will stay the same throughout the time you 50% or more of its total interest in partnership capital or depreciate the property. 13. you use the profits. the corporation. property for less than a full year. partnership must determine whether it is related to the Divide the balance by the number of years in the useful terminating partnership immediately before the event life. (2). 2. same person is the grantor of both trusts. if that person is an individual. member of that person’s family) who directly or indi. A tax-exempt educational or charitable organization stock directly or indirectly owned by or for the individ- and any person (or. The executor and beneficiary of any estate. a. estate.

cannot be less tize all applicable expenses paid or incurred in the current than 125% of the lease term. pavements. useful life of computer software leased under a lease agreement entered into after March 12. a 5-year period beginning with the month the property is vage value. 1. or method. • Motion picture films or video tapes. lesser of the life granted to it by the government or the bridges. and certain other transactions. of the property. under section 263A(i)(2) applies. 2. use the straight line method over a taxable year the property is placed in service. gible and can be depreciated. ation deduction is equal to the cost. The Code. You can amortize certain tax year instead of using the income forecast method. you can deduct in that year any of its remaining cost or other basis. see section 167(g) of the Internal Revenue Tax-exempt use property subject to a lease. amounts paid to acquire memberships or privileges of indefinite duration. • Patents. and pollution control facili- remaining life when you acquire it. and recordings. even if acquired in connec. • Copyrights. or estimated with reasonable accuracy. • Any amount paid to facilitate an acquisition of a Films. or limited useful life that is specifically prescribed or For more information. amortize the expenses ratably over 15-year period using the straight line method and no sal. MUST be removed before printing. such as roads. it may also qualify current year’s net income from the property. For this purpose. The following are not eligible. lished IRS guidance. if the patent ties. 2003. such as a trade association member. 4. Property to which a simplified procedure established • Any intangible asset acquired from another person. governmental unit. video tapes. even though they have a useful life that cannot placed in service.Page 10 of 120 of Publication 946 15:26 . are eligible costs. This election does not apply to the be estimated with reasonable accuracy. Under the income forecast method. year in creating or acquiring musical compositions or copy- rights to musical compositions placed in service during the Certain created intangibles. a change in the capital structure MACRS for motion picture films. regulations. of a series of sounds. or other phonorecordings resulting from the fixation You must also increase the 15-year safe harbor amorti. computer software is not a section 197 intan. For example. to a Creating or acquiring musical compositions or copy- tax-exempt organization. video tapes. sound recordings are discs. and sound of a business entity. However. information.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. You can elect to amor- person or entity (other than a partnership). following. Computer software is a section 197 You can choose to use the income forecast method in- intangible and cannot be depreciated if you acquired it in stead of the straight line method to depreciate the following connection with the acquisition of assets constituting a depreciable intangibles. • Created financial interests. For more useful life of 36 months. use the straight line method over the erty includes property that will remain attached to the real useful life. The numerator of the fraction is the If the software meets the tests above. real prop- a patent or copyright. 3. multi- plied by a fraction. You can depreciate this property zation period to a 25-year period for certain intangibles using either the straight line method or the income forecast related to benefits arising from the provision. You cannot use trade or business. Income Forecast Method Computer software. If you can depreciate the cost of improvement of real property. Expenses that would not be allowable as a deduc- • Any intangible asset that has an amortization period tion. if it meets all of the following tests. or copyright becomes valueless before the end of its useful life. Page 10 Chapter 1 Overview of Depreciation . Patents and copyrights. business or a substantial part of a business. Property that is an amortizable section 197 intangi- • Any intangible asset that has a useful life that can be ble. each year’s depreci- • It has not been substantially modified. • Sound recordings. 2004. discussed later. production. If you can depreciate the cost through the end of the 10th taxable year following the of computer software. public. tapes. The useful life of a patent or copyright is the property for an indefinite period of time. • It is readily available for purchase by the general • Books. For this purpose. or foreign rights to musical compositions. If intangibles created on or after December 30. over a you make the election. or other pub. tunnels. • It is subject to a nonexclusive license. section 263A(h). recordings. tion with the acquisition of a business. and the de- for the section 179 deduction and the special depreciation nominator is the total income anticipated from the property allowance. Expenses that are qualified creative expenses under ship. Revenue Code. However. see section 167(g)(8) of the Internal prohibited by the Code.

you make that choice. You must continue to use the same depreciation method as the transferor and figure deprecia- tion as if the transfer had not occurred. other property. the cash you paid plus the mortgage property from MACRS. if you timely ment statement and include the following. or services. filed your return for the year without making the election. If change for a partnership interest. you can elect to exclude that total cost is $140. below). such as the erty and assume the seller’s mortgage of $120. You can include participa. You make the election by reporting you assumed. If you use the standard the property. includes the amount you pay in cash. To determine basis. you filed the original return. The nontaxable transfers covered by this rule include Cost as Basis the following.000. If you buy property and assume (or buy subject to) an existing mortgage or other debt on the Election To Exclude Property property. File the amended return at the same address property is placed in service. Attach the election to the amended return and residuals must relate to income to be derived from the write “Filed pursuant to section 301. taxes as part of your cost basis. However. you can depreciate only those videocas- settes bought for rental. Basis cept property the transferor placed in service after July 31. you cannot include those sales • A partnership distribution of property to a partner.000. If the videocassette has a useful What Is the Basis of Your life of one year or less. you must determine MACRS would otherwise apply. year that they are paid. Assumed debt. freight charges. You can elect to deduct state and local general sales taxes instead of state and local income taxes • A contribution of property to a partnership in ex. • A transfer to a corporation controlled by the trans. debt obligations. However. you can use it to depreci. For this purpose. you are treated as having made an election to Instead of including these amounts in the adjusted basis exclude the automobile from MACRS. if MACRS was elected) to the extent its basis is Exchange carried over from the property’s adjusted basis in the Fair market value transferor’s hands. participa. your basis includes the amount you pay for the From MACRS property plus the amount of the assumed debt. You make a $20. Terms you may need to know Corporate or Partnership Property (see Glossary): Acquired in a Nontaxable Transfer Abstract fees MACRS does not apply to property used before 1987 and Adjusted basis transferred after 1986 to a corporation or partnership (ex. Your unit-of-production method. • An exchange of property solely for corporate stock or securities in a reorganization. mileage rate to figure your tax deduction for your business automobile. Videocassettes. you can deduct the costs in the taxable for a discussion of the standard mileage rate.000 down payment on prop- method not based on a term of years. you need to ate the part of the property’s basis that exceeds the car. and installation and testing fees. MUST be removed before printing. These generally are shown on your settle- you place your property in service. Participations and residuals. If you are in the business of renting videocassettes. as an itemized deduction on Schedule A (Form 1040). you can currently deduct the cost as Depreciable Property? a business expense. if To figure your depreciation deduction. If you can properly depreciate any property under a Example. tions and residuals are defined as costs which by contract vary with the amount of income earned in connection with Use of standard mileage rate. 1986.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.9100-2” on the election property before the end of the 10th taxable year after the statement. The cost feror. See Publication 463 of the property.Page 11 of 120 of Publication 946 15:26 . The basis of property you buy is its cost plus amounts you • A distribution in complete liquidation of a subsidiary. your depreciation for the property on line 15 in Part II of Form 4562 and attaching a statement as described in the Settlement costs. tions and residuals in the adjusted basis of the property for you can still make the election by filing an amended return purposes of computing your depreciation deduction under within six months of the due date of the return (excluding the income forecast method. The basis of real property also in- instructions for Form 4562. know the cost or other basis of your property. The participations and extensions). ried-over basis. You must make this election by cludes certain fees and charges you pay in addition to the the return due date (including extensions) for the tax year purchase price. paid for items such as sales tax (see Exception. Chapter 1 Overview of Depreciation Page 11 . the basis of your property. Exception.

Several years ago. the full amount of depreciation allowable. The basis for depreciation on the house is the FMV on the • Abstract fees.000 ($160. See Like-kind exchanges and involuntary con- versions under How Much Can You Deduct in chapter 3 Property you construct or build. For a discussion of adjustments to the basis of your prop- erty. • Receiving rebates. Land is not depreciable. casualty and theft losses and other items that reduced your basis.000). If you depreciate your property under MACRS. for property acquired in a like-kind exchange or involuntary conversion. recording or mortgage fees. Example. because it is less than her • Survey charges. adjusted basis of the property you gave up. Other Basis Adjusted Basis Other basis usually refers to basis that is determined by the way you received the property. On the which you received a tax benefit (the depreciation al- same date. general asset account. If you held prop- erty for personal use and later use it in your business or • Paying legal fees for perfecting the title. You must reduce the basis of property by the depreci- ation allowed or allowable. as payment for services you creases) to the basis of the property for events occurring performed. If you acquired between the time you acquired the property and the time property in this or some other way. $15. • Incurring a casualty or theft loss. you must still reduce the basis of the property by the cost of the house when figuring the basis for deprecia. she paid $20. her property had an FMV of $180. Property changed from personal use. untary conversion when the property is contained in a nue Code. date of change ($165. the as back taxes or interest. • Owner’s title insurance. you also ments or additions and other costs that must be may have to reduce your basis by certain deductions and added to basis. The fair market value (FMV) of the property on the date of the change in use. For information about There are also special rules for determining the basis of the uniform capitalization rules. • Legal and recording fees. adjusted basis ($178.000).000 was for the land and $165. 1. see Adjusted Basis in Publication 551. whichever is greater.000 to Depreciation allowed is depreciation you actually deducted have her home built on a lot that cost her $25. you may basis is other than cost if you acquired the property in have to make certain adjustments (increases and de- exchange for other property.000 for permanent improvements to the house and lowable is depreciation you are entitled to deduct. MUST be removed before printing. such ally. b. If you construct. Before (from which you received a tax benefit). Property acquired in a nontaxable transaction.000 casualty loss deduction for damage to If you do not claim depreciation you are entitled to the house. • Installing utility lines. following. lesser of the following. and Figuring the Deduction for Property Acquired in a or otherwise produce property for use in your business. Decreased by any deductions you claimed for see What Is the Basis For Depreciation in chapter 4. you may have to use the uniform capitalization rules to Nontaxable Exchange in chapter 4.Page 12 of 120 of Publication 946 15:26 . For example. as a gift. Depreciation al- changing the property to rental use last year. tion. Gener- • Amounts the seller owes that you agree to pay. For more information.000 + $20. see Publication 551 to you placed it in service. and sales basis of the property you receive is the same as the commissions. Page 12 Chapter 1 Overview of Depreciation . See How Do You Use General Asset Accounts in chapter 4. you Nia’s adjusted basis in the house when she changed its must reduce your basis by any amount deducted from use was $178. credits with respect to the property. claimed a $2. Increased by the cost of any permanent improve. 2.000. so she includes only deduct. if you receive property in a nontaxable exchange. see Publication 551 and MACRS property involved in a like-kind exchange or invol- the regulations under section 263A of the Internal Reve.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.000 − $2. Your original cost or other basis adjusted as follows. your To find your property’s basis for depreciation. If you deduct more depreciation than you should. see Real Property in Publication 551. charges for improvements or repairs. determine the basis of your property. build.000 was for the house.000. or as an inheritance. Nia paid $160. Special rules apply in determining the basis and figuring the MACRS For fees and charges you cannot include in the basis of depreciation deduction and special depreciation allowance property. your depreciable basis is the • Settling zoning issues. income-producing activity.000). of which lowed). Basis adjustment for depreciation allowed or allowa- ble. a. These events could include the determine your basis.

Page 13 of 120 of Publication 946 15:26 . you may be able to change your Form 4562? accounting method to claim the correct amount of depreci- ation. • A section 179 deduction for the current year or a • You claimed the incorrect amount on property section 179 carryover from a prior year.S. or by using the same impermissible method of determining depreciation in two • A deduction for any vehicle if the deduction is re. you must treat the You must submit a separate Form 4562 for each improvement as separate depreciable property. U. 2003.irs. If you improve depreciable property. actual expenses (including depreciation) or the standard mileage rate. when you file your first tax return. Attach Form 4562 to your tax return for the current tax year if you are claiming any of the following • You have not adopted a method of accounting for property placed in service by you in tax years ending items. • You claimed the incorrect amount because of a post- Use Form 4562 to figure your deduction for depreciation ing error made in any year. available at • Amortization of costs if the current year is the first www. property in the same way as any other business expense. • Depreciation for property placed in service during the current year. as modified by Rev- year of the amortization period. on page or Schedule C-EZ (Form 1040). However. However. makes it more useful.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.gov/pub/irs-irbs/irb08-36. the roof. and you deduct job-related vehicle expenses using either you must treat it as an improvement and depreciate it. See Filing an Amended Do You Have To File Return. See chapter placed in service by you in tax years ending before 2 for information on the section 179 deduction. Improve- ment means an addition to or partial replacement of prop. How Do You Correct Improvements to rented property. or lengthens its life. Use Form 2106-EZ if you are claiming the stan- the roof of a rental house. For an exception to ported on a form other than Schedule C (Form 1040) this 2-year rule. • Depreciation on any vehicle or other listed property. Table 1-1 presents an overview of the purpose of the You generally deduct the cost of repairing business various parts of Form 4562. if you completely replace employer for any expenses. Placed in service • You claimed the incorrect amount because of a Standard mileage rate mathematical error made in any year.pdf. • Depreciation or amortization on any asset on a cor- How Do You Treat Repairs and porate income tax return (other than Form 1120S. Adoption of accounting method defined. you may be able to make a correction by filing an amended return for that year. You can depreciate Depreciation Deductions? permanent improvements you make to business property you rent from someone else. next. See using a permissible method of determining depreciation chapter 5 for information on listed property. the new roof is an improvement because it in- creases the value and lengthens the life of the property. use either Form 2106 or Form Example. or more consecutively filed tax returns. Instead. 587 of Internal Revenue Bulletin 2008-36. appreciably lengthens the time you can use it. Income Tax Return for an S Corporation) re- Improvements? gardless of when it was placed in service. and amortization. erty that adds to its value. if a repair or replacement increases the value of Employee. after December 29. See Changing Your Accounting Method. If you deducted an incorrect amount of depreciation in any year. You deduct the cost of the repair dard mileage rate and you are not reimbursed by your as a rental expense. enue Procedure 2009-39 on page 371 of Internal Revenue Chapter 1 Overview of Depreciation Page 13 . If you are not allowed to make the correction on an amended return. later. ! CAUTION business or activity on your return for which a Form 4562 is required. Generally. Do not use Form 4562 if you are an employee your property. see Revenue Procedure 2008-52. 2003. You repair a small section on one corner of 2106-EZ. or adapts it to a different use. You depreciate the cost of the new roof. you adopt a method of accounting for depreciation by regardless of when it was placed in service. Terms you may need to know (see Glossary): Filing an Amended Return Amortization You can file an amended return to correct the amount of Listed property depreciation claimed for any property in any of the follow- ing situations. December 30.

timely valid depreciation election (including the elec- The following are examples of a change in method of tion not to deduct the special depreciation allow- accounting for depreciation. Table 1-1. MUST be removed before printing. to request a • Making a late depreciation election or revoking a change in your method of accounting for depreciation.irs. late election or revoke an election. treat rotable spare parts as depreciable assets and proce- dures to obtain automatic consent to change to the safe • A change from not claiming to claiming the special depreciation allowance if you did not make the elec- harbor method of accounting. tion election or revoke a depreciation election. period of re- irb09-38. see Form 4562 and its instructions. You • A change in the treatment of an asset from nonde. If you elected not to claim any special allowance. available at www. Part Purpose I • Electing the section 179 deduction • Figuring the maximum section 179 deduction for the current year • Figuring any section 179 deduction carryover to the next year II • Reporting the special depreciation allowance for property (other than listed property) placed in service during the tax year • Reporting depreciation deductions on property being depreciated under any method other than Modified Accelerated Cost Recovery System (MACRS) III •Reporting MACRS depreciation deductions for property placed in service before this year •Reporting MACRS depreciation deductions for property (other than listed property) placed in service during the current year IV • Summarizing other parts V • Reporting the special depreciation allowance for automobiles and other listed property • Reporting MACRS depreciation on automobiles and other listed property • Reporting the section 179 cost elected for automobiles and other listed property • Reporting information on the use of automobiles and other transportation vehicles VI • Reporting amortization deductions Bulletin 2009-38. method of accounting. or convention of a depreciable asset. • An adjustment in the useful life of a depreciable asset for which depreciation is determined under Changing Your Accounting Method section 167. Page 14 Chapter 1 Overview of Depreciation . must submit a request for a letter ruling to make a preciable to depreciable or vice versa. of accounting (and may only be made on an amended • 2 years from the time you paid your tax for that year. If an amended return is allowed. elected a 30% special allowance instead of a 50% • 3 years from the date you filed your original return special allowance). you must get IRS approval to change your same taxpayer. A return filed before an unextended due Changes in depreciation that are not a change in method date is considered filed on that due date.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. you must that is included in a class of property for which you file it by the later of the following. Purpose of Form 4562 This table describes the purpose of the various parts of Form 4562. available at www. For a safe harbor method of accounting to covery. if the and is not an accounting method change. • A change from claiming a 50% special depreciation pdf. 2007-48 on page 110 of Internal Revenue Bulletin 2007-29. allowance to claiming a 30% special depreciation allowance for qualified property (including property When to file. Application for Change in Accounting Method.Page 14 of 120 of Publication 946 15:26 . For more information.irs.gov/pub/irs-irbs/irb07-29. • A change in use of an asset in the hands of the Generally. for the year in which you did not deduct the correct amount. the special allowance is a revocation of the election mining depreciation for depreciable property. a change from not claiming to claiming • A change from an impermissible method of deter. impermissible method was used in two or more con- you must get IRS approval to make a late deprecia- secutively filed tax returns. return) include the following. see Revenue Procedure tion to not claim any special allowance. You generally must file Form 3115. ance).pdf. Generally.gov/pub/irs-irbs/ • A change in the depreciation method.

Structural components If you file a Form 3115 and change from one permissible method to another permissible method. A negative section 481(a) adjustment results in a decrease in taxable income. 680. see Revenue Proce. up to a limit. deduction. available at www.pdf.irs. the deduction (including special rules for partnerships and enue Bulletin 2009-39. the See chapter 6 for information about getting publications adjustment is the total depreciation allowable prior to the and forms. 179 Deduction ing for depreciation under the automatic change request procedures generally covered in Revenue Procedure 2008-52. qualifying property. you must use the advance consent You can elect to recover all or part of the cost of certain request procedures generally covered in Revenue Proce. pdf.irs.” A positive sec.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. what limits apply to Revenue Procedure 2009-39 on page 371 of Internal Rev.irs. and CAUTION filing Form 3115. tions. You can elect the section 179 deduction in- cluding lists of scope limitations and automatic accounting stead of recovering the cost by taking depreciation deduc- method changes. If no depreciation was deducted. If you file Form 3115 and ❏ 544 Sales and Other Dispositions of Assets change from an impermissible method to a permissible ❏ 954 Tax Incentives for Distressed Communities method of accounting for depreciation. you may be able to get approval from the IRS to change your method of account. Also see the Instructions for you place the property in service. For a safe harbor method of accounting to treat rotable spare parts as depreciable assets. For additional guidance and Estates and trusts cannot elect the section 179 special procedures for changing your accounting method. available at www. ❏ 4562 Depreciation and Amortization ducted for the property and the total amount allowable prior ❏ 4797 Sales of Business Property to the year of change. 1997-1 C.gov/pub/ corporations). you can make a section 481(a) adjustment for any unclaimed or excess Form (and Instructions) amount of allowable depreciation. ! deduction. Introduction dures to get approval.gov/pub/irs-irbs/irb08-36. MUST be removed before printing. The adjustment is the difference between the total depreciation actually de. on page 587 of Internal Revenue Bulletin 2008-36. In some instances. Publication ❏ 537 Installment Sales Section 481(a) adjustment. If you do not qualify to use the automatic proce. by deducting it in the year dure 97-27. Additional guidance. It is taken into account in the year of change and is reported on your business tax returns as “other expenses. and how to elect it. • Any change in the placed in service date of a depre- ciable asset. Electing the Section IRS approval.446-1(e)(2)(ii)(d) of the regulations for 2.Page 15 of 120 of Publication 946 15:26 . amending your return.” However. It also explains when and irs-irbs/irb09-39. as modified by qualify for the section 179 deduction. It is generally taken into account over 4 tax years Terms you may need to know and is reported on your business tax returns as “other (see Glossary): income.B. What Property Qualifies? tion 481(a) adjustment results in an increase in taxable income. Make Basis the election by completing the appropriate line on Class life Form 3115. year of change.000. available This chapter explains what property does and does not at www. in. Chapter 2 Electing the Section 179 Deduction Page 15 . Useful Items dure 2007-48 on page 110 of Internal Revenue Bulletin You may want to see: 2007-29. automatic change procedures.pdf. see Revenue Procedure 2008-52.gov/pub/irs-irbs/irb07-29. See section 1. more information and examples. This is the section 179 Form 3115 for more information on getting approval. you can elect to use a one-year adjust- Adjusted basis ment period and report the adjustment in the year of change if the total adjustment is less than $25. the section 481(a) Tangible property adjustment is zero. how to recapture the deduction.

Off-the-shelf computer software. Property is not considered acquired by purchase in the following situations. does not qualify. must be one of the following types of depreciable property. your property tangible personal property for the deduction even if treated must meet all the following requirements. tion.800 (80% × $11. presses. a. rental property (if renting extraction or of furnishing transportation.Page 16 of 120 of Publication 946 15:26 . treated as real property under local law. including horses. and property that nications. 1. It is acquired by one member of a controlled group grocery store counters. for the section 179 deduction is not controlled by its treat- ment under local law. 2. MUST be removed before printing. Property you acquire only for the production of income. a. testing equipment. so under local law. office equipment. See chapter 7 of Publication 225 for defi. b. and has not been substantially modified. May Oak bought and placed in service an item of section 179 property costing $11. a database or similar Eligible Property item is not considered computer software unless it is in the public domain and is incidental to the operation of other- To qualify for the section 179 deduction. or sewage dispo. Property Acquired by Purchase Tangible personal property. Under the stepped-up basis rules for property ac- The treatment of property as tangible personal property quired from a decedent. gas. produces royalties. • It must have been acquired by purchase. Its basis is determined either— • Gasoline storage tanks and pumps at retail service stations. such as refrigerators. This is computer software that is readily available for purchase by the general public. In whole or in part by its adjusted basis in the hands of the person from whom it was acquired. production. Single purpose agricultural (livestock) or horticultural Use the resulting business cost to figure your section 179 structures. • Livestock. hogs. • It must be acquired for business use. Storage facilities (except buildings and their struc.000. prop- the following property. $8. your property structural components) used as: must have been acquired for use in your trade or business.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. However. The business part of the cost of the property is ing petroleum or any primary product of petroleum. An integral part of manufacturing. Tangible personal property To qualify for the section 179 deduction. printing from another member of the same group. water. commu. you can elect the section 179 deduction only if you use the property more c. Off-the-shelf com- puter software placed in service during the tax year is • It must not be property described later under What qualifying property for purposes of the section 179 deduc- Property Does Not Qualify. and signs. or business and nonbusiness purposes. property may not be 3. • Property contained in or attached to a building (other than structural components). b. It is acquired from a related person. sal services. or goats. multiply modities. Page 16 Chapter 2 Electing the Section 179 Deduction . Off-the-shelf computer software. and mink and other furbearing animals. poses. is subject to a nonexclu- The following discussions provide information about sive license.000). your property is any tangible property that is not real property. 1. A research facility used in connection with any of Partial business use. To qualify for the section 179 deduction. 5. erty acquired by gift or inheritance does not qualify. 3. nitions and information regarding the use require- ments that apply to these structures. includes any program designed to cause a computer to perform a desired function. property is not your trade or business). A facility used in connection with any of the activi- than 50% for business in the year you place it in service. electricity. Tangible personal property. or such as investment property. It these requirements and exceptions. It includes must have been acquired by purchase. If ties in (a) for the bulk storage of fungible com- you use the property more than 50% for business. For example. deduction. and some property (such as fixtures) may be tangible personal property for the deduction even if • It must be eligible property. your property wise qualifying software. When you use property for both the activities in (a) above. Other tangible property (except buildings and their To qualify for the section 179 deduction. Example. property 80% for her business and 20% for personal pur- tural components) used in connection with distribut. cattle. the cost of the property by the percentage of business use. sheep. For example. Property Acquired for Business Use 2. She used the 4. • Machinery and equipment.

this sons or entities. electricity. They 2. This includes the following. • Property used predominantly outside the United States. treat as an individual’s family only his or her spouse.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. tricity generated by geothermal power. MUST be removed before printing.Page 17 of 120 of Publication 946 15:26 . and by transients. However. He bought two industrial others. Generally. Land and land improvements. However. you cannot claim Basis a section 179 deduction for property used predominantly to Class life furnish lodging or in connection with the furnishing of lodging. except property used under a lease includes equipment up to (but not including) the with a term of less than 6 months. that uses solar • Property used by certain tax-exempt organizations. 1. 2017. Property you purchase and lease to others if both the do not qualify as section 179 property because Ken and his following tests are met. Land improvements include swimming predominant portion of the accommodations is used pools. Excepted Property • Any energy property. noncorporate lessor). wharves. • Certain property you lease to others (if you are a 1. Ken Larch is a tailor. is less than 50% of the property’s class life. except property described in section b. Related persons are described under Leased property. Equipment used to produce. The term of the lease (including options to renew) deduction for the cost of these machines. or use en- or business income. This rule does not apply to corporations. not personal property and do not qualify as section the trade or business of furnishing lodging where the 179 property. Chapter 2 Electing the Section 179 Deduction Page 17 . Generally. distribute. to heat or cool a structure. He placed both ma- chines in service in the same year he bought them. fences. or to provide solar • Air conditioning or heating units. 2005. ergy derived from a geothermal deposit. Energy property is property that 179 deduction for the following property. this does not apply to the following types of property. and lineal descendants and substitute ‘‘50%’’ cost of the following property. For the first 12 months after the property is trans- What Property Does Not ferred to the lessee. and before January 1. are real prop. • Any certified historic structure to the extent its basis is due to qualified rehabilitation expenditures. electrical transmission stage. someone else. Certain property does not qualify for the section 179 de- duction. paved parking areas. meets the following requirements. such as buildings and other permanent structures and their components. For elec- • Property used by governmental units or foreign per. Even if the requirements explained earlier under What Property Qualifies are met. energy to illuminate the inside of a structure using except property used in connection with the produc. Terms you may need to know (see Glossary): Property used for lodging. you can claim a section 179 deduction for the ancestors. father are related persons. a. to provide ing or in connection with the furnishing of lodging. tion of income subject to the tax on unrelated trade c. However. b. • Property used by a hotel or motel in connection with erty. • Nonlodging commercial facilities that are available to those not using the lodging facilities on the same Land and Improvements basis as they are available to those using the lodg- ing facilities. Equipment that uses solar energy to generate • Certain property used predominantly to furnish lodg. process heat. for ‘‘10%’’ each place it appears. except for equipment used to gen- erate energy to heat a swimming pool. He cannot claim a section 179 a. Property you manufacture or produce and lease to Example. Equipment placed in service after December 31. fiber-optic distributed sunlight. docks. sewing machines from his father. you cannot elect the section Energy property. to determine 179 deduction based on the cost of property you lease to whether property qualifies for the section 179 deduction. hot water for use in a structure. you cannot claim a section Related persons on page 8. the total business deductions you are allowed on the property (other than rents Qualify? and reimbursed amounts) are more than 15% of the rental income from the property. It is one of the following types of property. bridges. Related persons. 168(g)(4) of the Internal Revenue Code.

000.000 for the saw. its cost for purposes of the section • You are married filing a joint or separate return. you can allocate the section 179 deduction property must begin with you. If you buy qualifying property with cash and a trade-in. Terms you may need to know Example.200). Your $25. 2008.720 ($520 + $4.000 Example. qualifying property. The construction. a total of $250. reconstruction. If the cost of your section of $4. the original use of the the year. see the special additional dollar limits. This is the maximum amount you can deduct.000. a retail bakery.000 circular saw for your busi- (see Glossary): ness. $4. you can generally depreciate the cost you do not deduct. as long as the total deduction is not more than $250.500 for a new van costing $9.Page 18 of 120 of Publication 946 15:26 . You do not have to claim the full 4. Only the portion of the new property’s basis paid by Example. You figure this by subtracting your $225.000 more than Silver Leaf’s qualifying costs for the section 179 deduction $800. among the items in any way. The basis for depreciation of your tractor is $50. you bought and placed in service a $275. d. Qualified fuel cell property or qualified Dollar Limits microturbine property placed in service after De- cember 31. 2005. Do the Passenger Automobile Limits Apply in chapter 5. MUST be removed before printing. must reduce the dollar limit (but not below zero) by the The bakery also traded a used van with an adjusted basis amount of cost over $800. This cost is $75.000 cost of the tractor. In 2009 Jane Ash placed in service machin- cash qualifies for the section 179 deduction. For property you acquire. Page 18 Chapter 2 Electing the Section 179 Deduction .000 deduc- Basis tion for the saw completely recovered its cost.000 $4. The general dollar limit is affected rules for applying the limits for partnerships and S corpora.000). Costs exceeding $800. The property must meet the performance and quality $250.000 are $4.000. tions later. ery costing $875. so she must reduce her dollar limit to $175.000. as a section 179 deduction.000. see Married tion may be reduced or increased or there may be Individuals under Dollar Limits. Silver Leaf. The total amount you can elect to deduct under section 179 for most property placed in service in 2009 generally 2. The amount you can elect to deduct is not af- TIP fected if you place qualifying property in service in For periods before February 14. you cannot take a section 179 deduction. prescribed by Income Tax Regula- tions in effect at the time you get the property. standards. Also. ($250. They received a 179 property placed in service during 2009 is $1.200 in cash for the new van.000.000.320. However.000 − $75.000.800 trade-in allowance on the used van and paid or more. See ice exceeds $800. They received an $800 trade-in allowance service in a year is more than $800. and before January 1. service more than one item of qualifying property during 3. you generally for the old ovens and paid $520 in cash for the new oven. 179 deduction includes only the cash you paid. the general dollar limits on the section 179 deduc- taxpayer. the total amount you can elect to deduct under section 179 is subject to a dollar limit Situations affecting dollar limit. Your basis Placed in service for depreciation is zero.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. You elect to deduct $225. you must apply the business income limit (described later) to determine your How Much Can You Deduct? actual section 179 deduction. not to each business. Under certain circum- and a business income limit. as defined by section 46(f)(5) of the Internal Revenue Code (as in effect on November 4. If you deduct only part of the cost of qualifying property • Your business is an enterprise zone business or a renewal community business. 1990). For a passenger automobile.000. After you apply the dollar limit to determine a ! CAUTION tentative deduction. However. if any. later. Therefore. 2017. by any of the following situations. • You placed in service a sport utility or certain other vehicles.000. or erection of the cannot be more than $250.000 section 179 deduction for the tractor from the Your section 179 deduction is generally the cost of the $275.050. Trade-in of other property. If you acquire and place in property must be completed by you.000. In 2009. energy property a short tax year or if you place qualifying property does not include any property that is public utility property in service for only a part of a 12-month tax year.000 for the tractor and the Adjusted basis entire $25.000 tractor and a $25. These limits apply to each stances. the total section • The cost of your section 179 property placed in serv- 179 deduction and depreciation deduction are limited. traded two ovens having a total adjusted basis of $680 for a new oven If the cost of your qualifying section 179 property placed in costing $1.

of any heavy sport utility vehicle (SUV) and certain other creased by the smaller of: vehicles placed in service during the tax year. or plained earlier). Note.000. as qualified not have seating rearward of the driver’s seat.” see Publication 954. regardless of which of you purchased the property or disaster occurred before January 1.000 (ex- ment.000. you file a joint return.Page 19 of 120 of Publication 946 15:26 . You take into account only 50% (instead of 100%) of the cost of qualified zone property or qualified renewal • Equipped with a cargo area (either open or enclosed by a cap) of at least six feet in interior length that is property placed in service in a year when figuring the not readily accessible from the passenger compart- reduced dollar limit for costs exceeding $800. He and his wife file tance property. • The cost of qualified section 179 Disaster Assistance They elect to allocate the $240. allocate the dollar limit (after any reduction) between you equally. This is because they must figure is increased by the smaller of: the limit as if they were one taxpayer. 2010. They reduce the $250. in an • The cost of qualified section 179 Disaster Assistance empowerment zone or renewal community. The dollar limit on the section 179 deduction dollar limit is $240. the $25.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.” “renewal community busi- ness. roads.000. vehicle weight. Tax Incentives for Dis- Sport Utility and Certain Other Vehicles tressed Communities. tion 179 property (described earlier) placed in service December 31. See Qualified Disaster Assistance Prop.” “qualified zone property. elect not to treat the property as qualified section 179 Disaster Assistance property. or over $800. creased by the smaller of: prise zone businesses and renewal community busi. her own business. 50% will be allocated to each of you. that is rated at more than 6. even if you to any vehicle: are filing a separate return). • Designed to seat more than nine passengers behind the driver’s seat.gov. For definitions property placed in service during the tax year. • That has an integral enclosure fully enclosing the For purposes of this increased section 179 de- driver compartment and load carrying device.000 pounds gross zone property or qualified renewal property placed in vehicle weight and not more than 14. A list of the placed it in service. 2010.000 of the cost The dollar limit on the section 179 deduction is in.000 dollar limit as fol- property placed in service during the tax year. MUST be removed before printing. Jack bought and placed in service erty in chapter 3 for a description of qualified Disaster $800.000 limit does not apply erty placed in service by your spouse.000. you and your spouse are treated as fied section 179 Disaster Assistance property placed in one taxpayer in determining any reduction to the dollar service in a federally declared disaster area in which the limit.000. You must www. Qualified section 179 Disaster Assistance property is sec.000 pounds gross service before January 1.000. of “enterprise zone business. defined next. Chapter 2 Electing the Section 179 Deduction Page 19 . or • The cost of section 179 property that is also qualified highways. Their combined Dollar limits. 2007 that is also qualified Disaster Assis.000. or applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets. in- An increased section 179 deduction is available to enter. If the Qualified section 179 Disaster Assistance property. Married Individuals Disaster Assistance Property If you are married. lows. or nesses for qualified zone property or qualified renewal property placed in service before January 1. Emergency Management Agency (FEMA) website at including the reduction for costs over $800. how you figure your section 179 deduc- tion depends on whether you file jointly or separately. does ! CAUTION duction. separate returns. • $600.fema. Jack Elm is married. Example. do not treat qualified section 179 Disas- ter Assistance property. Enterprise Zone and Renewal Community The amount for which you can make an election is Businesses reduced if the cost of all section 179 property placed in service during the 2009 tax year exceeds $800.000 dollar limit by the $10. 2010 (including such prop.” and “qualified renewal property. His wife has Assistance property. This rule • $35. and has no body section protruding more than 30 inches zone property (or qualified renewal property) unless you ahead of the leading edge of the windshield. percentages elected by each of you do not total 100%. unless you both elect a different allocation.000 excess of their costs • $100. and she bought and placed in service $10. you are treated as one taxpayer for the dollar limit.000 of qualified farm machinery in 2009. If you and your spouse file separate federally declared disaster areas is available at the Federal returns. If An increased section 179 deduction is available for quali. You cannot elect to expense more than $25. However.000 of qualified business equipment.

XYZ’s hypothetical section 179 deduction is $250. • Wages.000 ($240. • Any unreimbursed employee business expenses. • The self-employment tax deduction. Elm’s equipment. way. Step 2 – Using $270. For information about section 1231 gains and losses.000).000 ($270. you are considered to actively conduct a trade or taxable income figured in Step 7. If you and Two different taxable income limits. Step 1 – Taxable income figured without either deduc- tion is $270.000. XYZ figures its • Interest from working capital of your trade or busi- section 179 deduction and its deduction for charitable ness. salaries. later.000 of the using the taxable income figured in Step 1. figured without the section 179 deduction or the deduction for charitable contributions is $270. Gener. Step 1.000. business if you meaningfully participate in the manage- ment or operations of the trade or business. 8 Figure your actual other deduction using the ally.000 ($240. It elects to expense the entire $250. After the due date of their figured in Step 2 from the taxable income figured returns. A corporation’s this purpose by totaling the net income and losses from all limit on charitable contributions is figured after subtracting trades and businesses you actively conducted during the any section 179 deduction. dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Elm’s machinery. This is the lesser of the following amounts.000 × 50%) to each of them. 5 Subtract the hypothetical other deduction figured • $32. see chapter 3 in Publication 544. the XYZ corporation because of this limit can be carried to the next year. Example. If they did not make an election to allocate their costs in this • Any net operating loss carryback or carryforward. • $12. In June.000. If so.000. 2009. 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as • $240.000—The dollar limit less the cost of section taxable income. section 179 deduction is $32. Net income or loss from a trade or business includes the section 179 deduction is figured after subtracting any the following items. On February 1.Page 20 of 120 of Publication 946 15:26 .000 x 5%) to Mrs. • $228. plete the following steps. 179 property over $800. property that cost $250.000 cost under section 179.000 ($240. tips. the may have a taxable income limit for some other deduction. Step Action • The total cost of section 179 property you and your spouse elected to expense on your separate returns.000 as taxable income. XYZ’s taxable income • Section 1231 gains (or losses). Business Income Limit 7 Subtract your actual section 179 deduction The total cost you can deduct each year after you apply the figured in Step 6 from the taxable income figured in Step 1. 6 Figure your actual section 179 deduction using the taxable income figured in Step 5. the corporation Taxable income. cost of section 179 property on his separate return and his 3 Subtract the hypothetical section 179 deduction wife elected to deduct $2. The business income limit for year.000.000 x 95%) to Mr. they file a joint return. they would have to allocate $120.000—The total they elected to expense on their in Step 4 from the taxable income figured in separate returns. Any cost not deductible in one year under section 179 Example. In general.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.000. Their dollar limit for the in Step 1. figure taxable income without regard to any of the following. or other pay earned as an employee.000. Page 20 Chapter 2 Electing the Section 179 Deduction . 1 Figure taxable income without the section 179 deduction or the other deduction. dollar limit on the joint return is the lesser of the following You may have to figure the limit for this other deduction amounts. Joint return after filing separate returns. In addition to the your spouse elect to amend your separate returns by filing business income limit for your section 179 deduction. taking into account the section 179 deduction. contributions as follows. tion 179 property over $800. In addition. figure taxable income for gave a charitable contribution of $10. The facts are the same as in the previous 2 Figure a hypothetical section 179 deduction example except that Jack elected to deduct $30. you a joint return after the due date for filing your return. Step 3 – $20. com- • The dollar limit (after reduction for any cost of sec. • The section 179 deduction.000). allowable charitable contributions.000 − $250. MUST be removed before printing.000. See purchased and placed in service qualifying section 179 Carryover of disallowed deduction.

For purposes of the busi- ness income limit. XYZ’s actual charitable contribution (limited to Internal Revenue Code.000 from that business for the year.000 of its taxable income from the active conduct of its subsequent year in which only part of the total carryover business.000 (from Step 5) as taxable by adding together the net income and losses from all income. 179 deduction is $250. He allocates the carryover amount to Share of Income. loss). XYZ during the year. Its maximum section 179 deduc- If you place more than one property in service in a year. if the partner’s tax year and that of the partner- service by the partnership.000 of its section 179 deduction and corporation as one item of section 179 property. Beech Partnership placed in service 179 deduction in the next year.000 of his sole proprie- torship’s section 179 costs. section 179 costs allocated from a partnership or an S It allocates $40.000 from Beech Partnership plus $30.000 − $80. MUST be removed before printing. The partnership determines its his business taxable income of $80. Enter that amount on line section 179 property with a total cost of $825. figure taxable income without regard to credits.000 over of your disallowed section 179 deduction. However.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. income limit.000 in section 179 deductions allocated from the part- nerships ($40.000 Partnerships and Partners from Cedar Partnership).000.Page 21 of 120 of Publication 946 15:26 . You can carry over of a partner engaged in the active conduct of one or more for an unlimited number of years the cost of any section of a partnership’s trades or businesses includes his or her 179 property you elected to expense but were unable to allocable share of taxable income derived from the partner- because of the business income limit. His maximum section nor the new owner can deduct any of the unused amount.000 ($50.000 − $800. XYZ figures the actual section 179 deduction. and it elects to you can select the properties for which all or a part of the expense that amount.000 from Cedar Partnership the deduction among its partners. plus $55. over $45.000 section 179 deduction. The 10 of your Form 4562 for the next year. See the Instructions for Form 1065 for can take a $250. XYZ’s hypothetical charitable contribution (lim. deduction amount is shown on line 13 of Form 4562. In 2009. 10% of taxable income) is $2. the partner does not Different tax years. Credits. allocated to him a $30.000.000 loss from his sole proprietorship).) to his or her the cost of section 179 property placed in service in his nonpartnership section 179 costs and then applies the sole proprietorship. applied. This disallowed ship’s active conduct of any trade or business.000. Step 5 – $268.000 ($825.000) is income for a tax year is generally the partner’s distributive Chapter 2 Electing the Section 179 Deduction Page 21 . and notes that information in The section 179 deduction limits apply both to the partner.000). neither you and his dollar limit is not reduced.000 − $25. the section 179 deduction. tion is $225. Partner’s 179 costs to 2010. the total carryover will be allocated In addition to being a partner in Beech Partnership. Partner’s share of partnership’s taxable income. information on how to figure partnership net income (or Step 7 – $20. treat the year was $300. It then allocates Beech Partnership. If there is a sale or other disposition of your Dean does not have to include section 179 partnership TIP property (including a transfer at death) before you costs to figure any reduction in his dollar limit. so his total can use the full amount of any outstanding carry- section 179 costs for the year are not more than $800. To determine any reduction in the and records. and guaranteed payments under section 707(c) of the come. tax-exempt income.000 section 179 deduction and If costs from more than one year are carried forward to a $35. minus $5. After the dollar limit (reduced ship differ. you must deduct the costs being carried and.000 from section 179 deduction subject to the limits.000). equally among the properties you elected to expense for Dean is also a partner in the Cedar Partnership. The partnership’s taxable income costs will be carried forward.000. However.000 ($125. If you do $50. trades or businesses actively conducted by the partnership Because the taxable income is at least $250. which the year. the partner’s share of the partnership’s taxable for any nonpartnership section 179 costs over $800.000. Deductions. For this purpose. one of its partners. For purposes of the business in- include any of the cost of section 179 property placed in come limit.000).000 − $250.000. He elects to expense all of the Instead.000 ($270.000). dollar limit for costs over $800. He also conducts a business as a sole proprietor can be deducted.000 of its taxable income to Dean.000 ($250. plus $35. He had a net loss of $5. Step 4 – Using $20.000.000 ($270. You use the amount you carry over to determine your section Example. Partnership’s taxable income.000 (from Step 3) as taxable in. in 2009. placed in service in that business qualifying forward from the earliest year first. etc. so it can deduct the full $225. his deduction is limited to ship and to each partner. not make a selection.000. the taxable income Carryover of disallowed deduction. He carries Each partner adds the amount allocated from partner. section 179 property costing $55. partnership must reduce its dollar limit by $25.000. you must add it back to the property’s basis. and notes that allocation in his books dollar limit to this total.000 (from Step 7) as taxable in. For purposes of the business income limit. any remaining cost of the partnership and non- come.000 − $2. $70. Your selections must be from the active conduct of all its trades or businesses for shown in your books and records.000) of the elected section ships (shown on Schedule K-1 (Form 1065). figure the partnership’s taxable income Step 6 – Using $268. Step 8 – Using $20. partnership section 179 property is subject to the business ited to 10% of taxable income) is $2. his books and records.

treat deduc. The S corporation allocates its deduc. This reduction of basis must be made You elect to take the section 179 deduction by completing even if a partner cannot deduct all or part of the section 179 Part I of Form 4562. The S corporation of any trade or business. you take identification of each piece of qualifying section into account the items from that trade or business that are RECORDS 179 property. To fig. partner’s entire share) of partnership taxable income in 2. S Corporations CAUTION For property placed in service in 2009. and deductions for compensation Revoking an election. The deduction limits apply to an S corporation and to • Your original 2009 tax return. above. it timely. To figure the net income (or loss) from a trade or You must keep records that show the specific business actively conducted by an S corporation. 1. deduction allocated to that partner by the partnership be- cause of the limits. disregard any limits on the the time prescribed by law. MUST be removed before printing. to which the election applies and the part of the cost ure taxable income (or loss) from the active conduct by an of each such item to be taken into account. A partner must reduce the basis of his or her partnership interest by the total amount of section 179 expenses allocated from the partnership even if the partner cannot currently deduct How Do You Elect the the total amount. Once account when figuring a shareholder’s taxable income. For its tax year ending January 31. the rules that apply to a partnership and its with either of the following. Adjustment of partner’s basis in partnership. the section 179 deduction. tax-exempt income. acquired the property.000 (each tax return). conducted by the S corporation during the year. 2009 can be revoked without IRS approval by filing an tions and losses as negative income.000 was earned deductions (as reported on the corporation’s income during 2008. The amended return must also amount of an S corporation item that must be taken into include any resulting adjustments to taxable income. not derived year. file Form 4562 Generally.000.Page 22 of 120 of Publication 946 15:26 . January 31. The basis of a partnership’s section 179 property Placed in service must be reduced by the section 179 deduction elected by the partnership. An election made on an amended return must specify the item of section 179 property Figuring taxable income for an S corporation. Page 22 Chapter 2 Electing the Section 179 Deduction . However. Oak Partnership uses a tax year ending following changes.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. Terms you may need to know nership. the partner’s basis for determining Deduction? gain or loss is increased by any outstanding carryover of disallowed section 179 expenses allocated from the part. partners also apply to an S corporation and its sharehold- ers. you total the net amended return must also include any resulting ad- income and losses from all trades or businesses actively justments to taxable income. of which $70. prescribed by law. In figuring the taxable amended return. take into account any credits. 2009. made in the election) to take a section 179 deduction for ing the total amount of S corporation items. from a trade or business actively conducted by the corporation during the tax year. If the partner disposes of his or her partnership interest. complete Part V of Form 4562 before completing Part I. It is figured before deducting the section 179 deduc- Oak Partnership’s taxable income from the active conduct tion. tion to the shareholders who then take their section 179 • An amended return for 2009 filed within the time deduction subject to the limits. the revocation is irrevocable. whether or not you file each shareholder. A corporation’s taxable income from its active conduct of Example. John and James each include $40. John and James Oak are equal partners in any trade or business is its taxable income figured with the Oak Partnership. made. These records must show how you passed through to the shareholders and used in determin. (see Glossary): Listed property Adjustment of partnership’s basis in section 179 prop- erty. you do not when you placed it in service. The amended return must be filed within income of an S corporation. share for the partnership tax year that ends with or within Other Corporations the partner’s tax year. If you elect the deduction for listed property (de- ! scribed in chapter 5). It is adjusted for items of income or deduction in- computing their business income limit for the 2009 tax cluded in the amount figured in 1. For purposes of determin. and ing each shareholder’s tax liability. and special of its business is $80. the person you acquired it from. any net operating loss deduction. John and James both use a tax year ending December 31. An election (or any specification paid to shareholder-employees.

. exchange. . the per- centage of business use drops to 50% or less. and when you must include the year of recapture.Page 23 of 120 of Publication 946 15:26 . . Figure the depreciation that would have been allowa. . . He used the prop- erty only for business in 2007 and 2008. Subtract the depreciation figured in (1) from the sec.000 sec- tion 179 deduction for the property and also elected not to claim a special depreciation allowance. . for the first year you place the property in service. $1. . . taxpayer. . placed in service during the tax year.50 × 40% (business)) . . . . 4797. use the rules for recapturing depreciation explained in chapter 3 of Publication 544 under Section 1245 Prop- erty. . Recovery periods for property are dis- cussed under Which Recovery Period Applies in chapter 4. .80 in income for 2009. . a calendar year Depreciation Allowance on page 32. He figures his recapture amount as follows. He elected a $5. The allowance applies only the percentage of business use drops to 50% or less.000. Section 179 deduction claimed (2007) . . . . how with the year you placed the property in service and to elect not to claim an allowance. . See Election to Accelerate Certain Credits in Lieu of the Special Example. . . minimum tax credits in lieu of claiming the special depreciation allowance for eligible qualified property. . Begin includes rules regarding how to figure an allowance. . Similar rules apply to qualified section 179 GO Zone property. . . Introduction If the property is listed property (described in You can take a special depreciation allowance to recover ! CAUTION chapter 5). To figure the amount to regular depreciation under MACRS for the year you place recapture. . do not figure the recapture amount under the rules explained in this discussion when part of the cost of qualified property (defined next). . take the following steps. . 2. . Claiming the Special If you sell.50 2009 ($740. 2. . . . . . Corporations and certain automotive partner- tion 179 deduction you claimed. . Chapter 3 Claiming the Special Depreciation Allowance Page 23 . an additional 50% (or 30%. The result is the TIP ships can elect to accelerate certain research and amount you must recapture.20 4. . do not figure the recapture amount under the rules explained in this discussion. . 1. . . .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. . the property in service. recapture an allowance. This chapter explains what is qualified property. . For Instead. Paul Lamb. . In 2009. $ 814. You may have to recapture the section 179 deduction if. The property is not listed property.000. 296. the benefit of the Recovery period increased section 179 deduction must be reported as other Section 1245 property income on your return. Disposition If any qualified zone property or qualified renewal Exchange ! CAUTION property placed in service during the year ceases to be used in an empowerment zone or renewal Recapture community by an enterprise zone business or a renewal community business in a later year. .20 2009 — Recapture amount . bought and placed in service section 179 prop. The property is 3-year property. . . MUST be removed before printing. . and forms. It also ble on the section 179 deduction you claimed. .80 Terms you may need to know (see Glossary): Paul must include $814. . Allowance stead. . . in any year during the property’s recovery period. . you include the recapture amount as ordinary income in Part IV of Form 3. . In January 2007. . . . You also increase the basis of the property by the recapture amount.666. . . if applicable) special allow- ance. he used the property 40% for business and 60% for personal use. . . .185. . . $5. In. . or otherwise dispose of the Depreciation ! CAUTION property. . In the year the business use drops to 50% or less. . .00 When Must You Recapture the Minus: Allowable depreciation using Table A-1 (instead of section 179 deduction): Deduction? 2007 . .222. use the rules for recapturing excess depreciation qualified property placed in service in 2009. . . The allowance is an additional deduction you can take after any section 179 deduction and before you figure Figuring the recapture amount. . . you can take in chapter 5 under What Is the Business-Use Requirement. . . . See chapter 6 for information about getting publications erty costing $10. . .50 2008 .

and before January 1. • Certain qualified property placed in service after De. erty you placed in service after September 10. con- struction. date of sale if the property is sold within 3 months after the as part of an integrated plan. replaces real property destroyed or condemned. the property is sold within 3 months of the date it was placed in service. Sale-leaseback. 2001.168(k)-1(b)(5) of the regulations. 2010. and leased it back within 3 months after you originally placed it The following discussions provide information about the in service. Substantially all (80% or more) of nents of a building (such as walls. exceed 12 months. or produced by you. and the user of Nonresidential real property and residential rental the property does not change. For special rules explaining when property involved in stroyed (or condemned) only if an entire building or struc. 2001. then the property is treated property. Placed in service date test. after September 10. The property will not qualify for the special allowance if Qualified Liberty Zone Property the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the You can take a special depreciation allowance for qualified property before September 11. as a re. the property is considered damaged real property. Otherwise. 2001. MUST be removed before printing. your own use meets this test if you began the manufacture. then only costs related to replacing the damaged or de- What Is Qualified Property? stroyed structural components qualify for the special Lib- erty Zone depreciation allowance This property must also meet all of the tests that are Terms you may need to know discussed under Other Tests To Be Met below. Property you manufacture. Zone property is originally placed in service by a lessor erty (defined next). This property is qualified Liberty Zone property as originally placed in service by the taxpayer no earlier only to the extent it rehabilitates real property damaged. that is nonresidential real or residential rental prop. certain other transactions is treated as originally placed in ture was destroyed (or condemned) as a result of the service. Substantial use test. and Structural components there must not have been a binding written contract for the acquisition in effect before September 11. real property is considered de. 2001.Page 24 of 120 of Publication 946 15:26 .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. For example. 2001. Syndicated leasing transactions. Page 24 Chapter 3 Claiming the Special Depreciation Allowance . 2010. construct. Zone. If qualified Liberty 2010. 1. but the building is not destroyed (or condemned). floors. manufactured. Property that is manufactured. 2001. see section 1. leaseback. the property is treated as originally placed in types of qualified property listed above for which you can service no earlier than the date it is used by you under the take the special depreciation allowance. in service for use in your trade or business before January • Qualified disaster assistance property. or than the date of the last sale. 10. if certain structural compo. the property must also meet all of the following tests. construction. Multiple units of property subject to the same lease will sult of the events of September 11. such property replaces real final unit is placed in service and the period between the property included in a continuous area that includes real times the first and last units are placed in service does not property destroyed or condemned. or produce for ing. Nonresidential real property Placed in service Acquisition date test. binding contract entered into before the manufacture. constructed. The property must be placed • Qualified cellulosic biofuel plant property. or production of the property. Liberty Zone property placed in service before January 1. For these purposes. Your property is qualified property if it is one of the follow. 2007. You must have acquired the prop- Residential rental property erty by purchase (as discussed under Property Acquired by Purchase in chapter 2) after September 10. • Qualified reuse and recycling property. (see Glossary): Business/investment use Other Tests To Be Met Improvement To be qualified Liberty Zone property. attacks. or production of the property after September • Qualified Liberty Zone property. 2001. produced for your use by another person under a written sion property. or • Specified Gulf Opportunity Zone (GO Zone) exten. is considered to be • Qualified Recovery Assistance property. If you sold qualified Liberty Zone prop- cember 31. constructed. and plumbing the use of the property must be in the Liberty Zone and in fixtures) were damaged or destroyed as a result of the the active conduct of your trade or business in the Liberty attacks. Property is be treated as originally placed in service no earlier than the treated as replacing destroyed or condemned property if.

Also. treatment. and has not been substan- following. Tangible property depreciated under the modified more than 20% of the total cost of the property. The original use of the property in the Specified GO Zone extension property. Qualified leasehold improvement property.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. irb07-17. Qualified leasehold improvement property. is subject to a Qualified Liberty Zone property does not include any of the nonexclusive license. property. and you leased it back within 3 months after Method Can You Use To Depreciate Your Property you originally placed the property in service. Property on page 27. explained under Excepted depreciation allowance. For other property required to be depreci. • Any of the following types of property placed in serv- tioned or rebuilt property you acquired does not meet this ice in a building described above before January 1. explained under Other Tests To Be Met ! CAUTION come. 4. Used property can be qualified Liberty Zone property if it • Nonresidential real property or residential rental has not previously been used within the Liberty Zone. Specified portions of the GO Zone are those counties or • Property required to be depreciated using the Alter. 2011.Page 25 of 120 of Publication 946 15:26 . Notice 2007-36 on page 1000 of the Internal Revenue in chapter 4. Property converted from personal use to business use in the same or later tax year may be qualified Liberty Zone In addition. out regard to this provision. available at www. Specified GO Zone extension property must by the lessee (or any sublessee) of that part. the property does not satisfy this substan- tial use test and does not qualify for the special on page 26. Chapter 3 Claiming the Special Depreciation Allowance Page 25 .irs. 2001. Water utility property. However.pdf. aged by the hurricanes occurring during 2005. For gui- ness use. considered to be the original user of the property. defined • Property converted from business use to personal below. accelerated recovery system (MACRS) with a re- If you sold property you placed in service after Septem- covery period of 20 years or less. see Which Depreciation System (GDS or ADS) Applies. Specified GO Liberty Zone must have begun with you after Zone extension property includes any of the following September 10. parishes in the GO Zone that are identified by the IRS as native Depreciation System (ADS). See Which ber 10. test. Bulletin 2007-17. meet certain tests.168(k)-1(b)(3) of the regulations. Extension Property • The improvement is made under or according to a lease by the lessee (or any sublessee) or the lessor You can take a special depreciation allowance for speci- of that part of the building. the cost of recondi. see section or commercial distribution of water. GO Zone (discussed below) before January 1. cial depreciation allowance (discussed later). to recondition or rebuild your property meet or the original use test if the original use of the property in the Liberty Zone began with you. use in the same tax year it is acquired. This includes having more than 60% of the occupied housing units dam- listed property used 50% or less in a qualified busi. which is either (a) property involved in certain other transactions and the original user that is an integral part of the gathering. same tax year.gov/pub/irs-irbs/ • Property for which you elected not to claim any spe. Original use test. and that. the property described in (1) through (4) above must be in the building and placed in service no later than 90 days • Property that also qualified for the special deprecia- after the building is placed in service. would be 20-year property or (b) any municipal sewer. tially modified. tion allowance. specified GO Zone extension property cannot be excepted property. MUST be removed before printing. ber 10. of fractional interests in property. substantially all (80% or more) of the use of property. this is any improvement to an interior part of a building that is nonresidential real property. property placed in service in specified portions of the additional capital expenditures you incurred after Septem. If the property is held for the production of in. For special rules identifying the original user of property 2. with- 1. Also. see Required use of ADS under eligible for the extension of the placed in service date. Computer software that is readily available for purchase by the general public. fied Gulf Opportunity Zone (GO Zone) extension property (defined below) placed in service in specified portions of • That part of the building is to be occupied exclusively the GO Zone. Property containing used parts will not be treated as 2011: reconditioned or rebuilt if the cost of the used parts is not 1. the lessor is in chapter 1. The cost of some computer software is treated as part of the cost of hardware • Property placed in service and disposed of in the and is depreciated under MACRS. 2001. Generally. if all the following require- Specified Gulf Opportunity Zone ments are met. dance identifying the affected counties and parishes ated using ADS. 2001. Excepted Property 3.

and lineal descen- Sale-leaseback. your trade or business in the GO Zone. Substantially all (80% or more dur- corporation. A corporation and an individual who directly or indi. and the fiducia. more of the value of the outstanding stock of each Substantial use test. Two S corporations. Property you manufacture. sister. Page 26 Chapter 3 Claiming the Special Depreciation Allowance .Page 26 of 120 of Publication 946 15:26 . duced for your use by another person under a written binding contract entered into before the manufacture. business located in specified portions of the GO Zone. the property must also meet all of the following tests. Members of an affiliated group. MUST be removed before printing. A tax-exempt educational or charitable organization Multiple units of property subject to the same lease will and any person (or. is considered to be related persons. brother. and an S corporation and a times the first and last units are placed in service does not regular corporation. if the change. service by any person. rectly owned by or for the trust or grantor of the trust. and the fiduciary and ben. the property is sold within 3 months of the date it was 7. You must have acquired the prop- erty by purchase (as discussed under Property Acquired • Any structural component benefiting a common by Purchase in chapter 2) after August 27. date of sale if the property is sold within 3 months after the rectly controls the organization. the following are struction. treated as a lease and the parties to the commitment are construction. The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a 5. in service before January 1. or production of the property. See partnership. Placed in service date test. For this purpose. or produced by you. and the user of the property does not ries and beneficiaries of two different trusts. An individual and a member of his or her family. for the definition of section 1250 11. • The improvement is placed in service more than 3 a. binding written contract for the acquisition in effect before • The internal structural framework of the building. or produce for Generally. service by the taxpayer no earlier than the date of the last sale. Two corporations that are members of the same con- trolled group. and leased it back within 3 months after you originally rectly owns 80% or more of the value of the out. if that person is an individual. The grantor and fiduciary. originally placed in service by a lessor after August 27. placed it in service. placed in service. a qualified leasehold improvement does not Other Tests To Be Met include any improvement for which the expenditure is attributable to any of the following. However. b. 80% or more of the value of the outstanding stock years after the date the building was first placed in of the corporation. 80% or more of the capital or profits interest in the • The improvement is section 1250 property. or production of the property after August 27. To be specified GO Zone extension property. placed in service no earlier than the date it is used by you under the leaseback. Property that is manufactured. eficiary. If you sold specified GO Zone exten- dant. • The enlargement of the building. A corporation and a partnership if the same persons specified areas of GO Zone and in the active conduct of own both of the following. ing each tax year) of the use of the property must be in the 10. sion property you placed in service after August 27. 2005. 8. 2010. 3. 1. a lease be. final unit is placed in service and the period between the 9. If the property is 6. a binding commitment to enter into a lease is your own use meets this test if you began the manufacture. half-sister. then the property is treated as originally placed in same person is the grantor of both trusts. • Any elevator or escalator. property before August 28. ancestor. the property is treated as originally standing stock of that corporation. construct. manufactured.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. half-brother. Sales and Other Dispo- sitions of Assets. The property must be placed 2. 2005. 2005. or pro- tween related persons is not treated as a lease. Acquisition date test. if the same persons own 80% or exceed 12 months. chapter 3 in Publication 544. August 28. treated as the lessor and lessee. The executor and beneficiary of any estate. child. The fiduciaries of two different trusts. for use in your trade or including only a spouse. 4. 2005. constructed. 2005. 2005. Syndicated leasing transactions. However. of any trust. constructed. con- Related persons. parent. with no area. A trust fiduciary and a corporation if 80% or more of written binding contract in effect for the acquisition of the the value of the outstanding stock is directly or indi. a be treated as originally placed in service no earlier than the member of that person’s family) who directly or indi. property.

and you leased it back within 3 months after you including definitions of substantially rehabilitated building originally placed the property in service. Property low) placed in service before January 1. to recon- dition or rebuild your property meet the original use test if the original use of the property in the GO Zone began with Qualified revitalization building. the tion.gov/pub/irs-irbs/irb07-17. • Any real property determined by square footage Excepted Property (other than any portion that is less than 100 square feet) that is dedicated to gambling. or the on-site viewing of such racing. • Property any portion of which is financed with the pdf. page 590 of Internal Revenue Bulletin 2006-40. It is nonresidential real property or residential rental low). The original use of the property in the same or later tax year may be qualified GO Zone GO Zone must have begun with you after August 27. and qualified revitalization expenditure. see Notice 2006-77 on ness use. 2007-17. If the building is new. This is a commercial you. If you acquire new property for personal use and then use the property in your trade or business or for the Gambling or animal racing property. or the on-site viewing of such racing. the lessor is con. Additional guidance. original use of the building must begin with you. suntan facility. 2005.irs. Used property can be specified GO Zone extension property if it has not previously been used within the • Other bonus depreciation property to which section specified portions of the GO Zone. proceeds of a tax-exempt obligation under section 103 of the Internal Revenue Code. under Other Tests To Be Met).168(k)-1(b)(3). This includes spect to the 50% additional first-year depreciation deduc- listed property used 50% or less in a qualified busi. or other property of fractional interests in property. MUST be removed before printing. and placed in service in the Kansas disaster area. ditures.irs. For a complete commercial golf course. Chapter 3 Claiming the Special Depreciation Allowance Page 27 . or any store. It is property that meets certain tests (explained next cial depreciation allowance (discussed later). If the property is held for the production of in. You can take a special depreciation allowance for qualified talization deduction for qualified revitalization expen.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. Kansas. use in the same tax year it is acquired. tion for qualified GO Zone property. and surrounding areas. the racing of Specified GO Zone extension property does not include animals. For other property required to be depreci.Page 27 of 120 of Publication 946 15:26 . property. • Property required to be depreciated using the Alter. For more information. 4492-A. software. 27. • Any gambling or animal racing property (defined be. see Required use of ADS under at www. For additional guidance with re- native Depreciation System (ADS). If the nue Bulletin 2007-17. massage par. For further guidance on the original use requirement building and its structural components that you placed in for the GO Zone additional first year depreciation deduc. property. available at www. country club. of animals. available ated using ADS. Property converted from personal use to business use in the Original use test. any of the following. 2005. the qualified Recovery Assistance property if it meets the fol- principal business of which is the sale of alcoholic lowing requirements. see Publication sidered to be the original user of the property. building is not new. service in a renewal community. additional capital 168(k) of the Internal Revenue Code applies. • Property placed in service and disposed of in the ! come.pdf and Notice Which Depreciation System (GDS or ADS) Applies. expenditures you incurred after August 27. Tax Incentives for Distressed Communities. the property does not satisfy this substan- tial use test and does not qualify for the special same tax year.gov/pub/irs-irbs/irb06-40. Your property is lor. 954. Recovery Assistance property you acquired after May 4. beverages for consumption off premises. you are considered to be the original animal racing property includes the following personal and user. 2. the racing 1. real property. Also. see Notice 2007-36 on page 1000 of Internal Reve. The Kansas disaster area is generally located in Kiowa • Any property used in connection with any private or County. • Property converted from business use to personal CAUTION depreciation allowance. 2010. you must substantially rehabilitate the If you sold property you placed in service after August building and then place it in service. for which you have elected to claim a commercial revi. Gambling or production of income. 2007. 2005. see Pub. hot tub facility. furniture. 1. see Regulations section used directly in connection with gambling. 2007-36 on page 1000 of Internal Revenue Bulletin in chapter 4. • Property for which you elected not to claim any spe. Qualified Recovery Assistance • Any qualified revitalization building (described be. For special rules identifying the original user of property involved in certain other transactions and the original user • Any equipment. list of the affected areas.

is considered to be manufactured. The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a • Property converted from business use to personal written binding contract in effect for the acquisition of the use in the same tax year acquired. The property must be placed • Any qualified revitalization building (defined earlier in service for use in your trade or business before January under Qualified revitalization building on page 27) 1. or production of the property after May 4. to recondition or rebuild cepted Property below). person under a written binding contract entered into before the manufacture. May 5. ified reuse and recycling property also includes software Original use test. distribute. tance property you placed in service after May 4. Used property can be qualified Recovery Assistance property if it has not previously been used within the • The property must have a useful life of at least 5 Kansas disaster area. or produced for your use by another System (GDS or ADS) Applies. cycling property is any machinery or equipment (not includ- ing buildings or real estate). Substantial use test. Property you manufacture. • The property must be depreciated under MACRS. or production of the prop. Page 28 Chapter 3 Claiming the Special Depreciation Allowance . the property is treated as originally cial depreciation allowance (discussed later). 2007. constructed. It is not excepted property (explained under Ex. 2009. 103 of the Internal Revenue Code. For other prop- construction. 2010. Substantially all (80% or more) of that is used exclusively to collect. Property con- property before May 5. and you leased it back within 3 months after you originally placed the property in service. Required use of ADS under Which Depreciation factured. Acquisition date test. 2010. • Property any portion of which is financed with the erty. along with any appurtenance. You must have acquired the prop- erty by purchase (as discussed under Property Acquired Excepted Property by Purchase in chapter 2) after May 4. lessor after May 4. 2007. The property must Kansas disaster area must have begun with you after May meet the following requirements.Page 28 of 120 of Publication 946 15:26 . or recycle the use of the property must be in the Kansas disaster area qualified reuse and recyclable materials (as defined in and in the active conduct of your trade or business in the section 168(m)(3)(B) of the Internal Revenue Code). and the user of 168(k) of the Internal Revenue Code applies. 4. your property meet the original use test if the original use of the property in the Kansas disaster area began with you. or produce for • Property required to be depreciated using the Alter- your own use meets this test if you began the manufacture. Multiple units of property subject to the same lease will Qualified Reuse and Recycling be treated as originally placed in service no earlier than the Property date of sale if the property is sold within 3 months after the final unit is placed in service and the period between times You can take a special depreciation allowance for qualified the first and last units are placed in service does not reuse and recycling property. deduction for qualified revitalization expenditures. 2007. then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. constructed. and leased it back within 3 months after you originally • Property for which you elected not to claim any spe- placed it in service. you incurred after May 4. Property that is manu. construct. If qualified Recovery Assistance property is originally placed in service by a Assistance property. Other Tests To Be Met 2007. 3. If you sold qualified Recovery Assis. native Depreciation System (ADS). see 2007. Also. for which you have elected to claim a commercial revitalization Sale-leaseback. The original use of the property in the necessary to operate such equipment. the property must also meet all of the following tests. If you sold property you placed in service after May 4. 2007. and before January 1. MUST be removed before printing. placed in service no earlier than the date it is used by you • Property placed in service and disposed of in the under the leaseback. the property is sold within 3 • Other bonus depreciation property to which section months of the date it was placed in service. Qual- Kansas disaster area. or proceeds of a tax-exempt obligation under section produced by you. Placed in service date test. with no Qualified Recovery Assistance property does not include binding written contract for the acquisition in effect before any of the following.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. the property does not change. placed in service before January 1. 2007. 2007. construction. in chapter 4. 2007. same tax year. the lessor is con- To be qualified Recovery Assistance property. sidered to be the original user of the property. additional capital expenditures years. verted from personal use to business use in the same or later tax year may be qualified Recovery Syndicated leasing transactions. Qualified reuse and re- exceed 12 months. erty required to be depreciated using ADS.

and before January 1. • Property placed in service and disposed of in the Syndicated leasing transactions. with no bind- ing written contract for acquisition in effect before Special Rules December 21. property before December 21. in chapter 2) after December 20. plant property you placed in service after October 3. in chapter 2) after August 31. If you sold qualified cellulosic biofuel • Property required to be depreciated using the Alter. structed. If qualified cellulosic same tax year. the property. construction. or produced for your use by another person under a written binding contract entered Qualified reuse and recycling property does not include into before the manufacture. The property must be placed in service for use in Self-constructed property. The original use of the property must begin with you written contract for the acquisition in effect before after December 20. • Other bonus depreciation property to which section The property will not qualify for the special allowance if 168(k) of the Internal Revenue Code applies. the property does not change. or produce for your own use meets this test if come after October 3. is considered to be manufactured. Property that is manu- factured. 2008. con- • Any rolling stock or other equipment used to trans. Property con. meet the following requirements. produced by you. your trade or business or for the production of in- construct. 2008. • The original use of the property must begin with you cane). 2008. 2006. Sale-leaseback. or production of 2013. constructed. Cellulosic biofuel is any Excepted Property liquid fuel which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or Qualified cellulosic biofuel plant property does not include recurring basis. and leased it back within 3 months after you originally erty required to be depreciated using ADS. or production of the property after December 20. construct. Examples include bagasse (from sugar any of the following. corn stalks. or produced for your use by another person under a written binding contract entered into before Special Rules the manufacture. with no binding 2. The property must after August 31. the property is treated as originally Required use of ADS under Which Depreciation placed in service no earlier than the date it is used by you System (GDS or ADS) Applies. biofuel plant property is originally placed in service by a lessor after October 3. construction. 4. and switchgrass. under the leaseback. construction. You must have acquired the property by purchase • The property must be placed in service for use in (as discussed under Property Acquired by Purchase your trade or business after August 31. the property is sold within 3 • Property converted from business use to personal months of the date it was placed in service. see placed it in service. 2008. Property you manufacture. recycling property. MUST be removed before printing. 2006. Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of sale if the property is sold within 3 months after the Qualified Cellulosic Biofuel Plant final unit is placed in service and the period between the times the first and last units are placed in service does not Property exceed 12 months. cial depreciation allowance (discussed later). construction. in chapter 4. The property is used in the United States solely to (as discussed under Property Acquired by Purchase produce cellulosic biofuel. and the user of use in the same tax year acquired. September 1. You can take a special depreciation allowance for qualified cellulosic biofuel plant property. or Self-constructed property. or production of the prop- erty. 3. or produce for your own use meets this test if you began the manufacture. native Depreciation System (ADS). 2006. Chapter 3 Claiming the Special Depreciation Allowance Page 29 . or produced by you. 2008. constructed. 2006. 2008. 2008. For other prop. 2008.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. the property after August 31. Property you manufacture. the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the • Property for which you elected not to claim any spe. then the property is treated verted from personal use to business use in the as originally placed in service by the taxpayer no earlier same or later tax year may be qualified reuse and than the date of the last sale. Property that is Excepted Property manufactured. is considered to be manufactured. you began the manufacture. port reuse or recyclable materials. or production of any of the following.Page 29 of 120 of Publication 946 15:26 . constructed. • You must have acquired the property by purchase 1. 2006.

8. constructed. The original use of the property within the applicable erty required to be depreciated using ADS. 2010. You must have acquired the property by purchase be treated as originally placed in service no earlier than the (as discussed under Property Acquired by Purchase date of sale if the property is sold within 3 months after the in chapter 2) on or after the applicable disaster date. final unit is placed in service and the period between the Page 30 Chapter 3 Claiming the Special Depreciation Allowance . 2010. The property must be similar in nature to. or pro- fema. If qualified disaster d. Property you manufacture. The property is placed in service by you on or before • Property any portion of which is financed with the the date which is the last day of the third calendar proceeds of any obligation the interest on which is year following the applicable disaster date (the fourth exempt from tax under section 103 of the Internal calendar year in the case of nonresidential real prop- Revenue Code. constructed. erty and residential rental property). • Property for which a deduction was taken under sec. Nonresidential real property and residential rental property is treated as originally placed in service by the property. and has not been substan. property on page 25). Substantially all (80% or more) of the use of the cial depreciation allowance (discussed later). Qualified leasehold improvement property (de. or produced by you. tion 179C for certain qualified refinery property. It is one of the following types of property. the rehabilitated or • Property required to be depreciated using the Alter. c. native Depreciation System (ADS). same or later tax year may be qualified cellulosic 4. the property is treated as originally b. property if it meets the following requirements. Property replace property destroyed or condemned. • Property for which you elected not to claim any spe. occurring before January 1. 5. 1. taxpayer no earlier than the date of the last sale. construct. is considered to be manufactured. Tangible property depreciated under MACRS with date and leased it back within 3 months after you originally a recovery period of 20 years or less. entered into before the manufacture. System (GDS or ADS) Applies.) Syndicated leasing transactions. The property must rehabilitate property damaged.gov. effect before the applicable disaster date. It is not excepted property (explained later in Ex- • Other bonus depreciation property to which section cepted Property). 6. For other prop. A list of the federally declared use by another person under a written binding contract disaster areas is available at the FEMA website at www. • Property converted from business use to personal 3. and the user of the property does not change. cated in the same county as. see disaster area must have begun with you on or after Required use of ADS under Which Depreciation the applicable disaster date. construction. software is treated as part of the cost of hardware and is depreciated under MACRS. Sale-leaseback. or use in the same tax year it is acquired. Water utility property. • Property placed in service and disposed of in the with no binding written contract for the acquisition in same tax year. construction. Computer software that is readily available for The property will not qualify for the special allowance if purchase by the general public. If you sold qualified disaster assistance property you placed in service after the applicable disaster a. Your property is qualified disaster assistance duction of the property. MUST be removed before printing. as a re- converted from personal use to business use in the sult of the applicable federally declared disaster. and lo- biomass ethanol plant property. is subject to a the lessee or a related person to the lessee or lessor had a nonexclusive license. assistance property is originally placed in service by a lessor after the applicable disaster date. Property declared disaster areas in which the disaster occurred that is manufactured. 168(k) of the Internal Revenue Code applies. then the e. in chapter 4. replaced property. or production of disaster assistance property placed in service in federally the property after the applicable disaster date. placed in service no earlier than the date it is used by you under the leaseback. property must be in the active conduct of your trade or business in a federally declared disaster area. or produce for your own use meets this test if You can take a special depreciation allowance for qualified you began the manufacture. the property is fined under Qualified leasehold improvement sold within 3 months of the date it was placed in service. 7. Special Rules Qualified Disaster Assistance Property Self-constructed property. written binding contract in effect for the acquisition of the tially modified.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.Page 30 of 120 of Publication 946 15:26 . or produced for your before January 1. placed it in service. Multiple units of property subject to the same lease will 2. (The cost of some computer property before the applicable disaster date.

Page 31 of 120 of Publication 946 15:26 . and has not been substan- tially modified. The property must be placed in service for use in 103 of the Internal Revenue Code. After December 31. same or later tax year may be qualified disaster • The property has an estimated production period assistance property. Long Production Period Property • Any property for which the special allowance under To be qualified property. native Depreciation System (ADS). • Any property used in connection with any private or 5. exceeding $1. Tangible property depreciated under MACRS with purchaser who at the time of the contract for a recovery period of 20 years or less. in chapter 4. exceeding 1 year and an estimated production cost • Any gambling or animal racing property (defined ear. Chapter 3 Claiming the Special Depreciation Allowance Page 31 . hot tub facility. purchase.000. 2008. • The aircraft must be purchased (as discussed under Property Acquired by Purchase in chapter 2) by a a. It is not excepted property (explained later in Ex- commercial golf course. Water utility property. You can take a special depreciation deduction allowance for certain qualified property acquired after December 31. Your property is qualified property if it meets the used in the trade or business of transporting persons or property (except for agricultural or firefighting pur- following requirements. with no binding written System (GDS or ADS) Applies. Noncommercial Aircraft Certain Qualified Property Acquired To be qualified property. times the first and last units are placed in service does not c. for which you have elected to claim a commercial revitalization 4. long production period property section 168(k) or section 1400N(d) of the Internal must meet the following requirements. • The aircraft must not be tangible personal property 2007. property on page 25). noncommercial aircraft must meet the following requirements. For other prop- erty required to be depreciated using ADS. • The property has a recovery period of at least 10 years or is transportation property. above. Computer software that is readily available for exceed 12 months. contract for the acquisition of in effect before January • Property any portion of which is financed with the 1.) Qualified disaster assistance property does not include any of the following. Property con. your trade or business or for the production of in- • Any qualified revitalization building (defined earlier come before January 1. see 2. country club. trade or business of transporting persons or prop- erty. d. You must have acquired the property by purchase Required use of ADS under Which Depreciation after December 31. for certain property with a long production pe- under Qualified revitalization building on page 27) riod and certain aircraft (defined next)). 1. It is one of the following types of property. • It must meet the requirements of (2)–(5). 2007. purchase by the general public. MUST be removed before printing. lier under Excepted Property on page 27). poses). above. makes a nonrefundable deposit of the b. lesser of 10% of the cost or $100. 2010 (before January 1. Qualified leasehold improvement property (de- fined under Qualified leasehold improvement • Property required to be depreciated using the Alter. 2011. The original use of the property must begin with you deduction for qualified revitalization expenditures. placed in service before January 1.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. cepted Property). • The property is subject to section 263A of the Inter- verted from personal use to business use in the nal Revenue Code.000. 2007 • It must meet the requirements in (2)-(5). 2007. Transportation • Property placed in service and disposed of in the property is tangible personal property used in the same tax year. suntan facility. 2010. is subject to a nonexclusive license. • Property converted from business use to personal use in the same tax year acquired. (The cost of some computer Excepted Property software is treated as part of the cost of hardware and is depreciated under MACRS. Revenue Code applies.000. massage par. the principal business of which is the sale of alcoholic beverages for consumption off premises. or any store. lor. after December 31. proceeds of a tax-exempt obligation under section 3. • Property for which you elected not to claim any spe- cial depreciation allowance (discussed later).

2010. ‘‘section 168(k)(4) election’’). and before January 1. exten- be treated as originally placed in service no earlier than the sion property is eligible qualified property acquired after date of the last sale if the property is sold within 3 months March 31. 2009. or production of the property after December 31. the elect for their first tax year ending after March 31. 2008. verted from personal use to business use in the If you make an election to accelerate these credits in same or later tax year may be qualified property. placed in service before January 1. Property you manufacture. Property that is manufactured. then the property is treated as originally placed in apply to extension property (as defined in section service by the taxpayer no earlier than the date of the last 168(k)(4)(H) of the Internal Revenue Code) unless the sale. the corporation Qualified property does not include any of the following. for long production period property and originally placed in service by a lessor after December 31. can elect for its first take year ending after December 31. to property is treated as originally placed in service no earlier accelerate pre-2006 unused research credits or minimum than the date it is used by you under the leaseback. allowance for only extension property. 2011. This includes basis in the property under MACRS using the straight line listed property used 50% or less in a qualified busi- method. Generally. If qualified property is January 1. A section 168(k)(4) • Property converted from business use to personal election made by a certain automotive partnership does use in the same tax year acquired. lieu of claiming the special depreciation allowance. credits in lieu of the special depreciation allowance construct. consent. you must not take the 50% special depre- • Property required to be depreciated under the Alter- ciation allowance for the property and must depreciate the native Depreciation System (ADS). 2008. 2010. MUST be removed before printing.000. 2010. after the final unit is placed in service and the period 2008. to claim pre-2006 unused research credits or mini- • Property placed in service and disposed of in the mum tax credits in lieu of claiming the special depreciation same tax year. 2008. and before January 1. Depreciation Allowance Sale-leaseback. lieu of claiming the special depreciation allowance for eligible property. 2008. • Property for which you elected not to claim any spe- Special Rules cial depreciation allowance (discussed later). • Property for which you elected to accelerate certain Self-constructed property. the property is sold within 3 months of the date it was A section 168(k)(4) election made by a corporation for placed in service. continues to change. and placed in service before January 1. 2007. If a Excepted Property corporation did not make a section 168(k)(4) election for its first tax year ending after March 31. 2009 (before Syndicated leasing transactions. 2008. Once made. corporation makes an election not to apply the section Multiple units of property subject to the same lease will 168(k)(4) election to extension property. or production of the property. • Qualified restaurant property (as defined in section Additional guidance. See Which Depreciation Method Applies in chap- ness use. not apply to extension property. • The aircraft must have an estimated production pe. and the user of the property does not its first tax year ending after March 31. or produced by you. tax credits in lieu of claiming the special depreciation The property will not qualify for the special depreciation allowance for certain eligible qualified property (as defined allowance if the lessee or a related person to the lessee or in section 168(k)(4)(D) of the Internal Revenue Code) (the lessor had a written binding contract in effect for the acqui. 2007. construction. ated using ADS. 2008. or produce for your own use meets this test if (discussed next). and placed in service after December 31. see Required use of ADS under Which Depreciation System (GDS or ADS) Applies. If you sold qualified property you placed in service after December 31. constructed. see Page 32 Chapter 3 Claiming the Special Depreciation Allowance . this election ap- sition of the property before January 1. the election cannot be revoked without IRS in Chapter 4. For other property required to be depreci- ter 4. constructed. and placed in service after December 31. and leased it back Corporations and certain automotive partnerships can within 3 months after you originally placed in service. For additional guidance on the 168(e)(7) of the Internal Revenue Code) placed in election to accelerate the research or minimum tax credit in service before January 1. con- struction. is considered to be Credits in Lieu of the Special manufactured. 2008. you began the manufacture. • Qualified retail improvement property (as defined in riod exceeding four months and a cost exceeding section 168(e)(8) of the Internal Revenue Code) $200. plies to eligible qualified property acquired after March 31. or produced for your use by another person under a written Election to Accelerate Certain binding contract entered into before the manufacture. and before January 1. Long production period between the time the first and last units are placed in property and noncommercial aircraft are extension prop- service does not exceed 12 months. Generally. 2010.Page 32 of 120 of Publication 946 15:26 . erty if acquired after March 31. 2007. 2010. noncommercial aircraft (defined earlier)).13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. Property con. 2008.

000 of cost to qualified reuse and recycling property. available at www. MACRS depreciation deduction (discussed in chapter 4). Also. the carryover basis of the acquired If you place qualified property in service in a short property is eligible for a special depreciation allowance. in chapter 4. Credit for Prior Year Depreciating the remaining cost. available at www. 2008-65 on page 1082 of Internal Revenue For information about how to determine the cost or other Bulletin 2008-44. Rev.000) as a special depreciation allowance for 2009. tions that reduce depreciable basis. involuntary conversion. For a discussion of business/ Revenue Bulletin 2009-06. available at www.irs.gov/pub/ investment use. See Figuring the Deduction for The following are examples of some credits and deduc- Property Acquired in a Nontaxable Exchange.pdf. qualified cellulosic figure his special depreciation allowance of $62. remaining carryover basis to figure your regular MACRS depreciation deduction. see What Is the Basis of Your Deprecia- irb08-44. and Rev.000 ($250. qualified Recovery Assistance property. special allowances for all property in such class placed in see section 1016 of the Internal Revenue Code. Proc. He did not elect to Adjusted basis claim a section 179 deduction. He uses the remaining $62. you must reduce the carryover basis of the property tions allocable to the property. Therefore. for any class of property. enter the special you acquire qualified property in a like-kind exchange or allowance on line 25 in Part V of Form 4562. For qualified GO ery Assistance property) of the property’s cost as a section Zone property.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.000 + 30% if applicable). On November 1. ($125.irs. The • Any section 179 deduction. you can use the remaining cost to figure your regular nal Revenue Bulletins available at www. enter the special allowance on line 14 in Part II of Form 4562. gov/pub/irs-irbs/irb09-29.gov/irb. and credit for employer-provided childcare fa- cilities and services. see Partial business or investment use irs-irbs/irb09-06.000 for qualified Recov- multiply the depreciable basis by 30%. 2009. the depreciable basis of the qualified property by 50% (or except that Tom elects to deduct $325. enhanced oil recovery credit. Gen- eral Business Credit.000. For qualified property other than listed property. depreciation allowance. and related instructions.500 of cost erty. by the allowance before figuring your regular MACRS depreciation deduction. 2009-16 on page 449 of Internal ble Property in chapter 1. How Can You Elect Not To • Basis adjustment to investment credit property under Claim an Allowance? section 50(c) of the Internal Revenue Code. Additional guidance may also be available in later Inter. Proc. you must reduce the depreciable basis of the property by the special depreciation allowance before fig- How Much Can You Deduct? uring your regular MACRS depreciation deduction. In the year you claim the allow- Depreciable basis. TIP tax year. qualified disaster assistance prop. For qualified Liberty Zone property.irs. If qualified property that is listed property. You can elect. see Form 3800. 2009-33 on page 150 under Property Used in Your Business or In- of Internal Revenue Bulletin 2009-29. 179 deduction. The facts are the same as in Example 1. Chapter 3 Claiming the Special Depreciation Allowance Page 33 . Rev. • Any disabled access credit. reduced by the total amount of any credits and deduc.000 of cost to figure his Placed in service regular MACRS depreciation deduction for 2009 and later years. you can take the full amount of a special After you figure your special allowance. come-Producing Activity in chapter 1. Tom Brown bought and placed in service in his business qualified Recovery (see Glossary): Assistance property that cost $450. multiply the depreciable basis by 50%. and certain qualified property acquired after Decem- to figure his regular MACRS depreciation deduction for ber 31.pdf. under How Is the Depreciation Deduction Figured. Terms you may need to know Example 1. After you figure your Minimum Tax — Corporations. Proc. MUST be removed before printing. For Like-kind exchanges and involuntary conversions.Page 33 of 120 of Publication 946 15:26 . Basis He uses the remaining $225.000 × 50%). Figure the special depreciation allowance by multiplying Example 2.irs. This is the property’s cost or other ance (the year you place in service the property received in basis multiplied by the percentage of business/investment the exchange or dispose of involuntarily converted prop- use.500 biofuel plant property. 2009 and later years. He deducts 50% of the cost ($225. not to deduct any For additional credits and deductions that affect basis. service during the tax year. 2007. you can use the depreciation allowance.pdf. erty). He uses the remaining $125. excess basis (the part of the acquired property’s basis that • Any deduction for removal of barriers to the disabled exceeds its carryover basis) is also eligible for a special and the elderly.gov/pub/irs-irbs/ basis of property. special depreciation allowance for your qualified property. the increased dollar limit of $100. Form 8827.

Page 34 of 120 of Publication 946 15:26 - 13-MAY-2010

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

To make an election, attach a statement to your return the special depreciation allowance. For additional gui-
indicating what election you are making and the class of dance, see Notice 2008-67 on page 307 of Internal Reve-
property for which you are making the election. nue Bulletin 2008-32.
When to make election. Generally, you must make the Recapture of allowance for qualified disaster assis-
election on a timely filed tax return (including extensions) tance property. If, in any year after the year you claim the
for the year in which you place the property in service. special depreciation allowance for qualified disaster assis-
However, if you timely filed your return for the year tance property, the property ceases to be used in the
without making the election, you can still make the election applicable disaster area, you may have to recapture as
by filing an amended return within 6 months of the due date ordinary income the excess benefit you received from
of the original return (not including extensions). Attach the claiming the special depreciation allowance.
election statement to the amended return. On the For additional guidance, see Notice 2008-67 on page
amended return, write “Filed pursuant to section 307 of Internal Revenue Bulletin 2008-32.
301.9100-2.”
Revoking an election. Once you elect not to deduct a
special depreciation allowance for a class of property, you
cannot revoke the election without IRS consent. A request
to revoke the election is a request for a letter ruling. 4.
If you elect not to have any special allowance
!
CAUTION
apply, the property may be subject to an alterna-
tive minimum tax adjustment for depreciation. Figuring Depreciation
Under MACRS
When Must You Recapture an
Introduction
Allowance? The Modified Accelerated Cost Recovery System
When you dispose of property for which you claimed a (MACRS) is used to recover the basis of most business
special depreciation allowance, any gain on the disposition and investment property placed in service after 1986.
is generally recaptured (included in income) as ordinary MACRS consists of two depreciation systems, the General
income up to the amount of the special depreciation allow- Depreciation System (GDS) and the Alternative Deprecia-
ance previously allowed or allowable. See When Do You tion System (ADS). Generally, these systems provide dif-
Recapture MACRS Depreciation in chapter 4 for more ferent methods and recovery periods to use in figuring
information. depreciation deductions.
To be sure you can use MACRS to figure depreci-
Recapture of allowance deducted for qualified GO
Zone property. If, in any year after the year you claim the !
CAUTION
ation for your property, see Which Method Can
You Use To Depreciate Your Property in
special depreciation allowance for qualified GO Zone prop- chapter 1.
erty (including specified GO Zone extension property), the
property ceases to be used in the GO Zone, you may have This chapter explains how to determine which MACRS
to recapture as ordinary income the excess benefit you depreciation system applies to your property. It also dis-
received from claiming the special depreciation allowance. cusses other information you need to know before you can
For additional guidance, see Notice 2008-25 on page 484 figure depreciation under MACRS. This information in-
of Internal Revenue Bulletin 2008-9. cludes the property’s recovery class, placed in service
date, and basis, as well as the applicable recovery period,
Qualified cellulosic biomass ethanol plant property convention, and depreciation method. It explains how to
and qualified cellulosic biofuel plant property. If, in use this information to figure your depreciation deduction
any year after the year you claim the special depreciation and how to use a general asset account to depreciate a
allowance for any qualified cellulosic biomass ethanol group of properties. Finally, it explains when and how to
plant property or qualified biofuel plant property, the prop- recapture MACRS depreciation.
erty ceases to be qualified cellulosic biomass ethanol plant
property or qualified biofuel plant property, you may have Useful Items
to recapture as ordinary income the excess benefit you You may want to see:
received from claiming the special depreciation allowance.
Publication
Recapture of allowance for qualified Recovery Assis-
tance property. If, in any year after the year you claim the ❏ 225 Farmer’s Tax Guide
special depreciation allowance for qualified Recovery As-
❏ 463 Travel, Entertainment, Gift, and Car
sistance property, the property ceases to be used in the
Expenses
Kansas disaster area, you may have to recapture as ordi-
nary income the excess benefit you received from claiming ❏ 544 Sales and Other Dispositions of Assets

Page 34 Chapter 4 Figuring Depreciation Under MACRS

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❏ 551 Basis of Assets • All property used predominantly in a farming busi-
ness and placed in service in any tax year during
❏ 587 Business Use of Your Home (Including Use
which an election not to apply the uniform capitaliza-
by Daycare Providers)
tion rules to certain farming costs is in effect.
Form (and Instructions) • Any property imported from a foreign country for
which an Executive Order is in effect because the
❏ 2106 Employee Business Expenses
country maintains trade restrictions or engages in
❏ 2106-EZ Unreimbursed Employee Business other discriminatory acts.
Expenses
❏ 4562 Depreciation and Amortization If you are required to use ADS to depreciate your
See chapter 6 for information about getting publications !
CAUTION
property, you cannot claim any special deprecia-
tion allowance (discussed in chapter 3) for the
and forms. property.

Electing ADS. Although your property may qualify for
Which Depreciation System GDS, you can elect to use ADS. The election generally
must cover all property in the same property class that you
(GDS or ADS) Applies? placed in service during the year. However, the election for
residential rental property and nonresidential real property
Terms you may need to know can be made on a property-by-property basis. Once you
(see Glossary): make this election, you can never revoke it.
You make the election by completing line 20 in Part III of
Listed property Form 4562.
Nonresidential real property
Placed in service
Which Property Class Applies
Property class
Recovery period
Under GDS?
Residential rental property Terms you may need to know
(see Glossary):
Tangible property
Tax exempt Class life
Nonresidential real property
Your use of either the General Depreciation System (GDS) Placed in service
or the Alternative Depreciation System (ADS) to depreci- Property class
ate property under MACRS determines what depreciation
method and recovery period you use. You generally must Recovery period
use GDS unless you are specifically required by law to use Residential rental property
ADS or you elect to use ADS.
Section 1245 property
If you placed your property in service in 2009, complete
Part III of Form 4562 to report depreciation using MACRS. Section 1250 property
Complete section B of Part III to report depreciation using
GDS, and complete section C of Part III to report deprecia-
tion using ADS. If you placed your property in service The following is a list of the nine property classifications
before 2009 and are required to file Form 4562, report under GDS and examples of the types of property included
depreciation using either GDS or ADS on line 17 in Part III. in each class. These property classes are also listed under
column (a) in section B, Part III, of Form 4562. For detailed
Required use of ADS. You must use ADS for the follow- information on property classes, see Appendix B, Table of
ing property. Class Lives and Recovery Periods, in this publication.
• Listed property used 50% or less in a qualified busi- 1. 3-year property.
ness use. See chapter 5 for information on listed
property. a. Tractor units for over-the-road use.
• Any tangible property used predominantly outside b. Any race horse over 2 years old when placed in
the United States during the year. service. (All race horses placed in service after
December 31, 2008, and before January 1, 2014,
• Any tax-exempt use property. are deemed to be 3-year property, regardless of
• Any tax-exempt bond-financed property. age.)

Chapter 4 Figuring Depreciation Under MACRS Page 35

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c. Any other horse (other than a race horse) over 12 c. Any municipal wastewater treatment plant.
years old when placed in service.
d. Any qualified leasehold improvement property
d. Qualified rent-to-own property (defined later). (defined later) placed in service before January 1,
2010.
2. 5-year property.
e. Any qualified restaurant property (defined later)
a. Automobiles, taxis, buses, and trucks. placed in service before January 1, 2010.
b. Computers and peripheral equipment. f. Initial clearing and grading land improvements for
gas utility property.
c. Office machinery (such as typewriters, calcula-
tors, and copiers). g. Electric transmission property (that is section
1245 property) used in the transmission at 69 or
d. Any property used in research and experimenta- more kilovolts of electricity placed in service after
tion. April 11, 2005. See Natural gas gathering line,
e. Breeding cattle and dairy cattle. natural gas distribution line, and electric transmis-
sion property, later.
f. Appliances, carpets, furniture, etc., used in a resi-
dential rental real estate activity. h. Any natural gas distribution line placed in service
after April 11, 2005. See Natural gas gathering
g. Certain geothermal, solar, and wind energy prop-
line, natural gas distribution line, and electric
erty.
transmission property, later.
h. Certain farm machinery or equipment (defined
i. Any qualified retail improvement property placed
later) placed in service before January 1, 2010.
in service before January 1, 2010.
3. 7-year property.
6. 20-year property.
a. Office furniture and fixtures (such as desks, files,
a. Farm buildings (other than single purpose agricul-
and safes).
tural or horticultural structures).
b. Agricultural machinery and equipment.
b. Municipal sewers not classified as 25-year prop-
c. Any property that does not have a class life and erty.
has not been designated by law as being in any
c. Initial clearing and grading land improvements for
other class.
electric utility transmission and distribution plants.
d. Certain motorsports entertainment complex prop-
erty placed in service before January 1, 2010 (de- 7. 25-year property. This class is water utility property,
fined later). which is either of the following.
e. Any natural gas gathering line placed in service a. Property that is an integral part of the gathering,
after April 11, 2005. See Natural gas gathering treatment, or commercial distribution of water, and
line, natural gas distribution line, and electric that, without regard to this provision, would be
transmission property, later. 20-year property.
4. 10-year property. b. Municipal sewers other than property placed in
service under a binding contract in effect at all
a. Vessels, barges, tugs, and similar water transpor- times since June 9, 1996.
tation equipment.
b. Any single purpose agricultural or horticultural 8. Residential rental property. This is any building or
structure. structure, such as a rental home (including a mobile
home), if 80% or more of its gross rental income for
c. Any tree or vine bearing fruits or nuts. the tax year is from dwelling units. A dwelling unit is
d. Qualified small electric meter and qualified smart a house or apartment used to provide living accom-
electric grid system (defined later) placed in serv- modations in a building or structure. It does not in-
ice on or after October 3, 2008. clude a unit in a hotel, motel, or other establishment
where more than half the units are used on a tran-
5. 15-year property. sient basis. If you occupy any part of the building or
structure for personal use, its gross rental income
a. Certain improvements made directly to land or includes the fair rental value of the part you occupy.
added to it (such as shrubbery, fences, roads,
9. Nonresidential real property. This is section 1250
sidewalks, and bridges).
property, such as an office building, store, or ware-
b. Any retail motor fuels outlet (defined later), such house, that is neither residential rental property nor
as a convenience store. property with a class life of less than 27.5 years.

Page 36 Chapter 4 Figuring Depreciation Under MACRS

2008. the customer can either continue to use the A retail motor fuels outlet does not include any facility property by making the next payment or return the related to petroleum and natural gas trunk pipelines. Any machinery rent-to-own agreement is of a type that may be used by the or equipment (other than grain bins. • Providing real-time. tions. and the beginning date. ther all the required payments or the early purchase poses of being subject to a rent-to-own contract. Chapter 4 Figuring Depreciation Under MACRS Page 37 . prove that this property is qualified rent-to-own property. televisions. after December 31. and management placed in service after • The property is tangible personal property of a type October 3. at the end of each weekly or monthly payment pe- riod. cal energy or a provider of electrical energy services. • Provides that the customer has no right to sell. pawn. Consumer durable property does not include real property. devoted to petroleum marketing sales. and guage. However.Page 37 of 120 of Publication 946 15:26 . motor vehicles. Real property is a retail motor payments that can be either level or decreasing. you still fences. or trailers.” “Lease Agree. mortgage. It includes computers and peripheral equip. or other land improvements) used in a farming can treat this property as qualified property as long as it business (as defined in section 263A(e)(4) of the Internal does not represent a significant portion of your leasing Revenue Code) where the original use begins with you property. If your property is not listed above. cotton ginning assets. quality. Qualified rent-to-own the rent-to-own dealer until the customer makes ei- property is property held by a rent-to-own dealer for pur. It is payments required under the contract to acquire le- tangible personal property generally used in the home for gal title. • Provides a beginning date and a maximum period of • Providing real-time analysis of an event prediction based on collected data that can be used to provide time. The property class is generally the payments. Smart grid property includes electronics and related equip- Rent-to-own contract. personal use. • Provides for total payments that do not exceed • 50% or more of the gross revenues generated from $10. • Provides for regular periodic (weekly or monthly) Retail motor fuels outlet. and is placed in service before sent a significant portion of your leasing property. for which the contract can be in performance. The events must ordinary course of your business for the use of con. sub- ment. If some of the property you rent to others under a Certain farm machinery or equipment. two-way communications to ment with Ownership Option. collecting. This is any lease for the use of ment that is capable of: consumer property between a rent-to-own dealer and a customer who is an individual which— • Sensing. MUST be removed before printing. or motorcycles during the 36-month period after the first day of the month • You regularly enter into rent-to-own contracts in the in which the facility is placed in service. or otherwise dispose camcorders. and monitoring data of or from all portions of a utility’s electric distribution grid. you can determine its property in good working order with no further obli- property class from the Table of Class Lives and Recovery gations and no entitlement to a return of any prior Periods in Appendix B.400 square feet. stereos. aircraft. Motorsports entertainment complex. You are a rent-to-own dealer if track facility permanently situated on land that hosts one or you meet all the following requirements. renters for either personal or business purposes. Qualified smart electric grid system. appliances. property. • It is not larger than 1. pledge. 2008. more racing events for automobiles. This is a racing Rent-to-own dealer. 2010. • Is titled “Rent-to-Own Agreement. effect (including renewals or options to extend). refrigerators. • Provides that legal title to the property remains with Qualified rent-to-own property. if this dual-use property does repre. by a taxpayer who is a supplier of electri- generally used within the home for personal use. • Provides that the customer has no legal obligation to • 50% or more of the floor space in the property is make all payments outlined in the contract and that. If fuels outlet if it is used to a substantial extent in the retail the payments are decreasing. same as the GDS recovery period indicated in the table. A qualified smart • A substantial portion of these contracts end with the electric grid system means any smart grid property used as customer returning the property before making all part of a system for electric distribution grid communica- the payments required to transfer ownership. not to exceed 156 weeks or 36 months from electric distribution system reliability. lease. washing machines and of the property until all contract payments have been dryers. videocassette recorders. furniture. the normal retail price of the property plus interest.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. sumer property.000 for each item of property. you must January 1. not it is also used to sell food or other convenience items) • Provides for total payments that generally exceed and meets any one of the following three tests. and other similar consumer durable made. the property are derived from petroleum sales. trucks. boats. monitoring. no payment can be marketing of petroleum or petroleum products (whether or less than 40% of the largest payment.” or other similar lan- monitor or to manage the grid. be open to the public for the price of admission.

Therefore. An exchange of property by a corporation solely for stock or securities in another corporation in a • The property must not be self-constructed property reorganization. reconditioned or rebuilt property you acquired. con- property is any section 1250 property that is a building structed. as dential real property. or production of the property. Any natural nal lessor by reason of the lessor’s death or in any of the gas gathering line placed in service after April 11. and first used. A complete liquidation of a subsidiary. 2010. or produce for your own use). 2005. • Provides all commercial and residential customers of this is any improvement to an interior part of a building such supplier or provider with net metering. construc- square footage must be devoted to preparation of meals tion. an improvement made by the lessor does not qualify as qualified leasehold improvement property to Natural gas gathering line.Page 38 of 120 of Publication 946 15:26 . meals. If you converted property held for personal use Page 38 Chapter 4 Figuring Depreciation Under MACRS . is following types of transactions. MUST be removed before printing. 2005. if you began the manufacture. or produced by you. property used by any person basis in the property represents the carryover basis. Examples include the following. or production of the property before April Qualified restaurant property. Placed in service • Provides for the exchange of information between the supplier or provider and the customer’s smart You begin to claim depreciation when your property is electric meter in support of time-based rates or other placed in service for either use in a trade or business or the forms of demand response. Property that is manufactured. if the following require- trade or business as qualified leasehold improve. Original use means the 3. and electric transmission prop- 1. erty (that is section 1245 property) used in the transmis- sion at 69 or more kilovolts of electricity and any natural 2.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. a specific use. if any. Prop- erty. ment property and the taxpayer retains a substantial interest in the trade or business. provided all of the requirements dis. In addition. It is therefore not necessarily the date it is mation to customers electronically. constructed. treated as 7-year property. 2010) that is nonresi. A mere change in the form of conducting the trade or gas distribution line placed in service after April 11. Qualified leasehold improvement property. con- struction. A transfer to a corporation controlled by the trans- feror. provider. and before under a written binding contract entered into by you January 1. 2005. Original or use includes additional capital expenditures you in- 4. • The property must not be placed in service under a binding contract in effect before April 12. original use does not include the cost of to the transferor’s or distributor’s basis in the prop. production of income. more than 50% of the building’s or a related party before the manufacture. complies with applicable federal and state laws and cussed in chapter 3 under Qualified leasehold regulations for providing electricity to the supplier or improvement property are met. Generally. A qualified smart electric meter is any time-based meter and related communication equipment which is placed in service by a supplier of What Is the Placed in Service electric energy or a provider of electric energy services and which is capable of being used by you as part of a system Date? that: Terms you may need to know • Measures and records electricity usage data on a (see Glossary): time-differentiated basis in at least 24 separate time segments per day. 2008. Net me- (placed in service before January 1. or re. The placed in service date for your • Provides data to the supplier or provider so that the property is the date the property is ready and available for supplier or provider can provide energy usage infor. (property you manufacture. construct. tering means allowing a customer a credit. business so long as the property is retained in the are treated as 15-year property. is considered to and seating for on-premise consumption of prepared be manufactured. 2005. A like-kind exchange. c. How- your basis in the property is determined by reference ever. Certain nonrecognition transactions to the extent that curred to recondition or rebuild your property. Also. 2005. and electric transmission property. 2005. or produced for your use by another person placed in service after December 31. whether or not acquisition of real property to the extent that the by you. before April 12. involuntary conversion. Qualified smart electric meter. Qualified restaurant 12. A transaction to which section 381(a) applies. natural gas distribution any subsequent owner unless it is acquired from the origi- line. erty containing used parts will not be treated as reconditioned or rebuilt if the cost of the used parts a. is not more than 20% of the total cost of the prop- erty. b. is not original use. ments are met. first use to which the property is put. • The original use of the property must have begun with you after April 11.

MUST be removed before printing. used. . . . see section 1016 of the Internal Revenue Code. . . See Placed in Service under When Does Depreciation Begin and End in chapter 1 for examples Applies? illustrating when property is placed in service. . • Any deduction under section 179D of the Internal Property Class Recovery Period Revenue Code for certain energy efficient commer- cial building property placed in service after Decem. 25 years3 • Any deduction for removal of barriers to the disabled Residential rental property . . . . . 1993). . 431. . Terms you may need to know (see Glossary): What Is the Basis for Active conduct of a trade or business Depreciation? Basis Terms you may need to know Improvement (see Glossary): Listed property Basis Nonresidential real property Placed in service Property class The basis for depreciation of MACRS property is the prop- erty’s cost or other basis multiplied by the percentage of Recovery period business/investment use. . .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. The recovery period of property is the number of years tions that reduce basis. . . . 7 years • Any deduction under section 179E of the Internal 10-year property . Reduce that amount by any credits and deductions allocable to the property. For a discussion of business/ Residential rental property investment use. 20 years ber 20. . . to use in a trade or business or for the production of income. . . . III of Form 4562. . 1993). . . . 1996. It is deter- mined based on the depreciation system (GDS or ADS) • Any deduction for section 179 property. 2005. . . . see Partial business or investment use under Property Used in Your Business or In. . . . . . 20-year property .5 years if placed in • Any special depreciation allowance. covery periods. 25-year property . . . . • Any deduction under section 179C of the Internal Under GDS. . The following are examples of some credits and deduc. . . 2005. . . . For information about how to determine the cost or other basis of property. . . . 1996. . 1997. . or if construction began before May 13. . . . . . . . . 239 cilities and services. . 2006. 39 years4 15 years for qualified rent-to-own property placed in service • Any disabled access credit. Recovery Periods Under GDS ronmental Protection Agency sulfur regulations. Table of Class Lives and Chapter 4 Figuring Depreciation Under MACRS Page 39 . . . . 1994. service before May 13. . enhanced oil recovery before August 6.5 years for property placed in service before May 13. . . 15 years2 equipment property placed in service after Decem. . . . .5 years and the elderly. . . . . years for property that is a retail motor fuels outlet placed in service before August 20. if the purchase or construction of the property is under a binding contract in effect before May Enter the basis for depreciation under column (c) in Part 13. 1993 For additional credits and deductions that affect basis. 5-year property . . . . . . or under a binding contract in effect before June 10. Section 1245 property come-Producing Activity in chapter 1. . . . . . see What Is the Basis of The GDS recovery periods for property not listed above Your Depreciable Property in chapter 1. property that is not qualified Indian reserva- Revenue Code for certain qualified refinery property tion property is depreciated over one of the following re- placed in service after August 8. years for property placed in service before June 13. . . . 3-year property . 1996 (31. over which you recover its cost or other basis. . (or before January 1. Nonresidential real property . . credit. . . 5 years 7-year property . treat the property as being placed in service on the Which Recovery Period conversion date. . • Any deduction under section 179B of the Internal Revenue Code for capital costs to comply with Envi. . and credit for employer-provided childcare fa. . . . • Basis adjustment for investment credit property 320 under section 50(c) of the Internal Revenue Code. . . . . 3 years1 ber 31. . . can be found in Appendix B. . 27. . . . . . . 1993. . .Page 39 of 120 of Publication 946 15:26 . . . 10 years Revenue Code for qualified advanced mine safety 15-year property . unless you elected to depreciate it over 15 years. . .

but is not limited to. Property eligible for the shorter re- erty Class Applies Under GDS. . . The term Indian reservation means a 6 years A-23 reservation as defined in section 3(d) of the Indian Financ- ing Act of 1974 (25 U. . if tion on a regular basis. .S. See Publication 587 for a 3. . . . or III gaming activities. 22 years • It is placed in service in connection with the active conduct of a trade or business within a reservation. see IF your recovery period is: THEN use the following Related persons in the discussion on property owned or table in Appendix A: used in 1986 under Which Method Can You Use To Depre- 2 years A-21 ciate Your Property in chapter 1 for a description of related persons. . residential rental property. . . . . . . . . or reservation to include former Indian reservations in A-18 Oklahoma. . Recovery Periods. . These including depreciation. A-17.C. Property acquired directly or indirectly from a related GDS. tial real property over 39 years (31.” see Notice 98-45 in Internal 22 years A-24 Revenue Bulletin 1998-35. 2 years • It is qualified property. . A-4.S.C. or Indian Child Welfare Act of 1978 (25 U. covery periods are 3-. . . . . You must use this prop- under column (d) in section B of Part III. The recovery periods for qualified property you placed in service on an Indian reservation after 1993 and before Qualified infrastructure property. you own and the building is residential rental property as defined earlier under Which Property Class Applies Under 2.5 years. . . unless already erty predominantly in the active conduct of a trade or shown (for 25-year property. 3-year property . . . roads. 9 years • It is available to the general public. 5-. For purposes of item (2) above.5 years if you began 1. . 15-year property . . . . . 1993). . . . . 1903(10)). that was your personal home before 1987. . . . The rental of real and nonresidential real property). family residence and you begin to use part of your home as an office. . .Page 40 of 120 of Publication 946 15:26 . . 15-. . Use this chart to find the correct percentage table to use power lines. . Residential rental property and nonresi- dential real property are defined earlier under Which Prop. 4 years 10-year property . 12 years Nonresidential real property . 3 years it is outside the reservation. . . or housing class I. cations facilities. . 7-year property . Infrastructure property includes. . . . . . . .S. A-2. 20-year property . . .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. you depreciate 4. 1452(d)) or section 4(10) of the 9 years A-14. Nonresidential real property is defined earlier under Which Property Class Applies Under GDS. . or A-5 4 years A-22 Indian reservation. . .C. . . A-17. . . Property used or located outside an Indian reserva- using it for business before May 13. Property placed in service for purposes of conducting discussion of the tests you must meet to claim expenses. . . . 3 years A-1. Related person. . mine whether property is qualified without regard to the election to use ADS and after applying the spe- Indian Reservation Property cial rules for listed property not used predominantly for qualified business use (discussed in chapter 5). Any property you must depreciate under ADS. . . . for the business use of your home. . . A-18 Section 3(d) of the Indian Financing Act of 1974 defines 12 years A-14. . property that is located on an Indian reservation is treated as the active conduct of a trade or business within an Office in the home. A-3. A-16. . and 20-year property Enter the appropriate recovery period on Form 4562 and nonresidential real property. . . . . railroad spurs. and communi- for qualified Indian reservation property. However. Qualified Recovery infrastructure property is property that meets all the follow- Property Class Period ing rules. Qualified property. as defined earlier. . 2703). For a definition of the term “former Indian reservations in Oklahoma. . A-16. . . . outside the reservation that is used to connect with quali- fied infrastructure property within the reservation. other than qualified infra- your home is an apartment in an apartment building that structure property. . MUST be removed before printing. . 7-. Page 40 Chapter 4 Figuring Depreciation Under MACRS . 10-. Deter- it as residential rental property over 27. Item (1) above 2010 are shorter than those listed earlier. . activities are defined in section 4 of the Indian Regu- Home changed to rental use. The following property is not qualified property. II. 6 years • It benefits the tribal infrastructure. If your home is a personal-use single Indian reservation. . The following does not apply to qualified infrastructure property located table shows these shorter recovery periods. . . . A-15. . except that 5-year property . water systems. .5 years. . rental property over 27. A-15. . . . depreciate the part used as an office as residential person. . depreciate that part of your home as nonresiden. If you begin to rent a home latory Act (25 U. . . business within an Indian reservation.

. . . residential rental property. . . 5 years years (39 years under ADS). Recovery If the improvement you make is qualified lease- Property Period ! CAUTION hold improvement property or qualified restaurant property (defined earlier under Which Property Rent-to-own property . Recovery Periods Under ADS • The date you place the addition or improvement in service. . . . . . . . . . . . . . . . . . . . . Do You Treat Repairs and Improvements in chapter 1 for a Your use of the mid-month convention is indicated by definition of improvements. . . . 15 years years because the home to which the addition is made Any tree or vine bearing fruit or nuts . . . averaging conventions establish when the nonresidential real property are defined earlier under recovery period begins and ends. . . . . . that a one-half month of depreciation is allowed for the erty is treated as separate depreciable property. . original property if you had placed it in service at the same time you placed the addition or improvement in service. . . . . . 50 years Recovery period The ADS recovery periods for property not listed above Residential rental property can be found in the tables in Appendix B. . . . . . . . . . . MUST be removed before printing. . . . . See How month the property is placed in service or disposed of. . . . . . . table shows some of the ADS recovery periods. . . . . . . High technology telephone station equipment installed on customer Example. . The following you made the addition or improvement. . . . 12 years MACRS to figure your depreciation deduction for the addi- Natural gas gathering lines .Page 41 of 120 of Publication 946 15:26 . . Under GDS. . . . . . . . . qualified leasehold improvement property. . . recovery period for any property leased under a lease agreement to a tax-exempt organization. . 5 years and place the addition in service this year. . . residential rental property. The ADS in the year you dispose of the property. . . . . . you treat all property placed in Additions and Improvements service or disposed of during a month as placed in service or disposed of at the midpoint of the month. . . . . . . improvements for gas utility property . This means An addition or improvement you make to depreciable prop. . . . 40 years Placed in service Railroad grading and tunnel bore . . . . . . . . . . . The convention you use Which Property Class Applies Under GDS. the GDS recovery period is 15 Computers and peripheral equipment . . . 20 years would be residential rental property if you had placed it in Initial clearing and grading land service this year. ciable bases of MACRS property you placed in service Chapter 4 Figuring Depreciation Under MACRS Page 41 . 4 years Automobiles and light duty trucks . . . . . Under this convention. 39 years Convention Any qualified restaurant property . Use this convention for unit. . . The mid-quarter convention. . . . . 40 years Section 1245 real property not listed in Nonresidential real property Appendix B . the property class for the addition is Single purpose agricultural and horticultural residential rental property and its recovery period is 27. . 5 years renting out since 1981. . . 35 years Any qualified leasehold improvement Basis property . . . .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. 14 years tion. . . . . 30 years (see Glossary): Natural gas distribution lines . . . . . . . . . . . . . . . and any railroad grading or tunnel bore. . . Use this convention if the The recovery period begins on the later of the following mid-month convention does not apply and the total depre- dates. . You own a rental home that you have been premises . . you would use Personal property with no class life . . . 20 years Initial clearing and grading land improvements for electric utility transmission and distribution plants . . . . . . . . . If you put an addition on the home High technology medical equipment . . and Under MACRS. . governmental The mid-month convention. determines the number of months for which you can claim depreciation in the year you place property in service and Tax-exempt use property subject to a lease. . . . . . 39 years Nonresidential real property . 40 years Disposition Residential rental property . . . . . . . . . . . cannot be less than 125% of the lease term. . . . . . The recovery periods for most property generally are • The date you place in service the property to which longer under ADS than they are under GDS. . . . . . . . or foreign person or entity (other than a partnership) nonresidential real property. Its property class and recovery the “MM” already shown under column (e) in Part III of period are the same as those that would apply to the Form 4562. . . . 5 years Class Applies Under GDS). . . .5 structures . . . Rent-to-own property. . 25 years Which Convention Applies? Electric transmission property used in the transmission at 69 or more kilovolts of Terms you may need to know electricity . . . . . . quali- fied restaurant property. . . . . . .

residential rental property. 7-. you treat all property placed in service or disposed of during a tax year as placed in disposed of. any rail. Table 4-1. This means that 11/2 months of depreciation is applies.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. the year the property is placed in service or disposed of. Use this convention if neither placed in service or disposed of at the midpoint of that the mid-quarter convention nor the mid-month convention quarter.S. 7-. 7-. 5-. Depreciation Methods Note. and 10-year property • Provides a greater deduction during the DB earlier recovery years • Changes to SL when that method provides an equal or greater deduction GDS using 150% • All farm property (except real property) • Provides a greater deduction during the DB • All 15. 2010 • Qualified restaurant property placed in service before January 1. enter “MQ” under column (e) means that a one-half year of depreciation is allowed for in Part III of Form 4562. service or disposed of at the midpoint of the year. you treat all property placed in service or disposed of during any quarter of the tax year as The half-year convention. 2010 • Tax-exempt property • Tax-exempt bond-financed property • Farm property used when an election not to apply the uniform capitalization rules is in effect • Imported property3 • Any property for which you elect to use this method2 1The MACRS percentage tables in Appendix A have the switch to the straight line method built into their rates 2See section 168(g)(7) of the Internal Revenue Code. 15-. the depreciable basis of property you placed in service during the road grading or tunnel bore. MUST be removed before printing. This If you use this convention.and 20-year property (except qualified earlier recovery years leasehold improvement property and qualified • Changes to SL when that method provides restaurant property placed in service before an equal or greater deduction1 January 1. allowed for the quarter the property is placed in service or Under this convention. and 20-year property2 • Property for which you elected section 168(k)(4) ADS using SL • Listed property used 50% or less for business • Provides for equal yearly deductions • Property used predominantly outside the U. allowance. during the last 3 months of the tax year (excluding nonresi. 5-. and 10-year property GDS using SL • Nonresidential real property • Provides for equal yearly deductions (except • Qualified leasehold improvement property for the first and last years) placed in service before January 1. Method Type of Property Benefit GDS using 200% • Nonfarm 3-. 5-. • Qualified leasehold improvement property placed in service before January 1. property placed in service and CAUTION disposed of in the same year. 2010 • Residential rental property • Trees or vines bearing fruit or nuts • Water utility property • All 3-.Page 42 of 120 of Publication 946 15:26 . 2010) • Nonfarm 3-. 10-. and property that is being tax year reflects the reduction in basis for amounts ex- depreciated under a method other than MACRS) are more pensed under section 179 and the part of the basis of than 40% of the total depreciable bases of all MACRS property attributable to personal use. ! mid-quarter convention applies. it does not reflect any reduction in basis for any special depreciation property you placed in service during the entire year. 3See section 168(g)(6) of the Internal Revenue Code Page 42 Chapter 4 Figuring Depreciation Under MACRS . However. Under this convention. The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. For purposes of determining whether the dential real property. 2010 • Qualified restaurant property placed in service before January 1.

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

If you use this convention, enter “HY” under column (e) Fruit or nut trees and vines. Depreciate trees and vines
in Part III of Form 4562. bearing fruit or nuts under GDS using the straight line
method over a recovery period of 10 years.

ADS required for some farmers. If you elect not to apply
Which Depreciation Method the uniform capitalization rules to any plant produced in
Applies? your farming business, you must use ADS. You must use
ADS for all property you place in service in any year the
election is in effect. See the regulations under section
Terms you may need to know 263A of the Internal Revenue Code for information on the
(see Glossary): uniform capitalization rules that apply to farm property.

Declining balance method
Electing a Different Method
Listed property
As shown in Table 4-1, you can elect a different method for
Nonresidential real property depreciation for certain types of property. You must make
Placed in service the election by the due date of the return (including exten-
sions) for the year you placed the property in service.
Property class However, if you timely filed your return for the year without
Recovery period making the election, you still can make the election by filing
an amended return within 6 months of the due date of the
Residential rental property return (excluding extensions). Attach the election to the
Straight line method amended return and write “Filed pursuant to section
301.9100-2” on the election statement. File the amended
Tax exempt return at the same address you filed the original return.
Once you make the election, you cannot change it.
MACRS provides three depreciation methods under GDS If you elect to use a different method for one item
and one depreciation method under ADS. ! in a property class, you must apply the same
method to all property in that class placed in
• The 200% declining balance method over a GDS CAUTION

recovery period. service during the year of the election. However, you can
make the election on a property-by-property basis for non-
• The 150% declining balance method over a GDS residential real and residential rental property.
recovery period.
• The straight line method over a GDS recovery pe- 150% election. Instead of using the 200% declining bal-
riod. ance method over the GDS recovery period for nonfarm
property in the 3-, 5-, 7-, and 10-year property classes, you
• The straight line method over an ADS recovery pe- can elect to use the 150% declining balance method. Make
riod. the election by entering “150 DB” under column (f) in Part
III of Form 4562.
For property placed in service before 1999, you
! could have elected the 150% declining balance Straight line election. Instead of using either the 200% or
CAUTION method using the ADS recovery periods for cer- 150% declining balance methods over the GDS recovery
tain property classes. If you made this election, continue to period, you can elect to use the straight line method over
use the same method and recovery period for that prop- the GDS recovery period. Make the election by entering
erty. “S/L” under column (f) in Part III of Form 4562.
Table 4-1 lists the types of property you can depreciate
Election of ADS. As explained earlier under Which De-
under each method. It also gives a brief explanation of the
preciation System (GDS or ADS) Applies, you can elect to
method, including any benefits that may apply.
use ADS even though your property may come under
GDS. ADS uses the straight line method of depreciation
Depreciation Methods for Farm over fixed ADS recovery periods. Most ADS recovery peri-
Property ods are listed in Appendix B, or see the table under Recov-
ery Periods Under ADS, earlier.
If you place personal property in service in a farming Make the election by completing line 20 in Part III of
business after 1988, you generally must depreciate it Form 4562.
under GDS using the 150% declining balance method
unless you are a farmer who must depreciate the property Farm property. Instead of using the 150% declining bal-
under ADS using the straight line method or you elect to ance method over a GDS recovery period for property you
depreciate the property under GDS or ADS using the use in a farming business (other than real property), you
straight line method. You can depreciate real property can elect to depreciate it using either of the following
using the straight line method under either GDS or ADS. methods.

Chapter 4 Figuring Depreciation Under MACRS Page 43

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

• The straight line method over a GDS recovery pe- 1. You must apply the rates in the percentage tables to
riod. your property’s unadjusted basis.
• The straight line method over an ADS recovery pe- 2. You cannot use the percentage tables for a short tax
riod. year. See Figuring the Deduction for a Short Tax
Year, later, for information on the short tax year
rules.

How Is the Depreciation 3. Once you start using the percentage tables for any
item of property, you generally must continue to use
Deduction Figured? them for the entire recovery period of the property.
4. You must stop using the tables if you adjust the basis
Terms you may need to know of the property for any reason other than—
(see Glossary):
a. Depreciation allowed or allowable, or
Adjusted basis b. An addition or improvement to that property that is
Amortization depreciated as a separate item of property.
Basis Basis adjustments other than those made due to the
Business/investment use items listed in (4) include an increase in basis for the
recapture of a clean-fuel deduction or credit and a reduc-
Convention tion in basis for a casualty loss.
Declining balance method
Basis adjustment due to recapture of clean-fuel vehi-
Disposition cle deduction or credit. If you increase the basis of your
Exchange property because of the recapture of part or all of a deduc-
tion for clean-fuel vehicles or the credit for clean-fuel vehi-
Nonresidential real property cle refueling property placed in service before January 1,
Placed in service 2006, you cannot continue to use the percentage tables.
For the year of the adjustment and the remaining recovery
Property class period, you must figure the depreciation deduction yourself
Recovery period using the property’s adjusted basis at the end of the year.
See Figuring the Deduction Without Using the Tables,
Straight line method later.

Basis adjustment due to casualty loss. If you reduce
To figure your depreciation deduction under MACRS, you
the basis of your property because of a casualty, you
first determine the depreciation system, property class,
cannot continue to use the percentage tables. For the year
placed in service date, basis amount, recovery period,
of the adjustment and the remaining recovery period, you
convention, and depreciation method that applies to your
must figure the depreciation yourself using the property’s
property. Then, you are ready to figure your depreciation
adjusted basis at the end of the year. See Figuring the
deduction. You can figure it using a percentage table
Deduction Without Using the Tables, later.
provided by the IRS, or you can figure it yourself without
using the table.
Example. On October 26, 2008, Sandra Elm, a calen-
dar year taxpayer, bought and placed in service in her
Using the MACRS Percentage Tables business in the GO Zone a new item of 7-year property. It
cost $39,000 and she elected a section 179 deduction of
To help you figure your deduction under MACRS, the IRS $24,000. She also took a special depreciation allowance of
has established percentage tables that incorporate the $7,500 [50% of $15,000 ($39,000 − $24,000)]. Her unad-
applicable convention and depreciation method. These justed basis after the section 179 deduction and special
percentage tables are in Appendix A near the end of this depreciation allowance was $7,500 ($15,000 − $7,500).
publication. She figured her MACRS depreciation deduction using the
percentage tables. For 2008, her MACRS depreciation
Which table to use. Appendix A contains the MACRS deduction was $268.
Percentage Table Guide, which is designed to help you
In July 2009, the property was vandalized and Sandra
locate the correct percentage table to use for depreciating
had a deductible casualty loss of $3,000. She must adjust
your property. The percentage tables immediately follow
the property’s basis for the casualty loss, so she can no
the guide.
longer use the percentage tables. Her adjusted basis at the
end of 2009, before figuring her 2009 depreciation, is
Rules Covering the Use of the Tables $4,232. She figures that amount by subtracting the 2008
MACRS depreciation of $268 and the casualty loss of
The following rules cover the use of the percentage tables. $3,000 from the unadjusted basis of $7,500. She must now

Page 44 Chapter 4 Figuring Depreciation Under MACRS

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

figure her depreciation for 2009 without using the percent- 11. Subtract line 10 from line 9. This is your
age tables. tentative basis for depreciation . . . . . . . . . . $
12. Multiply line 11 by .30 if the 30% special
depreciation allowance applies. Multiply line
Figuring the Unadjusted Basis of 11 by .50 if the 50% special depreciation
Your Property allowance applies. This is your special
depreciation allowance. Enter -0- if this is not
You must apply the table rates to your property’s unad- the year you placed the property in service,
justed basis each year of the recovery period. Unadjusted the property is not qualified property, or you
basis is the same basis amount you would use to figure elected not to claim a special allowance . . . $
gain on a sale, but you figure it without reducing your 13. Subtract line 12 from line 11. This is your
original basis by any MACRS depreciation taken in earlier basis for depreciation . . . . . . . . . . . . . . . . .
years. However, you do reduce your original basis by other 14. Depreciation rate (from line 6) . . . . . . . . . . .
amounts, including the following. 15. Multiply line 13 by line 14. This is your
• Any amortization taken on the property. MACRS depreciation deduction . . . . . . . . . . $
*If real estate, do not include cost (basis) of land.
• Any section 179 deduction claimed.
• Any special depreciation allowance taken on the The following example shows how to figure your
property. MACRS depreciation deduction using the percentage ta-
bles and the MACRS worksheet.
For business property you purchase during the year, the
unadjusted basis is its cost minus these and other applica- Example. You bought office furniture (7-year property)
ble adjustments. If you trade property, your unadjusted for $10,000 and placed it in service on August 11, 2009.
basis in the property received is the cash paid plus the You use the furniture only for business. This is the only
adjusted basis of the property traded minus these adjust- property you placed in service this year. You did not elect a
ments. section 179 deduction and the property is not qualified
property for purposes of claiming a special depreciation
MACRS Worksheet allowance so your property’s unadjusted basis is its cost,
$10,000. You use GDS and the half-year convention to
You can use this worksheet to help you figure your depre- figure your depreciation. You refer to the MACRS Percent-
ciation deduction using the percentage tables. Use a sepa- age Table Guide in Appendix A and find that you should
rate worksheet for each item of property. Then, use the use Table A-1. Multiply your property’s unadjusted basis
information from this worksheet to prepare Form 4562. each year by the percentage for 7-year property given in
Table A-1. You figure your depreciation deduction using
Do not use this worksheet for automobiles. Use
the MACRS worksheet as follows.
!
CAUTION
the Depreciation Worksheet for Passenger Auto-
mobiles in chapter 5.
MACRS Worksheet
Keep for Your Records
MACRS Worksheet
Keep for Your Records Part I
1. MACRS system (GDS or ADS) GDS
Part I
2. Property class . . . . . . . . . . . . . . 7-year
1. MACRS system (GDS or ADS) . . . . 3. Date placed in service . . . . . . . . 8/11/09
2. Property class . . . . . . . . . . . . . . . . . 4. Recovery period . . . . . . . . . . . . 7-Year
3. Date placed in service . . . . . . . . . . . 5. Method and convention . . . . . . . 200%DB/Half-Year
4. Recovery period . . . . . . . . . . . . . . . 6. Depreciation rate (from tables) .1429
5. Method and convention . . . . . . . . . .
Part II
6. Depreciation rate (from tables) . . . .
7. Cost or other basis* . . . . . . . . . . $10,000
Part II 8. Business/investment use . . . . . . 100%
7. Cost or other basis* . . . . . . . . . . . . . $ 9. Multiply line 7 by line 8 . . . . . . . . . . . . . $10,000
8. Business/investment use . . . . . . . . . % 10. Total claimed for section 179 deduction
9. Multiply line 7 by line 8 . . . . . . . . . . . . . . . . $ and other items . . . . . . . . . . . . . . . . . . . -0-
10. Total claimed for section 179 deduction and 11. Subtract line 10 from line 9. This is your
other items . . . . . . . . . . . . . . . . . . . . . . . . . $ tentative basis for depreciation . . . . . . . $10,000

Chapter 4 Figuring Depreciation Under MACRS Page 45

. . . . . . do not include cost (basis) of land. . . . . Year Basis Percentage Deduction 1st . . . . .000 2. .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. . MUST be removed before printing. your depreciation deduction for the year of the disposition will be only part of the deprecia- You refer to the MACRS Percentage Table Guide in tion amount for the full year. assume the 1st Furniture 1. $100. . .000 25. . . . Multiply line 11 by . .000 38. . . or you cial depreciation allowance.000 2nd Machine 4. . . the depreciation deduction for 3rd . . . exchange. . which you placed in MACRS depreciation deduction . . . $10. you figure the depreciation for the 2015 . figure the deductible part using the convention that applies to the property.000 4.92 892 use for each property. . .900 • You use GDS for all the properties. office furniture (7-year prop- line 11 by . . .49% $2. .50 if the 50% special erty) for $1. . The sales Recovery Period Ends contract showed that the building cost $100. end of its recovery period. . .000) you placed in service during the year.000. .000. . .1429 property you placed in service during the year is $10.30 if the 30% special Example 2. .000 and placed it in service on March 8. .000. Knowing what table to 2014 . Finally. . . For property for which you 2nd . . You Enter -0. . . . involuntary for the third month in Table A-7a. . .93 893 first 2 years as follows. property if you have permanently withdrawn it from use in March is the third month of your tax year. . elected not to claim a special allowance -0.033% $2. . . . Subtract line 12 from line 11. . Example 1. . . 10. Depreciation rate (from line 6) . .00 $1. This is $5.000 21. your depreciation deduction for items. .000.000 2. . .000 5. so you use Table A-4. . .00 250 • You use the calendar year as your tax year. .000 24. If there are no adjustments to the basis of the property you must use the mid-quarter convention for all three other than depreciation.Page 46 of 120 of Publication 946 15:26 . . .429 service during the last 3 months (the fourth quarter) of your *If real estate.93 893 fourth quarter. . 2nd Furniture 1.000 8.46 446 Year Property Basis Percentage Deduction Examples 1st Machine $4. . the items is qualified property for purposes of claiming a spe- property is not qualified property. Multiply (7-year property) for $4.000 and the land cost $20. so you must first determine if you have your basis for depreciation . 2016 . 10.249 the computer is 5-year property placed in service in the 2013 . because 2012 . 10.000 basis of the computer. . by the percentages sale. 100. . . You bought a building and land for Sale or Other Disposition Before the $120.51 255 • You use the property only for business. 10. . 15. you use Table A-5. . You placed the machine in service in January. . . . . . .if this is not the year you do not elect a section 179 deduction and none of these placed the property in service. and a computer (5-year property) for depreciation allowance applies. . In both examples. This is your The $5. . . $1.000 to use the mid-quarter convention.449 A-2. so multiply the your business or income-producing activity because of its building’s unadjusted basis. During the year.00 1. . Your depreciation deduc- conversion. . The If you sell or otherwise dispose of your property before the building’s unadjusted basis is its original cost. Multiply line 13 by line 14.000 8. abandonment. . $10. 1st Computer 5. .000 10. 2nd Computer 5.000. is more than 40% of the total bases of all property ($10. . . each subsequent year of the recovery period will be as You refer to the MACRS Percentage Table Guide in follows. It is nonresidential real property.000. you bought a machine depreciation allowance applies.564 2.000 25. . Appendix A to determine which table you should use under the mid-quarter convention. . . . . . .49 1. furniture in September. 10.564 used a half-year convention. Page 46 Chapter 4 Figuring Depreciation Under MACRS .000 12. . . The furniture is 7-year property placed in service in 2011 . . After you figure the full-year tion for each of the first 3 years is as follows: depreciation amount.033 Half-year convention used. . 12.749 the third quarter. . $100. . . . . .43 857 The following examples are provided to show you how to use the percentage tables. . . You have disposed of your Appendix A and find that you should use Table A-7a.49 1. so you use Table 2010 . . This is months of the year. . . 100.564 2. $100. The total bases of all 14. . 10. . Therefore. . or destruction.000 17.564 the year of the disposition is half the depreciation deter- mined for the full year. . the your special depreciation allowance.000 2. . . . . . The machine is 7-year prop- Year Basis Percentage Deduction erty placed in service in the first quarter.71 107 following.000 8. .000. and the computer in October. You placed property in service during the last three 13. . . retirement. . tax year. .

. ered in service. . . . This is $1. Your de- ductions for 2006.67% declining balance rate.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. .5 line method gives an equal or greater deduction. You figure your declining bal- Example.5% to get your depreci. multiplying a full year of depreciation by a fraction. .000). . . . 12. and $2. . . . . You then apply the mid-month convention for the 21/2 The following table shows the declining balance rate for months of use in 2009. . year you switch to the straight line method) as follows. . to get your 2009 depreciation deduction of $757. . . you purchased and placed ance rate by dividing the specified declining balance per- in service residential rental property. duce your adjusted basis in the property by the deprecia- tion deduction for the year of the disposition by multiplying tion claimed the previous year. . or a 66. . so you used declining balance rate. under Examples. . . To determine your depreciation deduction for 2009. On July 2. . . . 0. you must re- you used the mid-quarter convention. over 12. If you dispose of property before the end of its recovery tial rental or nonresidential real property. Apply the applicable convention. . Your unad. divide 2. . figure your depre. .368 by 37. . . . year. a full year of depreciation by the percentage listed below Figuring MACRS deductions without using the for the quarter in which you disposed of the property. Table A-5 to figure your depreciation deduction. The straight line method is justed basis for the property was $10.00 (200%) by 3 to get return based on the calendar year. You file your tax declining balance method. later. For property for which Before making the computation each year.68% of $10. 2. . . . . . . 37. You disposed of the property on April 6. .000). If you dispose of residen. equal or greater deduction.6667. . . . . . 1. . Mid-quarter convention used. figure your deprecia. you placed in service your property. The denominator is 12. ! CAUTION tables generally will result in a slightly different amount than using the tables. example. . 62.636. Multiply your adjusted basis in the property by the Your property is in the 5-year property class. 2009. On December 2. or a 10% seventh month of the third recovery year) from Table A-6. period. . . 2009. . for 3-year property depreciated using the 200% You sold the property on March 2. . . Property Declining Balance Class Method Rate Year Figuring the Deduction Without Using 3-year 200% DB 66. .10. . .280 (22. . You used Table number of years in the property’s recovery period. Multiply this new adjusted basis by the same declin- ation deduction of $513 for 2009. . . .5 Third . .667% 3rd the Tables 5-year 200% DB 40.Page 47 of 120 of Publication 946 15:26 . . The property cost centage (150% or 200% changed to a decimal) by the $100. first figure the deduction for the full year.5 Declining Balance Method Fourth .800 (38% of $10. . . MUST be removed before printing. mid-quarter convention because this was the only item of You figure depreciation for the year you place property business property you placed in service in 2006 and it was in service as follows. . . . .000 multiplied by . . .636 by the fraction. You must use the applicable convention for an item of 5-year property costing $10.000). 2006. . Reduce your adjusted basis in the property by the (13. for information on how to figure depreciation for the year you ciation deduction for the year of the disposition by dispose of it. . . Quarter Percentage First . .80% You figure depreciation for all other years (before the of $10. . Treat the month of disposition as each property class and the first year for which the straight one-half month of use. . . 2007. . . . . . Chapter 4 Figuring Depreciation Under MACRS Page 47 . .571 5th your depreciation deduction. Declining balance rate. . . . $3. . . 2.000. you can figure it yourself. not including the cost of land. . declining balance rate. . . . . . . Mid-month convention used. You did not the first tax year and you must switch to the straight line claim a section 179 deduction and the property does not method beginning in the first year for which it will give an qualify for a special depreciation allowance. April is in the second quarter of the depreciation allowed or allowable in earlier years. Multiply $3. divide 1. This is property depreciated using the 150% declining balance $100. .50 (150%) by 15 to get 0. . so you multiply $1. . You used the explained later. . . . ing balance rate used in earlier years.50.0 4th Instead of using the rates in the percentage tables to figure 7-year 200% DB 28. 87. .5 When using a declining balance method. . . you apply the same depreciation rate each year to the adjusted basis of Example. . For A-6 to figure your MACRS depreciation for this property. .368 1. .03636 (the percentage for the method. For 15-year A full year of depreciation for 2009 is $3. . .000. . placed in service during the last 3 months of your tax year. see Using the Applicable Convention. The Figuring depreciation under the declining balance numerator of the fraction is the number of months (includ- method and switching to the straight line method is illus- ing partial months) in the year that the property is consid- trated in Example 1. . . 2007. and 2008 were $500 (5% of 2. . . . later. .000).000. $10.5% Second . .

. .5 Convention Applies) affects how you figure your deprecia. . . 37. . . . . . . . . 12. August. . . . . . service and for the year you dispose of it. . . . . . . . . . . 62. . . If you hold the property for the entire recovery period. . . . . 1. Second . July. property you depreciate under the straight line method. .5% Straight line rate. . . . the applicable convention as explained in the following discus. . . . . . . . 1. 87. . . . . Figure your depreciation deduction for the year you place the property in service by multiplying the deprecia- If you dispose of property before the end of its recovery tion for a full year by the percentage listed below for the period. . . . November. If this convention applies. . . . .0 7th last year that you depreciate the property. . . . May. Multiply your adjusted basis in the property by the A quarter of a full 12-month tax year is a period of 3 straight line rate. . The third quarter begins You figure depreciation for all other years (including the on the first day of the seventh month of the tax year. . . for quarter you place the property in service. Determine the depreciation rate for the year. . . . . . . . . information on how to figure depreciation for the year you dispose of it. . . September 3. . . . 87. The second quarter begins on the first day of 2. . . . . . . . . . . . . . . . . . . . figure your depreciation deduc- Straight Line Method tion for the year of the disposition the same way. . . . . . . . . . . MUST be removed before printing. . . . . . . . . Quarter Percentage Using the Applicable Convention First .5 9th Figure your depreciation deduction for the year you place the property in service by dividing the depreciation for a full year by 2. . . . . 20-year 150% DB 7. . . Apply the applicable convention. . . . March Second . . . . The first quarter in a year begins on the first day of the tax year. . . .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. . . . It determines your depreciation deduction for the year that includes the how much of the recovery period remains at the beginning final quarter of the recovery period is the amount of your of each year. . . When figuring the number of years remaining. Fourth . . . . . . . .Page 48 of 120 of Publication 946 15:26 . . . . If the number of years year of the disposition by multiplying a full year of deprecia- remaining is less than 1. depreciation you can deduct for the first year that you sions. . . . .5 tion deduction for the year you place your property in If you hold the property for the entire recovery period. . . . First . . . 62. . . . . . See Straight line rate in the previous discussion. you apply a different tion deduction for the year that includes the final 6 months depreciation rate each year to the adjusted basis of your of the recovery period is the amount of your unrecovered property. . If this convention applies. Use the Mid-month convention. . .5 that year. . . . . February. . . . . . . .0 7th period. . . . ate the property depends on the quarter in which you place the property in service. . . . . . If you dispose of the property before the end of the recovery period. . . You must use the applicable convention in the basis in the property. . . . . . . . . . . Third . your deprecia- When using the straight line method. . later. You deduct a full year of depreciation for any other year during the recovery 15-year 150% DB 10. . figure your depreciation deduction for the you placed the property in service. year you place the property in service and the year you dispose of the property. . . . . . If you dispose of the property before the end of the you must take into account the convention used in the year recovery period. . dispose of the property. . . . . Fourth . . . The year you switch from the declining balance method to the fourth quarter begins on the first day of the tenth month of straight line method) as follows. . . you de- Class Method Rate Year duct a half-year of depreciation for the first year and the 10-year 200% DB 20. the fourth month of the tax year. . . see Using the Applicable Convention. . . . . . . . . 12. . . . . the depreciation rate for that tax tion by the percentage listed below for the quarter you year is 1. . . . months. Quarter Percentage First . . .5 years remaining in the recovery period at the beginning of Fourth . . . . December preciation rate figured in (2). .0 (100%). . . . . . January. April. . . . . . . the tax year. depreciate the property depends on the month in which Page 48 Chapter 4 Figuring Depreciation Under MACRS . Mid-quarter convention. . . .5% Second . . . . . 37. A calendar year is divided into the following quarters. . . so it also affects the depreciation rate for unrecovered basis in the property. . . . . . . . You determine the straight line depre. . . . . . Multiply the adjusted basis figured in (1) by the de. . . . . June 2. . . Property Declining Balance Half-year convention. . . . . Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years Quarter Months (under any method). October.5 The applicable convention (discussed earlier under Which Third . . If this convention applies. the You figure depreciation for the year you place property depreciation you can deduct for the first year you depreci- in service as follows.5 ciation rate for any tax year by dividing the number 1 by the Third .

The SL method provides an equal deduction. property for the entire recovery period. There is less than one year service in the last 3 months of the year. result (40%). and December). and the mid-month convention to figure your de- recovery period.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.456 multiply the result ($800) by the DB rate (40%). As. You multiply the adjusted basis of the property ($1.5. October. You Examples multiply the result ($288) by the DB rate (40%).000) by the 20% SL rate. The result is . You figure the SL depreci- You do not elect to take the section 179 deduction and the ation rate by dividing 1 by 1.000. 4. adjusted basis ($173) by the result (66. you treat the property as The DB method provides a larger deduction.456 from $100. The following examples show how to figure depreciation You figure the SL depreciation rate by dividing 1 by 2.) You multiply year that the property is in service plus 1/2 (or 0. years in the recovery period). In January.5.02564). You multiply the depreciation for a full year by deduct the $192 figured under the 200% DB method.000.000 that is nonresidential real property with a recov- under the 200% DB method is $200. ber. your depreciation Third year. You multiply the reduced adjusted basis ($480) by the residential real property in service in August. third year is $137.000) by the Example 2 —SL method and mid-month convention. Your first-year depreciation for the building is $2.5 (4 full months The DB method provides a larger deduction. you used only half a numerator of the fraction is the number of full months in the year of the recovery period in the first year. Deprecia.000 × . recovery period. You use the calendar year and place non. You reduce the adjusted basis ($480) by the depreciation claimed in the third year ($192). The ($200) by 2. months of depreciation for the year.958). If you hold the deduct the $320 figured under the 200% DB method.67%). You figure the SL depreciation rate for the You apply the half-year convention by dividing the result building by dividing 1 by 39 years.5 deduct the $200 figured under the 200% DB method. depreciation claimed in the fourth year ($115) to get the erty with a 5-year recovery period and a basis of $1.564 ($100.000) mal. You reduce the adjusted basis ($288) by the tion. Novem. You multiply the reduced First year. figure your depreciation deduction for the The DB method provides a larger deduction.22%). method to figure your depreciation. you placed in service depreciable prop. Figure your depreciation You figure the SL depreciation rate by dividing 1 by 4. Fourth year. the number of years in the method. tion for the third year under the 200% DB method is $192. reduced adjusted basis of $173.Page 49 of 120 of Publication 946 15:26 . Fifth year. You recovery period is the amount of your unrecovered basis in multiply the result ($480) by the DB rate (40%). Depreciation for the first year under the SL depreciation for a full year is $2. You subtract $2. MUST be removed before printing. Depreciation under the SL method for the is in service 4 full months (September. Deprecia- the property. ($2. so you plus 0. Your numerator is 4. multiplying the depreciation for a full year by a fraction. your tax year.02564. Depreciation ance. The result is 20%. Deprecia- tion for the fourth year under the 200% DB method is $115. Depreciation under the SL method for the sume for all the examples that you use a calendar year as fourth year is $115. Under the mid-month convention. so you must use remaining in the recovery period. rate for the sixth year is 100%.5 months divided by 12 months is by the depreciation claimed in the first year ($200). First year. so you switch to the SL method and deduct the $115. You use GDS and the 200% declining balance (DB) under the SL method for the fifth year is $115. You get 11. When the straight line Sixth year.375. you depreciation claimed in the fifth year ($115) to get the switch to the SL method. The result is 40%.5. In February. You use GDS. so the SL depreciation the half-year convention. Depreciation for the first year $100. The (Based on the half-year convention. You figure the depreciation rate under the adjusted basis ($58) by 100% to arrive at the depreciation 200% DB method by dividing 2 (200%) by 5 (the number of deduction for the sixth year ($58).544 for the second year. You reduce the adjusted basis ($1.You multiply the ad. You reduce the adjusted basis ($800) by deduction for the year that includes the final month of the the depreciation claimed in the second year ($320). under MACRS without using the percentage tables. The adjusted basis of the building is You figure the depreciation rate under the straight line its cost of $100. or 0. You apply the half-year convention by divid. You multiply the reduced adjusted basis ($288) by the Figures are rounded for purposes of the examples. You multiply the reduced property does not qualify for a special depreciation allow. 40% DB rate.564 × . You figure the SL depreciation rate by dividing 1 by 3. Chapter 4 Figuring Depreciation Under MACRS Page 49 . Expressed as a deci- Second year. get your adjusted basis of $97. The the reduced adjusted basis ($800) by the result (22. Example. ery period of 39 years. You reduce the adjusted basis ($173) by the (SL) method results in an equal or larger deduction. tion for the second year under the 200% DB method is Second year. The property result (28. method is $100. deduction for the year you place the property in service by the number of years remaining in the recovery period. preciation.5/12. You .958.5). Depreciation under the SL method for the second year is If you dispose of the property before the end of the $178. you bought and placed in service a building for ing the result ($400) by 2. You did not place any property in reduced adjusted basis of $58. the fraction of 11. Example 1—200% DB method and half-year conven. denominator is 12.57%). you place the property in service. justed basis of the property ($1.000 to $320. so you placed in service in the middle of January. the straight line (SL) (SL) method by dividing 1 by 5.5).5. so you year of the disposition the same way.

Last placed in service this year is $10.027 (1 divided by 37.00 (200%) by percentage for the first quarter). Much Can You Deduct and Property Acquired in a The result. You figure this by subtracting the first year’s ice in your business the following items.500 repair cost. $250. $1.544 × . your depreciation was $1.28571 to get the depreciation of $286 figure depreciation for the property as if the transfer had for the full year.980 × . Your depreciation deduction for the second year Month Placed is $1.02629). You figured your deduction using figure the depreciation. You determine the DB rate by dividing 2. You figured this by furniture are 7-year property and the computer is 5-year first subtracting the first year’s depreciation ($1.000 × . depreciation ($250) from the basis of the computer ($5.500.000).000. Acquired in a Nontaxable Exchange First and second year depreciation for furniture. Your depreciation for the second year is $255 ($893 × .000) is more than 40% of the total bases of In July of this year. This is 1 divided by the remaining First and second year depreciation for computer. Because you did not place any property do not qualify for a special depreciation allowance.042 years (39 years reduced by 11. the adjusted basis of the safe is of $1. so you multiply the $2. You determine $3. You depreciation for this property for this year because of the placed the safe in service in the first quarter of your tax adjustments to basis.500 you must use the mid-quarter convention. The result. furniture for the first year. You placed the computer in service in the fourth $2. Example 3—200% DB method and mid-quarter con.02629.5% (the mid-quarter self. Your unadjusted basis for the You do not elect a section 179 deduction and these items property is $7.143 ($4.40). During the year. you bought and placed in serv.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. You all property placed in service during the year ($10. However.29%). $107. is your 7 years. Your depreciation deduction for the second year is $857 Figuring the Deduction for Property ($3.979 for this year.928) by the declining balance rate of . ($94. The SL rate is . For the second year.072 ($7.000) from the unadjusted basis of First and second year depreciation for safe. You figure this by subtracting the first year’s depreciation ($107) from the basis of the furniture ($1. You must figure the deduction your- year.000 section 179 deduction.28571 to get your depreciation deduction For the second year. see Like-kind exchanges and in- third quarter of your tax year. recovery period of 38.000) by .072) and property. is $4.5% (the mid-quarter percentage for the fourth quarter). The basis of the year. you must generally furniture ($1.Page 50 of 120 of Publication 946 15:26 .000) from the basis of the safe ($4.000).564 ($97.564 12. Your adjusted applies to all three items of property. For the second year. your property was vandalized. earlier. You placed the furniture in service in the not occurred.000 by ing years). The result is .143 by 87.40.042 remain.000 and you elected a $24. The depreci- the second year is $2. quarter of your tax year. You in service in the last 3 months of your tax year. This was Office furniture September 1. in July. The If your property has a carryover basis because you ac- furniture is also 7-year property. you used use GDS and the 200% declining balance (DB) method to the half-year convention. You multiply the deduction for depreciation on the safe for the first year.40). adjusted basis of your property ($6. This convention to put the property back in operational order.750 × .000.928.564). The depreciation You cannot use the table percentages to figure your for the safe for a full year is $1.980 ($97.958 year). The adjusted basis is $94. The $7. so you multiply $1. computer ($5. Computer (not listed property) October 5. the adjusted basis of the furniture is $893.500.000. MUST be removed before printing.28571).00 (200%) by 7 years. To this amount ($3. is your deduction for depreciation on the computer for the first year. You figure this by subtracting the first year’s depre- ciation ($1. Your depreciation for the building for mine this by dividing 2.000 × . next.28571). is your deduction for depreciation on the Like-kind Exchange or Involuntary Conversion. Item in Service Cost Example 4—200% DB method and half-year conven- Safe January $4.000.28571. so had a deductible casualty loss of $3. You multiply the basis of the change or involuntary conversion.00 (200%) by 5 years. The total bases of all property you the percentages in Table A-1 for 7-year property.000 tion.5% (the mid-quarter percentage for the third quarter). the casualty loss ($3. ation for the computer for a full year is $2. you then added the 200% DB rate for 7-year property is . this by dividing 2.027).5 The 200% DB rate for 5-year property is . Last year. you bought and placed in service in your business a new item of 7-year property. The SL rate is .544 − .000).28571 or 28.000). The safe and office basis at the end of this year is $6.000 ($5. You also took a special deprecia- tion allowance of $7.500 × 14.000 × Third year. so you multiply $286 by voluntary conversions.750.500. in chapter 3 under How 37.571%. You deter- months or .28571).428). You spent $3. Your depreciation for the third year is $2.000 the only item of property you placed in service last year. the adjusted basis of the computer vention.900 ($4. Page 50 Chapter 4 Figuring Depreciation Under MACRS . The result. $3.28571.000 The property cost $39. so you use the same quired it in a nontaxable transfer such as a like-kind ex- 200% DB rate of .

disposed of on the midpoint of the month it is placed in Chapter 4 Figuring Depreciation Under MACRS Page 51 . S corporation. The depreciable basis of the new property is the adjusted Using the Applicable Convention in a Short basis of the exchanged or involuntarily converted property Tax Year plus any additional amount you paid for it. conversion. This section Automobile Limits Apply in chapter 5. You must make the elec. or consolidated cable convention in a short tax year. The remaining recovery period at the beginning of the tion on a timely filed return (including extensions) for the next tax year is the full recovery period less the part for year of replacement. Figuring the Deduction for a Short Special rules apply to vehicles acquired in a trade-in. This election treated as placed in service and disposed of. A short tax year is biles Acquired in a Trade-in under Do the Passenger any tax year with less than 12 full months. by the S corporation. The recovery period begins on the placed in service date determined by applying the conven- When to make the election. Property Acquired in a Like-kind Exchange For more information and special rules. respectively. see Revenue Procedure 89-15.B. discusses the rules for determining the depreciation de- duction for property you place in service or dispose of in a Election out. This applies only to acquired property with the continue to use the same depreciation method and con- same or a shorter recovery period and the same or more vention as the transferor. which depreciation was allowable in the first tax year. later of the date you acquired it or the time of the disposi- tion of the exchanged or involuntarily converted property. group. you can claim a special depreciation allowance on the carryover basis. the election may not be tion. treated as in service. Under the mid-month conven- group. Tax Year For information on how to figure depreciation for a vehicle acquired in a trade-in that is subject to the passenger You cannot use the MACRS percentage tables to deter- automobile limits. see the Instruc- or Involuntary Conversion tions for Form 4562. the property’s basis that exceeds its carryover basis (the changed or involuntarily converted. if any. rately by each person acquiring replacement property. lier in chapter 3 under What Is Qualified Property. Once made. if made. Treat the carryover basis and excess basis. Instead of using the above rules. It also discusses the rules for determining elect.Page 51 of 120 of Publication 946 15:26 . 816. MUST be removed before printing. The election must be made sepa. if For more information on figuring depreciation for a short any. changed or involuntarily converted property. discussed ear- • A partnership distribution of property to a partner. the property’s remaining recovery period in the transferor’s vention used for the exchanged or involuntarily converted hands. the election is made by the partnership. see Deductions For Passenger Automo. erty as if it were placed in service in the same tax year as the exchanged or involuntarily converted property. If the MACRS property you acquired in the exchange or involuntary conversion is qualified property. or by the common parent of a consolidated Mid-month convention. you always treat your property as placed in service or revoked without IRS consent. feror. 1989-1 C. You can depreciate the part of accelerated depreciation method than the property ex. over basis). you generally • A transfer to a corporation controlled by the trans- must depreciate the carryover basis of the acquired prop.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. You must property. as if the transfer had not occurred. the following. You • An exchange of property solely for corporate stock also generally continue to use the longer recovery period or securities in a reorganization. Property Acquired in a Nontaxable Transfer sion over the remaining recovery period of the property You must depreciate MACRS property acquired by a cor- exchanged or involuntarily converted. of the acquired property is treated as The nontaxable transfers covered by this rule include newly placed in service property. change for a partnership interest. The applicable convention establishes the date property is changed or involuntarily converted property. for depreciation purposes. for the acquired property as if placed in service the tax year. For acquired property that has a longer recovery period or less accelerated depreciation method than the ex. mine depreciation for a short tax year. applies to both the acquired property and the ex. The excess basis (the transferor’s adjusted basis in the property) as newly pur- part of the acquired property’s basis that exceeds its carry. You also generally poration or partnership in certain nontaxable transfers over continue to use the same depreciation method and con. and less accelerated depreciation method of the acquired • A contribution of property to a partnership in ex- property. You generally must depreciate the carryover basis of prop- erty acquired in a like-kind exchange or involuntary conver. The election. In The following discussions explain how to use the appli- the case of a partnership. tion. • A distribution in complete liquidation of a subsidiary. chased MACRS property. to treat the adjusted basis depreciation when you have a short tax year during the of the exchanged or involuntarily converted property as if recovery period (other than the year the property is placed disposed of at the time of the exchange or involuntary in service or disposed of). Depreciation does not affect the amount of gain or loss recognized on is allowable only for that part of the tax year the property is the exchange or involuntary conversion. you can short tax year.

it has a short tax year of 10 months. First. not beginning on the first day of a month and not ending on 3. If the short tax year includes part of a month. so Tara Corpora- quarter of the tax year in which it is placed in service or tion must treat the property as placed in service in the disposed of. During December. so it must half-year convention. you treat property as placed tion’s short tax year. MUST be removed before printing. 2. Page 52 Chapter 4 Figuring Depreciation Under MACRS . This is a short tax was incorporated on March 15. the midpoint of the tax year it is placed in service or To determine the midpoint of a quarter for a short tax disposed of. Tara treats this property as placed in March 15 and ending December 31 consists of 292 service on the first day of the sixth month of the short tax days. a short tax year of 91/2 months. year. it determines that its short tax year beginning half-year convention. The 37th day of the last quarter is November 25. year of other than 4 or 8 full calendar months. It has property as placed in service or disposed of on this mid- point.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. the midpoint of a month.Page 52 of 120 of Publication 946 15:26 . Treat property as placed in service or you treat property as placed in service or disposed of on disposed of on this midpoint. During the short tax year. and ends on December 31 consists of 7 months. Next. complete the First or last day of month. You use treat the property as placed in service or disposed of on the only full months for this determination. To determine if you must use the mid-quarter convention. 3/15 – 5/26 4/20 4/15 5/27 – 8/07 7/02 7/01 Mid-quarter convention. 2009. your tax year. Divide a short tax year into 4 quarters and middle of November (the nearest preceding first day or determine the midpoint of each quarter. use the mid-quarter The last quarter of the short tax year begins on October convention for all applicable property you place in service 20. year as beginning on June 1 instead of June 20. You apply this rule without regard to For a short tax year of 4 or 8 full calendar months. For purposes of the year of other than 4 or 8 full calendar months. or August 1. Tara placed property in service for which it uses the 1. ning on the first day of a month or ending on the last day of a month. You treat property under the mid-quarter convention as which is the midpoint of the quarter. For a short tax year begin. it divides 73 by 2 to determine the midpoint of the last day of a month. you treat the property as placed in service or Quarter Midpoint Placed in Service disposed of on the nearest preceding first day or midpoint of a month. you treat property as 3. it placed property in service for which it Example. Finally. If the result of (3) gives you a midpoint of a quarter that is For example. a short tax year that begins on June 20 on a day other than the first day or midpoint of a month. The midpoint of each quarter is either the first day or the Half-year convention. Determine the midpoint of each quarter by dividing placed in service or disposed of on either the first day or the number of days in each quarter by 2. midpoint of a month. following steps. months from the beginning of the tax year). it divides 292 by 4 to determine the length of Not on first or last day of month. a calendar year taxpayer. and the in service or disposed of on either the first day or the date in each quarter that Tara must treat its property as midpoint of a month. If you have a short tax year of 3 months or less. 2. days in the tax year by 2 is not the first day or the midpoint of a month. tax year by dividing the number of months in the tax year by 2. For the half-year convention. 2009. the tax year consists of the number of months in 1. of days in the tax year. determine the midpoint of each quarter. the end of the tax during that tax year. Determine the number of days in your short tax year. You treat was incorporated and began business on March 15. Tara Corporation. Tara Corporation. The midpoint of the tax year is the middle of September (31/2 Example. the tax year consists of the number each quarter. You determine the midpoint of the tax year by dividing the number of days in the tax year by 2. ending on December 31. the midpoint of each quarter. the tax year. If the result of dividing the number of placed in service. compare the basis of property 8/08 – 10/19 9/13 9/01 you place in service in the last 3 months of your tax year to 10/20 – 12/31 11/25 11/15 that of property you place in service during the full tax year. which is 73 days from December 31. must use the mid-quarter convention. so you treat the tax nearest preceding first day or midpoint of that month. 73 days. the 37th day. ending on December 31. a calendar year taxpayer. Under the half-year convention. service or disposed of. Determine the number of days in each quarter by you generally include the full month in the number of dividing the number of days in your short tax year months in the tax year. You determine the midpoint of the by 4. The following table shows the quarters of Tara Corpora- For the half-year convention. midpoint of that month). The length of your tax year does not matter. November 25 is not placed in service or disposed of on the midpoint of the the first day or the midpoint of November. For a short tax year each quarter. year. determine quarters on the basis of whole months.

placed in service on October 16 an item Using the simplified method for an early disposition. Its denominator is 12. The numerator (top number) of the fraction is the number of months (including parts of a month) the property is Depreciation After a Short Tax Year treated as in service during the tax year (applying the applicable convention). service during the tax year (applying the applicable con- Tara treats the property as placed in service on Septem.000. If of 5-year property with a basis of $1. tax year. ber 1. You mine the depreciation for the short tax year. corporation first multiplies the basis ($1. basis of the property at the beginning of the tax year by the applicable depreciation rate. depreciation rate and then multiplying the result by a frac- ration must apply the mid-quarter convention because the tion. fraction’s numerator is the number of months (including parts of a month) in the tax year. Its denominator is 12. The fraction’s numerator is the number of months property was the only item placed in service that year and it (including parts of a month) the property is treated as in was placed in service in the last 3 months of the tax year. of a month) that are included in both the tax year and the Chapter 4 Figuring Depreciation Under MACRS Page 53 . earlier. a 12-month or short tax year. The frac- then multiplies $400 by 4/12 to get the short tax year depre. If you were using property by the applicable depreciation rate. Tara does not elect to claim a section 179 deduc- for a later 12-month year in the recovery period by multiply- tion and the property does not qualify for a special depreci- ing the adjusted basis of your property at the beginning of ation allowance. The depreciation rate is 40% and Tara applies the half-year convention. The corporation attributable to that recovery year by a fraction. multiply the depreciation the depreciation for a full tax year of $400. you $400. depreciation for each later tax year by allocating to that for property that Tara Corporation placed in service during year the depreciation attributable to the parts of the recov- the quarter that begins on August 8 and ends on October ery years that fall within that year. Tara does not you dispose of property in a later tax year before the end of elect to claim a section 179 deduction and the property the recovery period. deter. The determining which recovery years are included in that year. August 1. property the corporation placed in service during the short Under the simplified method. The corporation then multiplies $400 by 5/12 to get the figure depreciation for that year by multiplying the adjusted short tax year depreciation of $167. you can no longer use them. the percentage tables. Tara’s depreciation Year. earlier. The adjusted basis on January 1 of under Using the Applicable Convention in a Short Tax the next year is $833 ($1. with a short tax year beginning March 15 and ending December 31. The corpo. The denominator (bottom number) You can use either of the following methods to figure the is 12. Do this by must figure depreciation for the short tax year and each multiplying the depreciation for a full tax year by a fraction. Example. The depreciation method for this property the year by the applicable depreciation rate.000) by 40% to get For each recovery year included.Page 53 of 120 of Publication 946 15:26 . The year of disposition by multiplying the adjusted basis of the depreciation method for this property is the 200% declining property at the beginning of the tax year by the applicable balance method. tion. Under MACRS. later tax year as explained next. MUST be removed before printing. and then by a fraction. The Tara Corporation claimed depreciation of $167 plained in the example illustrating the half-year convention for its short tax year. • The simplified method. you figure the depreciation by tion for the short tax year that consists of 10 months. Tara is allowed 4 months of deprecia. The depreciation rate is 40%. See Depreciation After a Short Tax Year.000 − $167). later. with a short tax year beginning March 15 and ending on December 31.000) by 40% (the declining Using the simplified method for a short year. placed in service on March 16 an item of You must use the method you choose consistently. 5-year property with a basis of $1. Assume the same facts as in Example 1 Tara treats the property as placed in service on under Property Placed in Service in a Short Tax Year. The determination of this August 1 date is ex. vention). is the 200% declining balance method. you must first determine the depreciation for a full began depreciating property. you figure the ing the Applicable Convention in a Short Tax Year. tion’s numerator is the number of months (including parts ciation of $133. you must change the way tax year. Tara Corporation. Property Placed in Service in a Short Property Placed in Service Before a Short Tax Year Tax Year To figure your MACRS depreciation deduction for the short If you have a short tax year after the tax year in which you tax year. the short tax year that consists of 10 months. Under the allocation method. This is the only Using the simplified method for a 12-month year. for depreciation for years after a short tax year. Then. If a later balance rate) to get the depreciation for a full tax year of tax year in the recovery period is a short tax year.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. Tara is allowed 5 months of depreciation for for that next year is 40% of $833. Whether your tax year is 19.000. determine the depreciation for the does not qualify for a special depreciation allowance. The Example 2—mid-quarter convention. Tara Corpora. This date is shown in the table provided in the Using the allocation method for a 12-month or short example illustrating the mid-quarter convention under Us. The corpora- tion first multiplies the basis ($1. Example 1—half-year convention. You do this by multiplying your basis in the you figure depreciation for that property. or $333. earlier. you figure the depreciation tax year. information on how to figure depreciation in later years. • The allocation method.

Convention Disposition • Mid-month convention. If recovery period and/or a less accelerated depreciation you dispose of property before the end of the recovery method. accounts (GAAs). see sections 1. the tax year. Page 54 Chapter 4 Figuring Depreciation Under MACRS . can be grouped into the same GAA. Asset Accounts? The following rules also apply when you establish a GAA. later. Its denominator is 12. The Terminating GAA Treatment. recovery year. The denominator is 12. together the depreciation for each recovery year. How Do You Use General • Convention. • Recovery period. If there is more than one recovery year in the tax year. recovery Adjusted basis period.000 − $400) by 40%.168(i)-1(h) and 1. Property subject to the mid-month convention can only be grouped into a Exchange GAA with property placed in service in the same month of the tax year. You cannot include prop- 5-year property placed in service during the short tax year erty in a GAA if you use it in both a personal activity and a extends from August 1 to July 31. Special rules apply to figuring deprecia- of $600 ($1. See sections 1. the applicable convention). Terms you may need to know (see Glossary): • No asset class. you add • Asset class. You then can depreciate all the proper- earlier. The numerator of the fraction Grouping Property is the number of months (including parts of months) the Each GAA must include only property you placed in serv- property is treated as in service in the tax year (applying ice in the same year and that has the following in common. Seven year in which you first place it in service.Page 54 of 120 of Publication 946 15:26 . Passenger automobiles subject to the limits on passenger automobile depre- Section 1245 property ciation must be grouped into a separate GAA. regulations. tax year is a full year of 12 months. Examples include a change in use resulting in a shorter recovery period and/or more accelerated depre- ciation method or a change in use resulting in a longer Using the allocation method for an early disposition. but with the same depreciation method. Placed in service Recovery period • Passenger automobiles. depreciation for the next tax year is $333. you can Example. • Depreciation method. MUST be removed before printing. The first recovery year for the Property you cannot include. For infor- mation on the GAA treatment of property that generates • $233—The depreciation for the first recovery year foreign source income.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. which is the sum of the following. If property you months of the first recovery year and 5 months of the included in a GAA is later used in a personal activity. Properties without an asset class. The Tara Corporation’s first tax year after the short ties in each account as a single item of property. This is figured by multiplying the adjusted basis Change in use. year of disposition by multiplying the depreciation figured for each recovery year or part of a recovery year included in the tax year by a fraction. determine the depreciation for the regulations. Property generating foreign source income. Property subject to the mid-quarter convention can only be grouped into a Basis GAA with property placed in service in the same quarter of the tax year.168(i)-4 of the period in a later tax year.168(i)-1(f) of the ($400 × 7/12). The allowable depre. see second recovery year fall within the next tax year. then multiplying tion for property in a GAA for which the use changes during the $240 result by 5/12. Amortization Amount realized • Mid-quarter convention. and convention. Tara deducted 5 months trade or business (or for the production of income) in the of the first recovery year on its short-year tax return. Assume the same facts as in Example 1 group separate properties into one or more general asset under Property Placed in Service in a Short Tax Year. To make it easier to figure MACRS depreciation. Unadjusted basis ciation for the tax year is the sum of the depreciation figured for each recovery year. • $100—The depreciation for the second recovery year. if any. beginning January 1 and ending December 31.

scrap. the following rules generally apply. record the deprecia. reduced by the total number of However. Make & Sell did not claim the section 179 deduction on the machines and the machines did not 3.200 and the rest cost a total of any expensed costs for property that you removed $1. When you dispose of property included in a GAA. depreciable bases of all the property in the GAA. The unadjusted depreciable basis of a GAA is the total of the unadjusted Passenger automobiles. Make & Sell. and elec- tric vehicle credit. You continue to depreciate the ac. The unadjusted depreciable basis of the GAA plus up a GAA for ten machines. The senger automobiles in a GAA. After you have set up a GAA. Example 1. • The property is treated as having an adjusted basis c. 1. machine. a. Removal of barriers for the elderly and disabled. Unadjusted depreciable basis.800. Figuring Depreciation for a GAA The retirement of a structural component of real property is not a disposition. To figure depreciation on pas. serve of the GAA are not affected by the sale of the • Sell. you do reduce your original basis by other automobiles removed from the GAA as discussed in Ter. so you cannot realize a loss on the disposi- tion. section minating GAA Treatment. up to the limit discussed later under 2010. earlier. its basis in that account is zero.200 to an Treatment of amount realized. Disposing of GAA Property Expensed costs. but figured without reducing your original basis by these limits by the number of automobiles originally in. Reforestation expenses. the depreciation reserve account is $2.000) × 40%]. Any amount previously recognized as ordinary in- qualify for a special depreciation allowance. ized from the disposition as ordinary income.000 [($10. However. or de. tion allowance in a separate depreciation reserve account. or similar account. Amortization deductions for the following.Page 55 of 120 of Publication 946 15:26 .000. The machine is treated as having an adjusted basis of zero. b. retire. • Neither the unadjusted depreciable basis (defined 2. The deprecia. minus half-year convention. recovery period. Expensed costs that are subject to recapture as depreciation include the following. tion 179 deduction) for property in the GAA ($0). later) nor the depreciation reserve account of the GAA is affected. If the property is transferred to a supplies. This GAA is depreciated under the 200% declining from the GAA under the rules discussed later under balance method with a 5-year recovery period and a Terminating GAA Treatment).000 × 40%) ÷ 2]. a calendar-year corporation.200 [($10. When you dispose of ation method. these rules do not apply to any disposition On its 2010 tax return. d. count as if the disposition had not occurred. apply the deduction limits unadjusted depreciable basis of an item of property in a discussed in chapter 5 under Do the Passenger Automo.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.000 amount realized as ordinary income because it is not more than the GAA’s unadjusted depreciable basis Disposition. Chapter 4 Figuring Depreciation Under MACRS Page 55 . Pollution control facilities.000 − $2. is $3. including any amortization deduction. $9.000. set 1. In February ordinary income. amounts. MUST be removed before printing. of January 1. The depreciation allowance for the GAA in 2010 stroy it. Property in a GAA is considered disposed of ($10. 2010. For each GAA. you must recognize any amount real- property in the GAA. and convention for the property in a GAA. 179 deduction.000 and were placed in service in June 2009. cause of dispositions of other property from the GAA ($0). come upon the disposition of other property from the tion allowance for 2009 is $2. minus any • Permanently withdraw it from use in your trade or amounts previously recognized as ordinary income be- business or from the production of income. GAA is the amount you would use to figure gain or loss on bile Limits Apply. The limit is: Example. Make & Sell sells the machine that cost $8. the sec- when you do any of the following. or similar account. up to a limit. The unadjusted depreciable basis and depreciation re- • Transfer it to a supplies. Treatment of amount realized. special depreciation allowance.000) plus any expensed cost (for example. you generally figure the MACRS depreciation for it by using the applicable depreci. The facts are the same as in the example • Any amount realized on the disposition is treated as under Figuring Depreciation for a GAA. later. unrelated person for $9. As GAA. exchange. The machines cost a total of 2. any depreciation allowed or allowable in earlier years. physically abandon. One of subject to recapture as depreciation (not including the machines cost $8. Multiply the amount determined using its sale. Make & Sell recognizes the described later under Terminating GAA Treatment. Tertiary injectants. scrap. Any expensed costs for property in the GAA that are $10. of zero. The section 179 deduction. cluded in the account.

machines. Make & Sell recognizes $1. change in use. Reduce the depreciation reserve account by the de- preciation allowed or allowable for the property (com. 2006.200) × 40%]. Terminating GAA Treatment • Any transaction between members of the same affili- ated group during any year for which the group You must remove the following property from a GAA. If you dispose of GAA property in 1. abusive transactions include the following. A transfer of GAA property to a related person. it from the GAA.100. capture event occurs. makes a consolidated return. • The adjusted depreciable basis of the GAA as of the • Property you change to personal use. an involuntary conversion. Make & Sell sells seven machines to an unre. take advantage of differing effective tax rates. The remaining amount realized of $100 ($1.000) is section 1231 gain (discussed in chapter 3 of and securities in another corporation that is also a Publication 544). GAA is the unadjusted depreciable basis of the GAA minus If you remove property from a GAA. The unadjusted depreciable basis and depreciation re- serve of the GAA are not affected by the disposition of the • The contribution of property to a partnership in ex- change for an interest in the partnership. Assume the same facts as in Example 1. The depreciation allowance for the GAA in 2011 is $1. the adjusted depreciable basis of a in service before January 1.000). uted in complete liquidation of another corporation. These machines are treated as having an adjusted basis of zero. • The depreciation allowable to you for the year of the the credit for qualified electric vehicles. The following are nonrecognition transac- tions. The recipient of the • Property you dispose of in a qualifying disposition or property (the person to whom it is transferred) must include in a disposition of all the property in the GAA.Page 56 of 120 of Publication 946 15:26 . 2. beginning of your tax year in which the transaction • Property for which you must recapture any allowable takes place. minus credit or deduction. the recipient’s basis in the • Property you dispose of in a like-kind exchange or property is the result of the following. MUST be removed before printing. • The distribution of property (including money) from a partnership to a partner. or the deduction for clean-fuel vehi- cles and clean-fuel vehicle refueling property placed For this purpose. You change or involuntary conversion and a main purpose for can use any reasonable method that is consistently the disposition is to get a tax benefit or a result that would applied to determine the unadjusted depreciable ba- not be available without the use of a GAA.000 feror is in control of the corporation immediately after as ordinary income. For ex- cussed earlier under Disposing of GAA Property. or recapture event occurs. In • The receipt by one corporation of property distrib- June 2011. by the unadjusted depreciable basis of the property A disposition is an abusive transaction if it is not a nonrec- as of the first day of the tax year in which the disposi. Example 2. GAA. Page 56 Chapter 4 Figuring Depreciation Under MACRS . you must remove it from the GAA. change in use.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. following adjustments. use an expiring net operating loss or credit. Reduce the unadjusted depreciable basis of the GAA an abusive transaction.100 party to a reorganization in exchange solely for stock − $1. a. ognition transaction (described earlier) or a like-kind ex- tion. A transaction with a main purpose of shifting income puted in the same way as computed for the GAA) as or deductions among taxpayers in a way that would of the end of the tax year immediately preceding the not be possible without choosing to use a GAA to year in which the disposition. or re. A choice to use a GAA with a main purpose of These adjustments have no effect on the recognition and disposing of property from the GAA so that you can character of prior dispositions subject to the rules dis. Abusive transactions. ciable basis ($10. ample. you must remove strong evidence to the contrary. lated person for a total of $1. you must make the any depreciation allowed or allowable for the GAA. If you dispose of GAA considered abusive transactions unless there is property in a nonrecognition transaction. • The transfer of property to a corporation solely in exchange for stock in that corporation if the trans- On its 2011 tax return. 2. party to the reorganization.920 [($10.000) plus the expensed costs ($0). the section transfer. if you your (the transferor’s) adjusted basis in the property in a choose to terminate GAA treatment.000 − $5. 1. Rules for recipient (transferee). • Property you dispose of in a nonrecognition transac- tion or an abusive transaction. such as the investment credit. if you have a net operating loss carryover or a credit carryover. the following transactions will be Nonrecognition transactions. minus the amount previously recognized as ordinary income • The transfer of property by a corporation that is a ($9. Examples of sis of the property you remove from a GAA. If you transferred either all of the property or the last item of property in a GAA. 179 deduction. This is the GAA’s unadjusted depre- the exchange.

adjusted basis of the property at the time of the disposition is the result of the following: Example. 2010).Page 57 of 120 of Publication 946 15:26 . or disposition of a business.400. exchange or involuntary conversion. If you dispose of GAA property machines). As of Janu- GAA. main- • The unadjusted depreciable basis of the property. loss. tains one GAA for 12 machines. you must remove from the GAA the property that you transferred. If you dispose of all transaction (described earlier). manufactur. For Sankofa’s 2010 return.000 unadjusted depreciable bases of the three Qualifying dispositions. or similar account). you can choose to remove the creased from $93.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. Of the 12 machines.760). the amount subject to recapture as If you choose to remove the property from the GAA. As of December 31. erty. plant. the amount subject to recapture as duction and the machines do not qualify for a special ordinary income is the smaller of the following.000 and are used in • The depreciation allowed or allowable for the prop. a like-kind exchange the property. The depreciation allowed or allowable in 2010 for shipwreck. See chapter 3 of Publication 544 facility. The Abusive transactions. or a transaction that is choose to end the GAA. If you make this choice. The result of the following: disposition. or other deduction resulting from the disposition in the manner described earlier under Abusive • The depreciation allowed or allowable for the GAA. Sankofa’s New York plant and three machines cost erty figured by using the depreciation method. ciation method.600. machine is $760 ($5. The original unadjusted depreciable basis of the chines from the GAA and figure the gain.000 ($180. follows.000 − $7. or other GAA (plus. or is you dispose of GAA property as a result of a like-kind available for use. You must determine the gain.000 to $135. loss. transactions.400 property from the GAA.200 ($93. in a GAA.000 minus the $45. ery period. The total gain previously recognized as ordinary 2009. the depreciation allowed or allowable for the three income on the disposition of property from the machines at the New Jersey plant is $23. ciation reserve account for the GAA is $93. basis of the GAA with the amount realized. 4.000 and was placed in service in 2008. the depre- 1. 2010. you can or involuntary conversion. b. ary 1. A qualifying disposition is one that depreciation allowed or allowable for the three machines does not involve all the property. the unadjusted depreciable basis of the GAA is reduced from $180.920 [($135. or the last item of prop. A transfer of GAA property under an agreement Like-kind exchanges and involuntary conversions. The depreciation allowance for erty. or other deduction due to an abusive transaction by from the disposition in the manner described earlier under taking into account the property’s adjusted basis. the loss recognized in 2010 for each termination. a 5-year recovery period.760 (the ad- allowed. including any expensed cost (such as section In May 2010.600 to $70. A disposition that is a direct result of a cessation.000. including any expensed cost (such as section 179 Chapter 4 Figuring Depreciation Under MACRS Page 57 . nine cost a total of $135. justed depreciable basis of $7. 2. storm. gain or loss for each of the three machines at the New Jersey plant is determined as 1. proceeds allocated to each of the three machines at the New Jersey plant is $5. and convention that applied to the GAA Assume this GAA uses the 200% declining balance depre- in which the property was included. depreciation allowance. or theft.800) × 40%) ÷ 2]. As of January 1.000 and are used in Sankofa’s New Jersey plant.000 − $70. A charitable contribution for which a deduction is The adjusted basis of each machine is $5. section 1231 treatment. supplies. any expensed cost). a calendar-year corporation. ordinary income is limited to the result of the following.600 minus $23. Each machine costs minus $15. figure your gain. MUST be removed before printing. following.200 removed from the ac- count less the $1. operation. minus For Sankofa’s 2010 return. scrap. The sales or allowable for the property). or other deduction resulting loss. so Sankofa chooses to remove the three ma- a. included in the GAA.440 [(($15. as of December 31. by you. recov- $45. 2010. Sankofa does not claim the section 179 de- If there is a gain. you figure nontaxable only because it is a disposition from a the gain or loss by comparing the adjusted depreciable GAA. other casualty. The depreciation allowed or allowable for the prop. 2009). tions. This loss is subject to ing or other income-producing process. Sankofa. A disposition that is a direct result of fire. remaining in a GAA and that is described by any of the the GAA in 2010 is $25.000 − $5. This transaction is a qualifying 2. each machine is $1. for section 1245 property originally deduction by taking into account their adjusted bases. the depreciation allowance for the GAA is figured as follows. or other unit (other than by transfer to a for information on section 1231 losses. loss. A nontaxable transaction other than a nonrecognition Disposition of all property in a GAA. b.440 depreciation allowed or allowable in 3. See chap- ter 1 of Publication 544 for information on these transac- Figuring gain or loss.200) × 40%]. If where the property continues to be used. and the depreciation reserve account is de- in a qualifying disposition. If there is a gain. or the last item of property. and a half-year convention. Sankofa sells its entire manufacturing 179 deductions or the additional depreciation allowed plant in New Jersey to an unrelated person. Figure your gain. As a result.

000 = $26. Disposition ble of $36. the adjusted depreciable basis of the account is $23. When to make the election. Duforcelf. and uses a • You remove property from the GAA as described half-year convention. How- ever. Duforcelf does not claim the section under Terminating GAA Treatment. you still can make the election by filing an amended return within 6 months of the • Any deduction under section 179E of the Internal due date of the return (excluding extensions). Depreciation. 179 deduction and the calculators do not qualify for a special depreciation allowance. The $10. if you timely filed your return for the ber 31. the GAA terminates.000 minus the Nonresidential real property adjusted depreciable basis of $23. during the year upon dispositions from each GAA. • Any deduction under section 179B of the Internal ship or S corporation level (and not by each partner or Revenue Code for capital costs to comply with Envi- shareholder separately).000 minus the depreciation allowed or allowa. Page 58 Chapter 4 Figuring Depreciation Under MACRS .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.960).960. MUST be removed before printing.960 − $10. Make the election by complet. • Any deduction under section 179C of the Internal ing line 18 of Form 4562. 2005. Residential rental property nized as ordinary income ($36. includes An election to include property in a GAA is made sepa. source income. the following. rately by each owner of the property. 2006. both United States and foreign Example.040.000 and were placed in service in 2007. a DISC. If you dispose of all the property or the last item of property in a GAA as a result of a like-kind exchange or involuntary Revoking an election. In 2009. MACRS. Therefore. and that reflect the amount realized come on the disposition of property from the GAA.960 is recaptured as When you dispose of property that you depreciated using ordinary income. Terms you may need to know On the date of the disposition. How to make the election.000 is recognized as ordinary income.000. any gain on the disposition generally is recap- tured (included in income) as ordinary income up to the Electing To Use a GAA amount of the depreciation previously allowed or allowable for the property. However. This means that an election to include property in a GAA must be made by • Any section 179 deduction claimed on the property. section 179 property. or a possessions corporation and its $60. You must make the election on a timely filed tax return (including extensions) for the • Any deduction under section 179D of the Internal Revenue Code for certain energy efficient commer- year in which you place in service the property included in cial building property placed in service after Decem- the GAA. You can revoke an election to use conversion.000 calculators that cost a total of FSC. ber 20. for this purpose. has a recovery period of 5 years. Duforcelf recognizes a gain of $11. earlier. or loss in the manner described above under Disposition of all property in a GAA. and that inclusion results in a sub- GAA is depreciated under the 200% declining balance stantial distortion of income. year without making the election. In 2010. method.960). each member of a consolidated group and at the partner. Duforcelf sells the remaining calculators in the GAA to an unrelated person for $35. 2005. Duforcelf sells 200 of the calculators to an unrelated person for $10. This is the amount realized of $35. The gain subject to Recapture recapture as ordinary income is limited to the depreciation allowed or allowable minus the amounts previously recog. Duforcelf MACRS Depreciation? decides to end the GAA.000. Assume this related supplier. Revenue Code for certain qualified refinery property placed in service after August 8. minus erty included in each GAA. ronmental Protection Agency sulfur regulations.Page 58 of 120 of Publication 946 15:26 . You must figure the gain a GAA only in the following situations.9100-2” on the election statement.040 (unadjusted depreciable (see Glossary): basis of $60. a calendar-year corporation. that establish the unadjusted depreciable basis and depreciation • The total gain previously recognized as ordinary in- RECORDS reserve of the GAA. or combined gross income of an tains a GAA for 1. Attach the Revenue Code for qualified advanced mine safety election to the amended return and write “Filed pursuant to equipment property placed in service after Decem- section 301. the entire gain of $11. deductions or the additional depreciation allowed or You must maintain records that identify the prop- allowable for the GAA). main. see chapter 2 for the recordkeeping requirements for Like-kind exchanges and involuntary conversions. When Do You Recapture In March 2010. • You include in the GAA property that generates for- eign source income.

phono- ered basis resulting from these limits after the end of graphic. and video-recording the recovery period. and cer. or amusement (including photographic. Publication ❏ 463 Travel. If the property is not Commuting used predominantly (more than 50%) for qualified business use. • Any special depreciation allowance previously al- lowed or allowable for the property (unless you For information on the limits on depreciation de- elected not to claim it). Listed property is any of the following. recrea- can continue to deduct depreciation for the unrecov. section 179 deductions and any special depreciation allowance) for certain passenger automobiles. You may want to see: cation 544. Straight line method tem (MACRS) using the straight line method over the ADS recovery period. You may also have to recapture (include in income) any excess deprecia. Annual • Any other property used for transportation. Listed prop- ❏ 4797 Sales of Business Property erty includes cars and other property used for transportation. ❏ 535 Business Expenses ❏ 587 Business Use of Your Home (Including Use Additional Rules for by Daycare Providers) Listed Property Form (and Instructions) ❏ 2106 Employee Business Expenses ❏ 2106-EZ Unreimbursed Employee Business Introduction Expenses This chapter discusses the deduction limits and other spe. communication. If your use of the prop- erty is not for your employer’s convenience or is not required as a condition of your employment. erty.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. ! CAUTION ductions for listed property placed in service before 1987. Improvement duction or a special depreciation allowance. There is no recapture for residential rental and nonresiden- tial real property unless that property is qualified property for which you claimed a special depreciation allowance. and Car Expenses 5. tion claimed in previous years. You • Property generally used for entertainment. tion. Recovery period tion. see Publication 534.Page 59 of 120 of Publication 946 15:26 . ❏ 4562 Depreciation and Amortization cial rules that apply to certain listed property. This chapter defines listed property and explains the enue Code for removal of barriers to the disabled special rules and depreciation deduction limits that apply.000 pounds or amount applies to certain leased property. unless it limits apply to depreciation deductions (including is an excepted vehicle. Entertainment. property used for entertainment. Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. MUST be removed before printing. property and explains how to report information about the property on your tax return. equipment). and the elderly. including the special inclusion amount rule for leased prop- • Any deduction under section 193 of the Internal Rev. A similar inclusion • Passenger automobiles weighing 6. you cannot claim the section 179 de. Gift. • Any deduction under section 190 of the Internal Rev. and forms. See chapter 6 for information about getting publications tain computers and cellular phones. Capitalized • Business-use requirement. • Passenger automobile limits and rules. What Is Listed Property? • Deduction for employees. you Terms you may need to know cannot deduct depreciation or rent expenses for your (see Glossary): use of the property as an employee. Useful Items For more information on depreciation recapture. Chapter 5 Additional Rules for Listed Property Page 59 . less. see Publi. In addi. It also discusses the recordkeeping rules for listed enue Code for tertiary injectants. you must figure any depreciation deduction under the Modified Accelerated Cost Recovery Sys.

unless Other Property Used used only at a regular business establishment and owned or leased by the person operating the estab. • Computers and related peripheral equipment. Publication 463. • A vehicle used directly in the trade or business of • Qualified moving vans. compo- nent. • A truck or van that is a qualified nonpersonal use • School buses used in transporting students and em- vehicle. purposes. • Combines. and any other vehi- made to listed property that must be capitalized is treated cles used to transport persons or goods. Other property used for transporta- as a whole also apply to the improvement. see is on call at all times. • Clearly marked police and fire vehicles. boats. using the straight line method. For example. if tion does not include the following qualified nonpersonal you must depreciate the listed property using the straight use vehicles (defined earlier under Passenger Automo- line method. Improvements to listed property. An improvement buses. officer or fire fighter who. and highways such. ployees of schools. cranes and derricks.000 pounds that is designed to carry cargo.000 pounds or less of unloaded gross vehicle weight (6. and forklifts. • Other buses with a capacity of at least 20 passen- Qualified nonpersonal use vehicles. It includes any part. or only for the driver plus a folding jump seat. • It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire Page 60 Chapter 5 Additional Rules for Listed Property . or other item physically attached to the automobile at • Bucket trucks (cherry pickers). listed property. roads. or combination ambu. • An ambulance. flatbed trucks. and price of an automobile. as a new item of depreciable property.000-pound threshold are not passen- ger automobiles.000 pounds or less of gross vehicle • Any vehicle with a loaded gross vehicle weight of over 14. hearse. The following vehicles are not considered passenger automobiles for these purposes. they are still “other property used for • Cellular telephones (or similar telecommunication transportation” and are subject to the special rules for equipment). They also include trucks and vans that have following requirements. next. transporting persons or property for pay or hire.Page 60 of 120 of Publication 946 15:26 . motorcycles. and rated at 6. been specially modified so that they are not likely to be used more than a minimal amount for personal purposes. refrigerated trucks. They include the trucks and vans listed as ex- Clearly marked police and fire vehicle. MUST be removed before printing. • Unmarked vehicles used by law enforcement officers Passenger Automobiles if the use is officially authorized. weight for trucks and vans). • It is required to be used for commuting by a police For a detailed discussion of passenger automobiles. Other property used for transportation includes trucks. • Delivery trucks with seating only for the driver. including leased passenger automobiles. gers that are used as passenger buses. • It is owned or leased by a governmental unit or an such as by installation of permanent shelving and painting agency or instrumentality of a governmental unit. dump the time of purchase or usually included in the purchase trucks (including garbage trucks). Qualified nonper.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. A regular business establishment includes a portion of a dwelling unit that is used both regularly Although vehicles used to transport persons or and exclusively for business as discussed in Publi- cation 587. A clearly cepted vehicles under Other Property Used for Transpor- marked police or fire vehicle is a vehicle that meets all the tation. lance-hearse used directly in a trade or business. airplanes. cement mixers. ! CAUTION property for pay or hire and vehicles rated at more than the 6. you also must depreciate the improvement biles). sonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal • Tractors and other special purpose farm vehicles. when not on a regular shift. • Qualified specialized utility repair trucks. • It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer’s arrest powers or the fire fighter’s obligation to respond to an emergency. The recovery period and method of depreciation that apply to the listed property Excepted vehicles. A passenger automobile is any four-wheeled vehicle made • Ambulances used as such and hearses used as primarily for use on public streets. for Transportation lishment. the vehicle to display advertising or the company’s name.

We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employ- device capable of accepting information. gas. The use Chapter 5 Additional Rules for Listed Property Page 61 . • Personal use is limited to situations in which it is more convenient to the employer. only if both the following requirements are met. MUST be removed before printing. you cannot deduct depreciation (including the section 179 deduction) or rent Qualified specialized utility repair truck. for personal purposes. you can claim a depreciation use. arithmetic. • Typewriters. vehicle. Example 3. adding and accounting ma. and supplying the nience of We Deliver and is required as a condition of results of those processes with or without human interven- employment. must travel to these sites on a regular basis. use his own car and receive payment for using it. amusement or entertainment. The use of his own • Any equipment that is an integral part of other prop. sewer. electronically activated town offices. Virginia Sycamore is employed as a courier with We Deliver. other than minimally. A marking on a license plate is not a clear • Equipment of a kind used primarily for the user’s marking for these purposes. and similar except that Uplift furnishes a car to Bill. working hours to carry on your employer’s business gener- equipment. The use of your property • Personal use for travel to and from a move site in performing services as an employee is a business use happens no more than five times a month on aver. that the use of the property is a condition of your employ- ment is not sufficient. for the van not to be returned to the employer’s business location. which provides local courier services. testing equipment. or parts. employer does not have to require explicitly that you use taining electricity. Virginia’s use of the motorcycle is for the conve- scribed processes to the information. However. It consists of a central processing unit with extensive storage. qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. duplicating equipment. a Related peripheral equipment is any auxiliary machine construction company with many sites in the local area. A truck is a expenses for your use of the property as an employee. a Deduction? • No personal use of the van is allowed other than for travel to and from a move site or for minor personal If you are an employee. calculators. incurs in traveling to the various sites. racks. Bill Nelson is an inspector for Uplift. or the property. owned or rented) in performing services as an employee only if your use is a business use. Computers and Related Example 1. The use of property must be truck home in order to be able to respond in emer.Page 61 of 120 of Publication 946 15:26 . or other permanent interior construc. it pays him for any costs he eral equipment.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. Uplift does not ing unit of a computer. who chooses to equipment. Can Employees Claim quirements are met. the truck would be used. Assume the same facts as in Example 2 chines. copiers. erty that is not a computer. the location of the move site. age. automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Condition of employment. and control capabilities. However. If these requirements are not met. applying pre- ment. The use of listed property during your regular tion has been installed to carry and store the tools. furnish an automobile or explicitly require him to use his The following are neither computers nor related periph. Employer’s convenience. convenience if it is for a substantial business reason of the • Shelves. a mere statement by the employer steam utility services. water. Example 2. or parts and would make it unlikely that ally is for the employer’s convenience. such as video games. logic. own automobile. A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following re. required for you to perform your duties properly. Qualified moving van. Whether the use of listed property is a condition of your employment depends on all • The employer requires the employee to drive the the facts and circumstances. employer. Your gency situations for purposes of restoring or main. such as a stop for lunch on the way from one deduction for the use of your listed property (whether move site to another. because of the • The use is required as a condition of your employ- location of the employee’s residence in relation to ment. He which is designed to be controlled by the central process. tion. • The use is for your employer’s convenience. telephone. The use is for your employer’s to carry heavy tools. She Peripheral Equipment owns and uses a motorcycle to deliver packages to down- A computer is a programmable. Whether the use of listed property is for your employer’s convenience must be deter- • The truck was specifically designed for and is used mined from all the facts.

electing the straight line method. small charter airline. actually used (rather than merely being available for use). • A lessee must add an inclusion amount to income in the first year in which the leased property is not used Example 5. You determine the percentage of qualified business predominantly (more than 50% of its total use) for qualified use by dividing the number of miles you drove the vehicle business use. you are not regularly en- Fair market value (FMV) gaged in the business of leasing automobiles. if you lease only one passenger Declining balance method automobile during a tax year. Y requires pilots to obtain 80 hours of This rule applies each year of the recovery period. of his own car is neither for the convenience of Uplift nor • Any depreciation deduction under MACRS for prop- required as a condition of employment. Occasional or incidental leasing activity is insuffi- cient. MUST be removed before printing. Pilots usually can obtain these hours by flying with • Excess depreciation on property previously used predominantly for qualified business use must be the Air Force Reserve or by flying part-time with another recaptured (included in income) in the first year in airline. His use of the computer is ! CAUTION an item of listed property not used predominantly for qualified business use is not the same as neither for the convenience of his employer nor required as a condition of employment. Recapture Recovery period How To Allocate Use Straight line method To determine whether the business-use requirement is met. you can determine the percentage of busi- ness use during the year it is placed in service does ness use of a computer by dividing the number of hours not qualify for a special depreciation allowance. It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. He owns and uses a home computer which is virtually Being required to use the straight line method for identical to the office model.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. If this requirement is not met. a straight line method over the ADS recovery period. you must allocate the use of any item of listed prop- You can claim the section 179 deduction and a special erty used for more than one purpose during the year depreciation allowance for listed property and depreciate among its various uses. This determination is made on the basis of the facts and circumstances in each case and Capitalized takes into account the nature of your business in its en- Commuting tirety. with Zip. To portation. allocate the property’s use on the basis of mile- meet this requirement. What Is the Business-Use Exception for leased property. of miles you drove the vehicle for all purposes (including business miles) during the year. listed property must be used age. An employer who allows an employee to use the employer’s property for Nonresidential real property personal purposes and charges the employee for the use Placed in service is not regularly engaged in the business of leasing the property used by the employee. flight time annually in addition to flight time spent with the airline. the following for business purposes during the year by the total number rules apply. erty not used predominantly for qualified business use during any year must be figured using the Example 4. • Property not used predominantly for qualified busi. He occasionally takes work home at night rather than work late in the office. Marilyn owns her own airplane. Marilyn Lee is a pilot for Y Company. The use of her airplane to obtain the required flight hours is neither for the which it is no longer used predominantly for qualified convenience of the employer nor required as a condition of business use. For example. you used the computer for business purposes during the Page 62 Chapter 5 Additional Rules for Listed Property . allocate the property’s use on ness use during the year it is placed in service does the basis of the most appropriate unit of time the property is not qualify for the section 179 deduction. The business-use re- Requirement? quirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in Terms you may need to know the business of leasing listed property.Page 62 of 120 of Publication 946 15:26 . For other listed property. (see Glossary): You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for Adjusted basis the leasing of listed property with some frequency over a Business/investment use continuous period of time. listed property using GDS and a declining balance method For passenger automobiles and other means of trans- if the property meets the business-use requirement. David Rule is employed as an engineer predominantly for qualified business use. • Property not used predominantly for qualified busi. employment. For example. an engineering contracting firm.

for all purposes (including business use) during the year. or amusement purposes as a for a qualified business use. The the property). ployee and James Company withholds tax on it. muting to business. recreation. • The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% Example 3. employees also are allowed to take the automobiles home • The use of property as pay for the services of a 5% at night. This use of company automobiles by employ- ees is not a qualified business use. or is considered to own. even for personal less the value of the use is included in that person’s purposes. advertises the owner’s or user’s trade or business does not see Related persons in the discussion on property owned convert an otherwise personal use into business use.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. John. listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. year by the total number of hours you used the computer Exception for leasing or compensatory use of aircraft. do not use of the automobile in Richard’s gross income and prop- treat your use of listed property as business use unless it is erly withholds tax on it. performed during the trip. This use son (other than a 5% owner or related person). such as commut- ing to and from work. capital or profits interest in the business.Page 63 of 120 of Publication 946 15:26 . a business tele. Example 2. un. a Deduction. The fact that an automobile is used to display material that Related persons. MUST be removed before printing. allows unrelated em- Qualified Business Use ployees to use company automobiles for personal pur- poses. Investment Use Property does not stop being used predominantly The use of property to produce income in a nonbusiness ! for qualified business use because of a transfer at death. However. it does not and he does not withhold tax on the value of the use of the include the following uses. gross income and income tax is withheld on that amount where required. or used in 1986 under Which Method Can You Use To Use of your automobile by another person. Examples. is a qualified business use for the company. John employs his brother. You properly report the value of the use as income to use of business property is qualified business use. The following examples illustrate whether the 2. a busi. He does not include the value of the personal use of Qualified business use of listed property is any use of the the company automobiles as part of their compensation property in your trade or business. The fair market value of each employee’s use of owner or related person. Richard. else uses your automobile. so it is not condition of your employment. CAUTION However. you can treat the investment use as business Chapter 5 Additional Rules for Listed Property Page 63 . The company includes the value of the personal Employee deductions. Similarly. an automobile for any personal purpose. regardless of whether work is For a corporation. in the business. James Company Inc. of company automobiles by employees. You are paid a fair market rent. If someone Depreciate Your Property in chapter 1. a 5% owner is any person who owns more than 5% of the Commuting use. plumbing contracting business. Treat the use of listed property for at least 25% of the total use of the aircraft during the year is entertainment. This is also true for a business meeting held in a car while commuting to work. That use is directly connected with your business. The use of an automobile for commut. business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its 5% owner. For a business entity that is not a corporation. automobiles. either of the following. earlier. As part of Richard’s pay. he is Treat any payment to you for the use of the automobile as allowed to use one of the company automobiles for per- a rent payment for purposes of item (3). a 5% owner is any person who owns. John Maple is the sole proprietor of a 3. activity (investment use) is not a qualified business use. For this purpose. Example 1. however. The use of the automobile is pay for for your employer’s convenience and is required as a the performance of services by a related person. 1. See Can Employees Claim a qualified business use. ration. sonal use. owns several auto- owner or person related to the owner or lessee of mobiles that its employees use for business purposes. is reported as income to the em- • The use of property as pay for services of any per. treat as related persons only the relationships ness use unless one of the following conditions applies. For a description of related persons. the other person and withhold tax on the income where required. ing is not business use. • Stock possessing more than 5% of the total com- ness call made on an otherwise personal trip does not bined voting power of all stock in the corporation. Treat the leasing or compensatory use of any aircraft by a 5% owner or related person as a qualified business use if Entertainment use. use as an ordinary and necessary business expense. do not treat that use as busi. change the character of a trip from personal to business. phone call made on a car telephone while commuting to • More than 5% of the outstanding stock of the corpo- work does not change the character of the trip from com. For example. in Example 1. If you are an employee.

.018 ness/investment use for determining her depreciation de- duction is 90%. it is used predominantly for which equals the total of the section 179 deduction and qualified business use.000 . The fair market value of the property. . . . Your qualified 1. .000 . described next. . Her combined business/ on which you took the depreciation deduction.) . Sarah Bradley uses a home computer 50% of the time to manage her investments. she cannot elect a section 179 2006 – 20% of $18.Page 64 of 120 of Publication 946 15:26 . . . Ellen claimed a section 179 deduction of $10. .618) for 2005 through computer 40% of the time in her part-time consumer re- 2008.018 excess depreciation in her a given year. . If Sarah uses her computer 30% of the time will be no excess depreciation. senger automobile limits discussed later under Do the Amount B. The depreciation allowable for the property (including business-use percentage is the part of the property’s total any section 179 deduction and special depreciation use that is qualified business use (defined earlier). you must include Excess depreciation is: an amount in your income in the first year your qualified business-use percentage is 50% or less. later. . The business/investment use for the first tax year the qualified business-use percentage is 50% or less. she Where to figure and report recapture. . you must Lessee’s Inclusion Amount recapture (include in income) excess depreciation in the first year you use it 50% or less. you must refigure 1. For the allowance claimed) for years before the first year you inclusion amount rules for a leased passenger automobile. $16. . If Ellen’s use of the truck does not change to 50% for business and 50% for personal purposes until 2011. . Sarah’s home computer is listed property because it is not used at a regular business establishment. you was over 6. . During 2009. She must depreciate it using the straight line 2008 – 20% of $18. depreciation she will have claimed.000 pounds. Therefore.800 business use. . . . report the recapture amount as other income on is 90%. . She 3.000 based on the purchase of the truck. She can elect a section 179 deduc. . . automobile for business/investment use. .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. The pickup truck’s gross vehicle weight of listed property is specified in the lease agreement. Amount B is: Passenger Automobile Limits Apply. . . $1. .000) and depreciation claimed ($6.600 12. do not use the property predominantly for qualified see Leasing a Car in chapter 4 of Publication 463. The excess depreciation is deter- mined as follows. . 2. Her combined busi. 3. . MUST be removed before printing. use to figure the depreciation deduction for the property in purposes.618 search business. see the special rules those years if you had not used the property for the inclusion amount. The fair market value of the property is the value on the ing it using the 200% DB method over a 5-year GDS first day of the lease term. . . can claim a special depreciation allowance and depreciate Part IV.000 . Minus: Depreciation allowable (Table A-8): She does not use the computer predominantly for qualified 2005 – 10% of $18. Excess depreciation . to figure the recapture amount. . . .600 method over the ADS recovery period. If the capitalized cost of an item recovery period. . Example. The depreciation that would have been allowable for Amount B. . . . must treat that amount as the fair market value. consumer research business. . line 21. . she used the truck 50% for business and 50% for personal 1. gross income for 2009. If you used listed property more than 50% in a qualified business use in the year you placed it in service. She also uses the Total section 179 deduction ($10. She includes $4. tion and. . If you took the depreciation deduc- Recapture of Excess Depreciation tion on Form 2106. Schedule C (Form 1040) if you took the depreciation de- duction on Schedule C.600 computer. . . . Ellen Rye purchased and multiplied by placed in service a pickup truck that cost $18. 3. . . (Depreciation is from Table A-1. You also increase the If you use leased listed property other than a passenger adjusted basis of your property by the same amount. 3. . . . so it was not subject to the pas. The applicable percentage from Table A-19 in Ap- used it only for qualified business use for 2005 through pendix A. if your lease begins in the predominantly for qualified business use in the year last 9 months of your tax year or is for less than one year. . Report the recap- the computer using the 200% declining balance method ture amount as other income on the same form or schedule over the GDS recovery period. Example 1. you placed it in service. multiplied by the depreciation using the straight line method and the ADS recovery period. . . report the recapture amount as other income on Form 1040. . . 2008. . minus The inclusion amount is the sum of Amount A and 2. . $4. business use. .000. However.000. In June 2005. . . . . there Example 2. . She began depreciat.600 deduction or claim a special depreciation allowance for the 2007 – 20% of $18. . Amount A is: To determine the amount in (2) above. if she does not deduct all the computer’s cost. For exam- investment use for determining her depreciation deduction ple. Use Form 4797. . .000 . Amount A. . . The total depreciation al- to manage her investments and 60% of the time in her lowable using Table A-8 through 2011 will be $18. . The fair market value of the property. . . multiplied by Page 64 Chapter 5 Additional Rules for Listed Property .

leased and placed in service an item of period of 5 years. . . . . . . . . . Larry House. The lease is for 5 years. . . . which is the year and you do not use the property predominantly (more sum of −$238 (Amount A) and $462 (Amount B). . Business/investment use for first year pendix A. . . . Schedule C or F (Form 1040). . . $147 is the sum of Amount A and Amount B. . . . following apply. . . close of your tax year. . . .000 × 70% × 2. The following worksheet 8. a calen. $224 2. . the first tax year his qualified business-use per. The average of the business/investment use for all Inclusion Amount Worksheet tax years the property was leased that precede the for Leased Listed Property first tax year the qualified business-use percentage is Keep for Your Records 50% or less. . Amount B is zero. . . and the applicable percentage for year one from A-20 is 22. . . . Figure the inclusion amount by taking etc. . 3. . . The computer has a 5-year recov. Rate (%) from Table A-19 . −238 not be more than the sum of the deductible amounts of rent 6. 22. Skip lines 6 Example. . . . . . Rate (%) from Table A-20 . . . . so it is listed property. . leased and placed in service a com- Example 1. . . . . . . . . Multiply line 8 by line 9. Form 1040. . . . . . . . . . . Schedule C Under this special rule. This is your Inclusion Amount Worksheet inclusion amount. . . a calendar puter with a fair market value of $3. 70 % Inclusion amount worksheet. . Enter here and as other for Leased Listed Property income on the form or schedule on which Keep for Your Records you originally took the deduction (for example. . . . . . . . The inclusion amount is subject to a special rule if all the 6. • You do not use the property predominantly (more 9. through 9 of the worksheet and enter zero on line 10. . . . . . . . . 5. of the tax year. Form 1120.600 for 2009. . . . . 2009 is $800. 2009 is the third tax $147 ($10.100 is provided to help you figure the inclusion amount for 9. He must add an inclusion amount to gross income 2009. Average business/investment use for years amount in gross income. . . . . . The amount included Chapter 5 Additional Rules for Listed Property Page 65 . . . Add line 5 and line 10. 2008. . . . . . . 462 11. 11.000 for the tax year in which the lessee must include the 7. .000. Larry uses the Inclusion Amount Worksheet for Leased Lease for less than one year. Multiply line 1 by line 2. . . . . .Page 65 of 120 of Publication 946 15:26 . . She must include $147 in income in 2009.) . 10. . Her property has a recovery business use of the property (all of which is qualified period of 5 years under ADS. . His market value of $10. . 8.8 % Maximum inclusion amount. Fair market value . . . . . . . . . Julie Rule. Multiply line 1 by line 2. . . Enter here and as other income on • The lease term continues into your next tax year. than 50%) for qualified business use during that part 10. . A special rule for the Listed Property to figure the amount he must include in inclusion amount applies if the lease term is less than one income for 2009. . . . . . dar year taxpayer. . 1. . . . the average business use for 2008 and A-19 is −19. . . .0%. . . . . . . . The inclusion amount can- 5. . etc. Multiply line 3 by line 4. . 2. . . . . . the product of the fair year of the lease. . . . Multiply line 6 by line 7 . . 40 % 3. 3. . 2007. . . . . . . so the applicable percentage from Table market value. . . Rate (%) from Table A-20 . . . . . . . . Multiply line 6 by line 7 . . . This is Amount A. . . .000 3. . . . . . . . . . 1. The lease is for a year taxpayer. . $3. . . 2. . . .240 is for 2009. . . 7. . Business/investment use for first year business use is 50% or less . . . His inclusion amount is $224. .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. . . −19. . . . . . multiplied by 1. . . Fair market value . . than 50%) for qualified business use. . . . Amount A is ery period under both GDS and ADS. Multiply line 3 by line 4. Fair market value . The applicable percentage from Table 2009. . The centage is 50% or less. property leased before the first year business use is 50% or less . . . deductible. . . .) . . Larry’s deductible rent for the computer for Table A-19. . into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Work- sheet for Leased Listed Property) and the applicable per- centage for the tax year the lease term begins. . . . . . On August 1. . The applicable percentage from Table A-20 in Ap. . . . . . .8%. . . . .000. . This is Amount A. . add the inclusion amount to income or F (Form 1040). . Add line 5 and line 10. . . . . . Multiply line 8 by line 9. Rate (%) from Table A-19 . and 40% in business use of the property was 50% in 2008 and 90% in 2009. Average business/investment use for years property leased before the first year • The lease term begins within 9 months before the business use is 50% or less . business use is 50% or less . . . . Lease beginning in the last 9 months of your tax year. . 60% in 2008. She paid rent of $3. . Her business use) is 80% in 2007. . of which $3. . .200 4. . 2. . . . in the next tax year. . . . . . . 4. the form or schedule on which you originally took the deduction (for example. On February 1. . .0 % leased listed property. . . . . . . . . This is your inclusion amount. . Larry does not use the computer at a listed property.1%). Form 1040. Form 1120. . . This is Amount B. This is Amount B. MUST be removed before printing. The property is 5-year property with a fair regular business establishment. . . . . . . . Fair market value .

675 Do the Passenger Automobile 2004 10. If you have two or more successive leases that are ger automobiles.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. 3If you acquired the vehicle before 5/06/03. John Joyce. vehicle is qualified Liberty Zone property.775 Convention 2000 3. you can claim for a passenger automobile (de. tions) for the same or substantially similar property. Amount A Passenger Automobiles is $71 ($15. the unrecovered basis of your depreciation allowance for the vehicle.900 2. The $71 is the sum of Amount A and Amount B.960. the maximum fined earlier) each year is limited. MUST be removed before printing. leased and placed in service an item of The passenger automobile limits are the maximum depre- listed property that is 3-year property. If 2008 10.6604 4. property.800 2.775 Basis 2001 7.850 $1.950 1. deduction is $7.800 $2.6102 4.960.000 × 45% × 2. including the section 179 de.950 1.850 1.060. qualified property. the maximum deduction is $3.775 C (Form 1040) if you took the deduction on Schedule C.775 you took the deduction for rental costs on Form 2106. For infor- The lease term for listed property other than residential mation on when you are considered regularly engaged in rental or nonresidential real property includes options to the business of leasing listed property. The limits generally do not apply to passenger automobiles numerator of the fraction is the number of days in the lease leased or held for leasing by anyone regularly engaged in term and the denominator is 365 (or 366 for leap years).775 Limits Apply? 12/31/2003 Terms you may need to know 1/01/2003– 7.900 2.850 1. If you elected not to claim any special after the recovery period.850 1. Amount B Maximum Depreciation Deduction is zero.1% × 182/365).960 4. the maximum deduction is $2. ear- part of the same transaction (or a series of related transac- lier.9601 4.775 report the inclusion amount as other income on Form 1040.675 5/06/2003– 10. On October 1. years. They are based on the date you placed the years under ADS.6604 4. 2008. see Exception for leased property. in income is the inclusion amount (figured as described in Exception for leased cars. the product of The maximum deduction amounts for most passenger the fair market value. line 21.660. during which he used the property 45% in business.Page 66 of 120 of Publication 946 15:26 .850 1. under What Is the Business-Use Requirement.775 5/05/2003 (see Glossary): 2002 7. report the inclusion amount as other income on Schedule 2009 $10. treat them as one lease. This section describes the maximum depreciation de. the business of leasing passenger automobiles.800 2. The lease term was 6 months (ending automobile in service.800 2. Page 66 Chapter 5 Additional Rules for Listed Property . For example. 2If you elected not to claim any special depreciation allowance The depreciation deduction.9601 $4.6605 4. or the duction. the average business use for both automobiles are shown in the following table. prorated for the length of the lease. He must include $71 in income in 2009.060 4. the vehicle is not qualified property. 2007 3. 2006 2.700 2.900 2. and the applicable percentage for year one from Table A-19. deduction is $2. Maximum Depreciation Deduction Example 2. The passenger automobile the preceding discussions) multiplied by a fraction.000 and a recovery period of 5 bile. for the vehicle. Report the inclusion Date 4th & amount figured as described in the preceding discussions Placed 1st 2nd 3rd Later as other income on the same form or schedule on which In Service Year Year Year Years you took the deduction for your rental costs.900 2.950 1. This property had a ciation amounts you can deduct for a passenger automo- fair market value of $15. a calen- dar year taxpayer.775 Placed in service 1If you elected not to claim any special depreciation Recovery period allowance for the vehicle or the vehicle is not qualified property.950 1.850 1.960 4. 2009).775 2005 2.900 2. the vehicle is not property that results from applying the passenger automo.060 4.7103 4.900 2. on March 31. including passen- renew. for Passenger Automobiles Where to report inclusion amount. the maximum duction amounts for 2009 and explains how to deduct. or the vehicle is qualified Liberty Zone bile limit.950 1.

280 14. the deduction amounts for electric vehicles placed in service vehicle is not qualified property.125 If you have a short tax year. tomobiles that are produced to run primarily on electricity are higher than those for other automobiles.850 5.750 5. are Zone property. the maximum deduction to figure her MACRS depreciation on the car. should use the for the vehicle. the vehicle is not qualified property. and before January 1.Page 67 of 120 of Publication 946 15:26 .080.225 determined on an annual basis during the tax year. a car is 5-year property.180.225 the short tax year and the denominator is 12. This deduction is $9. or the vehicle is qualified Liberty after August 5. the vehicle is not qualified property. Owners of electric vehicles Chapter 5 Additional Rules for Listed Property Page 67 .325 only in her business. the maximum deduction is $9.9804 14.500 unadjusted basis of her car by 0. use the table of maximum deduction amounts on page 68 5 If you acquired the vehicle before 9/11/01. the Maximum Depreciation Deduction vehicle is not qualified property.980 $14. the maximum deduction is $3.750 5.0302 14. or the vehicle ance for the car. only for business.325 Example. 4If you elected not to claim any special depreciation allowance placed in service after December 31.750 5.500. the vehicle or the vehicle is not qualified property.125 ! CAUTION maximum deduction amount by multiplying the maximum amount by a fraction. the maximum electric vehicles classified as passenger automobiles or deduction is $3. 2009. The maximum 5 If you acquired the vehicle before 9/11/01. the vehicle is not qualified property.550 5.900.900 is below the maximum depreciation deduction of $2. you elected not to claim any special depreciation allowance for the vehicle.8301 14. 2006.850 5.700 8. Virginia Hart bought and placed in service a new car for $14.800 8. Date 4th & If your business/investment use of the automobile Placed 1st 2nd 3rd Later ! CAUTION is less than 100%.300 8. the maximum deduction is Since she placed her car in service on April 15 and used it $8. you must reduce the maximum deduction amount by multiplying the maximum In Service Year Year Year Years amount by the percentage of business/investment use 2006 $8. or the vehicle is The maximum depreciation deductions for passenger au. 2007.0805 14.325 calendar year. is qualified Liberty Zone property.080.400 $8.960 for passenger automobiles placed in service in 3 If you elected not to claim any special depreciation allowance for the vehicle. The numerator of 5/06/2003 – 12/31/2003 32.060. qualified Liberty Zone property. the maximum deduction is $9. the maximum deduction is $9. shown in the following table.880 14.200 8. you must reduce the 2004 31.20 allowance for the vehicle.8803 14.450 5. qualified Liberty Zone property.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Under MACRS. she uses the percentages in Table A-1 2If you acquired the vehicle before 5/06/03. the vehicle is not qualified property. 5/05/2003 2002 22.880. If you elected not to claim any special depreciation multiplies the $14. 2005 8.600 8.650 $5. or the vehicle is qualified For Electric Vehicles Liberty Zone property.600 8. or the table of maximum deduction amounts on page 66 for vehicle is qualified Liberty Zone property. Electric Vehicles 4 If you elected not to claim any special depreciation allowance for the vehicle. you elected not to for electric vehicles classified as trucks and vans. claim any special depreciation allowance for the vehicle. $2.900 for 2009. or the vehicle is qualified Liberty Zone property. She can deduct the full $2. She files her tax return based on the 2000 9. Virginia is $22.880.280. She used the car 2001 23.800 8. or the vehicle is 2009. She does not elect a section 179 deduction 1If you elected not to claim any special depreciation allowance for and elected not to claim any special depreciation allow.060. 1997.225 the fraction is the number of months and partial months in 1/01/2003 – 22. On April 15. the maximum to get her MACRS depreciation of $2.

. . .875 -0. 12. . . . . .875 percentage . . . . . . . . . . . . 16.250 1. or the vehicle is qualified Liberty Zone property.Page 68 of 120 of Publication 946 15:26 . . . . Cost or other basis . Example. deduct for depreciation . . Enter 2004 10. . . the maximum deduction is $3. .975 1) If line 10 is equal to line 9. . Enter the lesser of line 11 or deduction is $3. .150 1. . Then use bought and placed in service a new car for $18. . . . . . the maximum 17.300 3. . . . . .9103 5. . 10. 3If you elected not to claim any special depreciation allowance 13. . This is your MACRS depreciation deduction . For Trucks and Vans 4. . . . . used the car 60% for business during 2009. .975 12/31/2003 Note. . This is for the vehicle. the maximum deduction is $3. . . . . .260 5. . . He files his tax return based on the calendar year. vehicle is qualified Liberty Zone property. . . . . Trucks and Vans Depreciation Worksheet for Passenger Automobiles The maximum depreciation deductions for trucks and vans Keep for Your Records placed in service after 2002 are higher than those for other passenger automobiles. . line 16. Multiply line 7 by line 8. . 5. This is allowance for the vehicle or the vehicle is not qualified the maximum amount you can property. . Date placed in service . . . . .260. . stop here. . . . . . Maximum depreciation deduction In Service Year Year Year Years for this year from the appropriate table . The maximum deduction Part I amounts for trucks and vans are shown in the following table. . . . Business/investment-use 2008 11. 14. . . . He uses Table A-1 to de- termine the depreciation rate. . . .0601 $4. . Maximum Depreciation Deduction 3. . . . Property class .000. . . Method and convention . 2009 $11. . You can use the following worksheet to figure your depre. .900 $2.0104 5. . is your basis for depreciation . his car is 5-year property. deduction is $3. . the vehicle is not 15. Page 68 Chapter 5 Additional Rules for Listed Property . . . the vehicle is not qualified property. . This qualified property. Donald’s MACRS deprecia- tion deduction is limited to $776. . .250 1. depreciation allowance for the vehicle. Multiply line 15 by line 6.775 8. . . . . . . . Depreciation rate (from tables) .100 3. . .875 adjusted maximum depreciation 2006 3. .9605 5.150 1.200 3. Multiply line 12 by line 8. . . .1602 5. Also. . . . . the maximum claimed in the year you placed the deduction is $7. . . . . . MUST be removed before printing. . Under GDS.875 deduction . . . or the maximum your business/investment cost . MACRS system (GDS or ADS) . . . . Part II 2If you elected not to claim any special depreciation 11. . .if this is not the year you placed the car in service. complete Part II. 9.950 $1. Donald is electing a section 179 deduction of $1. . . . or the vehicle is qualified Liberty Zone property.360. or the deduction . . . .260 5. 2009.050 1.000 on the car. Section 179 deduction claimed this 2005 3. . . 1. Placed 1st 2nd 3rd Later 7.260 5.200 3. as shown in the following worksheet on the next page. . .400 3. . . . . . . . . . . If you elected not to claim any special car in service . . Your 5/05/2003 combined section 179 and depreciation deduction is limited to the amount on line 9. . .360. This is 5 If you elected not to claim any special depreciation allowance your tentative MACRS depreciation for the vehicle. Subtract line 10 from line 9. the car does not qualify for any special depreciation allowance. . . the vehicle is not qualified property. . . . . . .875 year (not more than line 9). . 5/06/2003– 11. . He the information from this worksheet to prepare Form 4562. Donald Banks ciation deduction using the percentage tables.150 1. 2. Date 4th & 6. . . . .200 3. 1/01/2003– 7.960. . . Recovery period . .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. . . Subtract line 14 from line 13. . . . . Depreciation Worksheet for The following example shows how to figure your depre- Passenger Automobiles ciation deduction using the worksheet.160. On September 26. . . . .400 3. . . . . . Section 179 deduction and any special depreciation allowance 4 If you acquired the vehicle before 5/06/03. 1 If you elect not to claim any special depreciation 2) If line 10 is less than line 9. . .060. This is your 2007 3. allowance for the vehicle or the vehicle is not qualified property. .050 1. the maximum deduction is $3. . . .

. . MUST be removed before printing. $9. Year Percentage Amount Limit Allowed Part II 2003 20. your allowable depreciation deductions would have been $9. . . .960 ! CAUTION listed property other than passenger automobiles after the recovery period ends.775 1.629 1. .080 4. . $1. . .629 1. . This is your MACRS For example. . Section 179 deduction claimed this year (not more than line 9). Property class . . limited to the amount on line 9.775 1. 10. .Page 69 of 120 of Publication 946 15:26 . . . . . . . . See Maximum Depreciation Deduction. . Enter the lesser of line 11 or amount allowable as if the business use had been 100%. 7. . . . you will have unrecovered basis in your automobile at the end of If you acquire a passenger automobile in a trade-in. .000 under GDS (MACRS).52 3. .235 × 60%). electric vehicle credit. . . . . . This is your basis for If your business use of the car had been less than 100% depreciation . in figuring your unrecovered basis in the depreciation deduction .235). $18. . . . . Multiply line 12 by line 8. Subtract line 14 from line 13. . . .950 2. 5-year Unrecovered basis is the cost or other basis of the 3. . line 16.52 3.235 your business/investment cost .060 11. 2) If line 10 is less than line 9. . If in 2009 and later years claimed in year you placed the you continue to use the car 100% for business. 8.776 ery period. . . . . depre- the recovery period. . $1. Business/investment-use $2.2 6. . Recovery period . Depreciation rate (from tables) . Depreciation Worksheet for for business. . . . . You did not elect a section 179 deduction and elected not to claim any special deprecia- Note. you bought and placed in serv- Enter -0. . .950 deduct for depreciation . . .800 14. . . . Your tion allowance for the car.20 used the car 100% for business and investment use and the passenger automobile limits had not applied. but you still would have to reduce your basis by $16. You used the car exclusively for combined section 179 and depreciation deduction is business during the recovery period (2003 through 2008). . . . . Date placed in service . . . your depreciation deduction would have 16. depreciation. $16.0% $6. . . . . you can car in service . unrecovered basis. . . . . . .775 13. you would still reduce your basis by the maximum 17.235 to determine Deductions After the your unrecovered basis. . $1. . . . . . . .0 10.775 2007 11. . . . Example.800 during any year.814 1. Method and convention . . . .265 ($31. . . $1. . . . . Cost or other basis . Recovery Period Deductions For Passenger If the depreciation deductions for your automobile are Automobiles Acquired in a Trade-in reduced under the passenger automobile limits. . You can claim a depreciation Keep for Your Records deduction in each succeeding tax year until you recover your full basis in the car. $10. . . Subtract line 10 from line 9.76 1. . 200% DB/Half-Year 179 deductions that would have been allowable if you had 6. . .500 − $16. $776 2006 11. . Multiply line 15 by line 6. .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. .775 1.500. Section 179 deduction and any At the end of 2008. You figured your depreciation as shown below. . . . . . . . . . . 1) If line 10 is equal to line 9. . . if you had used your car 60% for business depreciation deduction . . This 2004 32. . . . . . . .048 2.000 2008 5. This is been less than the maximum amount allowable for that your tentative MACRS year. $776 instead of 100%. . . However.300 $3. . . MACRS system (GDS or ADS) GDS age. .960 car.if this is not the year ice a car costing $31. . . . . . . In May 2003. . The car was 5-year property you placed the car in service. . Maximum depreciation deduction for this year from the appropriate You cannot claim a depreciation deduction for table . . . . .775 12.000 deduct each year the lesser of $1. . . . . and section 5.060 $3.741 ($16.900 is the maximum amount you can 2005 19. .775 or your remaining 15. earlier. . This is Total . . . . . . stop here. you had an unrecovered basis of special depreciation allowance $15. Multiply line 7 by line 8. 60% covered basis at the end of the recovery period because 9.900 4. complete Part II. . . . . 9/26/09 passenger automobile reduced by any clean-fuel vehicle 4. . you can deduct that unrecovered basis after Passenger Automobiles the recovery period ends. . . . If you continue to use the automobile ciate the carryover basis separately as if the trade-in did Chapter 5 Additional Rules for Listed Property Page 69 . . . This is you are considered to have used this property 100% for your adjusted maximum business and investment purposes during all of the recov- depreciation deduction . . . . . 5-Year deduction. The maximum amount you can Part I deduct each year is determined by the date you placed the car in service and your business/investment-use percent- 1. There is no unre- percentage . 2.

For establish a business purpose depends on the facts and listed property. capital improvement costs. the amount of detail necessary to sufficient evidence to support your own statements. You do not Instead of figuring depreciation for the carryover basis have to keep a daily log. maintenance and re- for a special depreciation allowance. a salesperson visiting customers on an es- tablished sales route will not normally need a written expla- Adequate Records nation of the business purpose of his or her travel. and examples are discussed in section 1. Special rules apply in • The business or investment purpose for the expendi- determining the passenger automobile limits. not occur. Circumstantial evidence For example. These rules ture or use. You do not have to record information in an and personal purposes and whose only business use of account book. ten record. If the automobile acquired in the trade-in is • The amount of each separate expenditure. in the regular course of What Records Must Be Kept? business: Terms you may need to know • The statement is given by an employee to the em- ployer. the carryover basis is eligible the cost of acquiring the item. the route. lease pay- Opportunity Zone Property in chapter 3. diary. Written documents of your expenditure or use are gener- ally better evidence than oral statements alone. state. diary. You cannot take any depreciation or section 179 deduction Business purpose supported. For ceipt. together with the re. see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conver. or similar record if the information is the truck is to make customer deliveries on an established already shown on the receipt. The depreciation figured for the two components of the • The date of the expenditure or use. basis (carryover basis and excess basis) is subject to a single passenger automobile limit. a taxpayer who uses a truck for both business ture or use. enough information on each element of every business or RECORDS ment of expense. example. However. the total use of the property for the tax year. diary. such as mileage service property. You must record the elements of an expendi- sion in chapter 4 and sections 1. that Documentary evidence accounts for use during the week. Elements of expenditure or use. For example. such as qualified GO Zone property. including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. you can prepare a record of the business use of Page 70 Chapter 5 Additional Rules for Listed Property . An expense account statement made from an account book. will be considered a record made at or near the time of use. MUST be removed before printing. you can elect to treat the containing the elements of an expenditure or the business old automobile as disposed of and both of the basis com. elements. how to make this election. However. Your records or other Although you generally must prepare an adequate writ- documentary evidence must support all the following. or (see Glossary): • The statement is given by an independent contractor Business/investment use to the client or customer. Generally. determined from the surrounding facts and circumstances. or similar record or investment use. The amount of detail required to support other documentary evidence that. Timeliness. is sufficient to establish each element of an expendi.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. the use depends on the facts and circumstances. part of the new automobile’s basis that exceeds its carry. However. To meet the adequate records requirement. including documents is preferable to a statement you prepare later. a log maintained on a weekly basis. • The amount of each business and investment use over basis (excess basis) as if it were newly placed in (based on an appropriate measure. you must keep records for as long as any circumstances of each case.Page 70 of 120 of Publication 946 15:26 . some type of record and the excess basis separately. A written explanation of the recapture can still occur. log. Recapture can occur in any tax business purpose will not be required if the purpose can be year of the recovery period.168(i)-6(i) and 1. This excess basis is the additional cash for vehicles and time for other listed property). An adequate record contains must maintain an account book. an adequate for the use of listed property unless you can prove your record of business purpose must be in the form of a written business/investment use with adequate records or with statement. or similar record prepared or main- tained at or near the time of the expenditure or use gener- ally is considered a timely record if. See Qualified Gulf pair costs.168(i)-6(d)(3) of the regulations. For more information. you Business use supported. your records route can satisfy the requirement by recording the length of should back up your receipts in an orderly manner. or investment use of listed property made at or near the ponents for the new automobile as if placed in service at time of the expenditure or use and backed up by other the time of the trade-in. and paid for the new automobile in the trade-in. and any other expenses. Depreciate the ments.168(i)-6(j) ture or use at the time you have full knowledge of the of the regulations. trip sheet.

She maintains adequate records for total business use of the listed property. his business use of the automo- director for your area that you have substantially complied with the adequate records requirement for an element of bile does not follow a consistent pattern. Instead. The business use of his auto- mobile. Subcontractor invoices a single use. the automobile. if it can be shown by other evidence that the periods for which you maintain an adequate record are representative Separate or combined expenditures or uses. The determination that her business/invest- support to the IRS director for your area on request. record of miles traveled. Minimal personal use (such as a stop for lunch between two business stops) is not an Example 2. Do not endar year taxpayer. you can establish this element by any evidence the first 3 weeks of each month. but have Example 3. You can maintain an adequate record for part the right to support a deduction by reasonable reconstruc- of a tax year and use that record to support your business tion of your expenditures and use. If you choose. you can account for and paid bills show that her business continued at approxi- the use of a truck to make deliveries at several locations mately the same rate for the rest of the year. If any of the information on the the automobile is for business. If there is no that begin and end at the business premises and can change in circumstances. during the previous month. a sole proprietor and cal- Record each expenditure as a separate item. he occasionally uses his the IRS director for your area deems adequate. Bill Baker. as supported by adequate records. for meet- listed property during a tax year. flood. For your area. such as the purchase of a sec- include a stop at the business in between deliveries by a ond car for exclusive use in her business. direct evidence. you can combine repeated uses as a single item. by you normally is considered a separate use. earthquake. month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient support- If the element is the cost or amount. listed property in a computer memory device that uses a and investment use of listed property for the entire tax year logging program. you do that her business continued at the same rate during the not need to include it in the account book or similar record if later weeks of each month so that her weekly records are you record it at or near the time of the expenditure or use. During these weeks. ment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. but she and family members also use it for pense. its supporting duce adequate records is due to loss of the records evidence can be circumstantial evidence. MUST be removed before printing. Her business invoices show elements of an expenditure or use is confidential. you do deliver items to clients. or other casualty. or date ing evidence because his use during that week is not of an expenditure or use. If you combine these expenses. The determination based detailed information as to the element. the determina- single record of miles driven. its supporting evidence must be representative of use during other periods. time. a sole proprietor and calendar complied with the adequate records requirement for the year taxpayer. However. the first 3 months of the year showing that 75% of the You can account for uses that can be considered part of automobile use was for business. ness out of her home. Example 1. Chapter 5 Additional Rules for Listed Property Page 71 . such as a round trip or uninterrupted business use. through circumstances beyond your control. representative of the automobile’s business use through- You must keep it elsewhere and make it available as out the month. You can account for the use tion that her combined business/investment use of the of a passenger automobile by a salesperson for a business automobile for the tax year is 75% rests on sufficient trip away from home over a period of time by a single supporting evidence. is a salesman in a large metropolitan area expenditure or use to the satisfaction of the IRS director for for a company that manufactures household products. you must establish the element as week of each month. except that Denise maintains adequate records during the first week of every month showing that 75% of her use of Confidential information. you can combine amounts you spent for the use of business visits to the homes or offices of clients. operates an interior decorating busi- combine it with other expenditures. She uses her automobile for local ever. and to pick up and automobile repairs.Page 71 of 120 of Publication 946 15:26 . you can divide the expenses based on the personal purposes. During the fourth an expenditure or use. If the element is Loss of records. If you have not fully supported a particular element of an expenditure or use. by a single record. is 70% of its • By your own oral or written statement containing total use during that fourth week. how. There is no other business use of not need to support the business purpose of each ex. such as through fire. Substantial compliance. When you establish that failure to pro- the business purpose of an expenditure. Denise Williams. interruption of business use.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. place. you have Sampling. own automobile for business travel within the metropolitan If you fail to establish to the satisfaction of the IRS area. on the record maintained during the fourth week of the • By other evidence sufficient to establish the element. Assume the same facts as in Example 1. Each use of the use throughout the year. such as for gasoline or ings with suppliers and subcontractors. he delivers all business orders taken follows. For example.

and you keep in your records the infor- • A depreciation deduction for any other listed prop. tions in Section C to see if you meet an exception to completing Section B for that vehicle. Part V. if you file Schedule C (Form persons if you meet at least one of the following require. erty. for vacation trips. You provide more than five vehicles for use by your employees. you maintain a written policy state- provide the information requested in Section B. the employee person’s normal working hours and prohibits use of must give you this information. report 1. you also must salespersons. For demonstrator automobiles provided to full-time If you claim any deduction for a vehicle. by employ- Information Reported? ees who are not officers. • Any deduction for a vehicle. How Is Listed Property b. and you are not required to file Form complete Section B. 3. directors. If you file Form 2106. Personal use. 2106-EZ. You must provide the information about your listed prop- erty requested in Part V of Form 4562. Form 4562. mation on their use given to you by the employees. or 1%-or-more owners. a. 4. to store personal possessions. If you ment that limits the total mileage outside the sales- provide the vehicle for your employee’s use. Also. If you provide any vehicle the automobile by anyone else. Section A. as personal use. report information about listed property on that form employees who are not more-than-5% owners or related and not on Form 4562. All personal use including commuting. you must first answer the ques. for vehicles used by your 4562.Page 72 of 120 of Publication 946 15:26 . if you 2. MUST be removed before printing. vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason. You treat all use of the vehicles by your employees claim either of the following deductions. Exceptions. or Schedule Vehicles used by your employees. other than commuting. or for use by an employee. You maintain a written policy statement that prohibits vehicle information in Part IV of Schedule C and not on one of the following uses of the vehicles. You do not have to C-EZ (Form 1040). Page 72 Chapter 5 Additional Rules for Listed Property . 1040) and are claiming the standard mileage rate or actual ments.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.

ber is in your phone book. Regulations. Taxpayer irs. about taxpayer rights and responsibilities. • TAS employees know the IRS and how to navigate Internet. To find out what services are avail- able. For more infor- mation. LITCs are independent from the IRS. and on least 72 hours after the IRS acknowledges receipt of our website at www. financial difficulty or significant cost.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. level. can provide representation before the IRS or in court on audits. some clinics can provide multilingual information or other official guidance. a small fee. As part of the TCE program.irs. services. You can get help with unresolved tax issues. ask tax questions. If you filed Form 8379 with your return. The Low Income • Download forms. AARP offers the Tax-Aide nels and have gotten nowhere. 1546. or you believe an counseling program. and the exact whole dollar amount of your re- www.gov. or 3 to 4 weeks after mailing a call our toll-free line at 1-877-777-4778 or TTY/TDD paper return. and stay with you every step of the way until your problem is resolved. corner. Many VITA sites offer free electronic filing and all volunteers will • Our service is free.irs. or who believe that an IRS The Volunteer Income Tax Assistance (VITA) program is system or procedure is not working as it should. To find the nearest VITA or TCE site. you will have quick and easy access to (recorded tax information) you can listen to on your tele- tax help. MUST be removed before printing. • Check the status of your 2009 refund.gov/advocate. go to www. and Puerto Rico. see Publication 4134. call 1-888-227-7669 or visit AARP’s website at www. IRS Guide to Free Tax Services.irs. who are seeking help in Free help with your return. entitled to claim. in Pub. whose num. instructions. call • You may be eligible for TAS help if you have tried to 1-800-829-1040. Chapter 6 How To Get Tax Help Page 73 . confidential. and get informa. Most LITCs • Research your tax questions online. Low Income Taxpayer Clinic 6. Low income tax clinics (LITCs). You can call your local advocate. You can also your e-filed return. cost of professional representation.irs. It also has an index of 100 TeleTax topics that is best for you.org/money/taxaide. order free It contains a list of free tax information sources. publications. taxpayers age 60 and older with their tax returns.taxtoolkit. including publications and forms. Wait at Advocate Service —Your Voice at the IRS. List. This includes gov and enter the keyword “VITA” in the upper right-hand businesses as well as individuals. wait 14 weeks (11 weeks if you filed electronically). and publications.irs. glish. We will listen to your problem.gov and click on Where’s My Refund.Page 73 of 120 of Publication 946 15:26 . Find out about commercial tax preparation and e-file services available free to eligi- • TAS has at least one local taxpayer advocate in ble taxpayers. get Publication 910. including the For more information on these programs.gov. By selecting the method tance programs. or at your local IRS office. • Use the online Internal Revenue Code. through normal channels. 7 days a week to: stand what needs to be done to resolve it. phone. Free help in preparing your resolving tax problems that have not been resolved return is available nationwide from IRS-trained volunteers. site. www. and other issues for free or • Search publications online by topic or keyword. tax collection disputes. • E-file your return. If an individual’s native language is not En. fund. your filing sta- as a taxpayer by visiting our online tax toolkit at tus. This publication is available at www. and tailored to meet let you know about credits and deductions you may be your needs. Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain • Order IRS products online. Accessible versions of IRS published products are Contacting your Taxpayer Advocate. and free tax education and assis- tion from the IRS in several ways. To find the nearest AARP Tax-Aide IRS procedure just isn’t working as it should. 1-800-829-4059. resolve your tax problem through normal IRS chan. the District of Columbia. • TAS helps taxpayers whose problems are causing aarp. help you under. Have your 2009 tax return available so you can • You can learn about your rights and responsibilities provide your social security number. You can access the IRS website at it.gov 24 hours a day. The Taxpayer available on request in a variety of alternative formats for Advocate Service (TAS) is an independent organization people with disabilities. Here are designed to help low-income taxpayers and the Tax Coun- seven things every taxpayer should know about TAS: seling for the Elderly (TCE) program is designed to assist • TAS is your voice at the IRS. within the IRS whose employees assist taxpayers who are experiencing economic harm. Go to www. by calling 1-800-TAX-FORM (1-800-829-3676). How To Get Tax Help Free tax services. every state.

Wait at least bility. is necessary —just walk in. copy centers. • View Internal Revenue Bulletins (IRBs) published in the last few years. Another is to ask some callers • Sign up to receive local and national tax news by to complete a short survey at the end of the call. you can call your local Center and leave a message requesting • TeleTax topics. An employee can explain IRS IRS letters. complex tax hours or 1-800-829-4477 (automated refund infor. Have gov/localcontacts or look in the phone book under your 2009 tax return available so you can provide United States Government. You should receive Also.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. call 1-800-829-1954 during business convenience.irs. email. instructions. we use several methods to evaluate the quality of our telephone services. wait find the number of your local office. able on a walk-in basis. grocery stores.irs. IL 61705-6613 Page 74 Chapter 6 How To Get Tax Help . instructions. Call the IRS with your tax search purposes. credit unions. some IRS offices and libraries have the Inter- your order within 10 days. One method • Determine if Form 6251 must be filed by using our is for a second IRS representative to sometimes listen in Alternative Minimum Tax (AMT) assistant. You can walk in to your local Taxpayer solving tax problems every business day in IRS Tax. your request is received. MUST be removed before printing. An employee can explain face-to-face tax help. and publications. call 1201 N. son. and IRS offices to pick up certain forms. To check the status of your days to schedule an in-person appointment at your 2009 refund. your filing status. If you prefer. visit your local Taxpayer Assistance Center • TTY/TDD equipment. Call 1-800-829-4477 to listen to an appointment to resolve a tax account issue. request adjustments to your tax account. and publications. Many products and services are avail- business.irs. 7 days a week). • Get information on starting and operating a small Walk-in. instructions. instruc- the status of your refund and are not given the date tions. Some IRS offices. Many services are available by phone. prior-year forms and instructions. Bloomington. To e-filed return. Re- funds are sent out weekly on Fridays. courteous. payer Assistance Centers. If you check Mail.gov/individuals. holding calculator online at www. Evaluating the quality of our telephone services. stores have a collection of products available to print rent-year forms. Call your local help you set up a payment plan. You can get face-to-face help • Services. 14 weeks (11 weeks if you filed electronically). You can walk in to many post offices. account problem or a special need. Internal Revenue Service. and Cumulative Bulletins available for re- • Asking tax questions. an appointment can be requested. representative will call you back within 2 business • Refund information. ensure that IRS representatives give accurate. or you look in the phone book under United States Govern. Assistance Center every business day for personal. No appointment questions or to order forms and publications. on or record telephone calls. and publications and from a CD or photocopy from reproducible proofs. If you filed Form 8379 with your return. Internal Revenue Bulletins. 1-800-TAX-FORM (1-800-829-3676) to order cur. or 3 to 4 weeks after mailing a paper return. Mitsubishi Motorway 1-800-829-1954. If you have an ongoing. A pre-recorded messages covering various tax topics. have questions about how the find the number. request adjustments to your account. You can send your order for forms. If you need to Taxpayer Assistance Center for an appointment. or letters. and professional answers.Page 74 of 120 of Publication 946 15:26 . go to www. city and county government offices. • Other refund information. To resolve a tax problem. • Solving problems. All other 72 hours after the IRS acknowledges receipt of your issues will be handled without an appointment. To • Figure your withholding allowances using our with. Internal Revenue Serv- your social security number. and publications to the address below and it will be issued.To check the status of a prior Internal Revenue Service year refund or amended return refund. questions at 1-800-829-1040. or help you set up a payment plan. nal Revenue Code. call 1-800-829-4059 to ask tax an IRS representative face-to-face.gov/localcontacts or tax law applies to your individual tax return. Phone. If you have access to TTY/ where you can spread out your records and talk with TDD equipment. li- braries. go to www. • Products. and ice. are more comfortable talking with someone in per- ment. libraries. such as a disa- mation 24 hours a day. please wait until the next week receive a response within 10 business days after before checking back. regulations. and office supply • Ordering forms. the exact whole dollar amount of your refund.

gov/cdorders for $30 (no tem. – The final release will ship the beginning of March • Tax Map: an electronic research tool and finding aid. instructions.S. and publications. and publications. and obtain: • Toll-free and email technical support. • Tax law frequently asked questions.Page 75 of 120 of Publication 946 15:26 . – The first release will ship the beginning of January 2010. • Fill-in. MUST be removed before printing. and save features for most tax forms. • Current-year forms. 2010. print. • Internal Revenue Code—Title 26 of the U.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. 1796. Chapter 6 How To Get Tax Help Page 75 . instructions.You can order Publication • Internal Revenue Bulletins. • Two releases during the year.irs. handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). tion Service (NTIS) at www. Code. DVD for tax products. • Prior-year forms. Purchase the DVD from the National Technical Informa- • Tax Topics from the IRS telephone response sys. IRS Tax Products DVD.

7. MUST be removed before printing. Use this chart to find the correct percentage table to use for any property other than residential rental and nonresidential real property.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. 7.Page 76 of 120 of Publication 946 15:26 . 5. Use this chart to find the correct percentage table to use for residential rental and nonresidential real property. 5. 7. Income Inclusion Amount Rates for MACRS Leased Listed Property Table Amount A Percentages A-19 Amount B Percentages A-20 Page 76 Publication 946 (2009) . 5. 5. 7. Month or Quarter MACRS Depreciation Placed System Method Recovery Period Convention Class in Service Table GDS SL GDS/27. 5. 10 Half-Year 3. Use Chart 1 for all other property. 7. 10 1st Qtr A-15 2nd Qtr A-16 3rd Qtr A-17 4th Qtr A-18 GDS 150% GDS/15. 10 (Nonfarm) Half-Year 3. 10 Mid-Quarter 3.5 Mid-Month Residential Rental Any A-6 GDS SL GDS/31. 10 Any A-14 GDS 150% GDS/3. 20 Half-Year 15 & 20 Any A-1 GDS 150% GDS/15. 5. 20 Mid-Quarter 15 & 20 1st Qtr A-2 2nd Qtr A-3 3rd Qtr A-4 4th Qtr A-5 GDS SL GDS Half-Year Any Any A-8 ADS ADS GDS SL GDS Mid-Quarter Any 1st Qtr A-9 ADS ADS 2nd Qtr A-10 3rd Qtr A-11 4th Qtr A-12 ADS 150% ADS Half-Year Any Any A-14 ADS 150% ADS Mid-Quarter Any 1st Qtr A-15 2nd Qtr A-16 3rd Qtr A-17 4th Qtr A-18 Chart 2. 7. Month or Quarter MACRS Depreciation Placed System Method Recovery Period Convention Class in Service Table GDS 200% GDS/3. Use Chart 2 for residential rental and nonresidential real property.5 Mid-Month Nonresidential Real Any A-7 SL GDS/39 A-7a ADS SL ADS/40 Mid-Month Residential Rental Any A-13 and Nonresidential Real Chart 3. 7. 7. 5. Appendix A MACRS Percentage Table Guide General Depreciation System (GDS) Alternative Depreciation System (ADS) Chart 1. 10 (Nonfarm) Mid-Quarter 3. 5. 10 Any A-1 GDS 200% GDS/3. 10 1st Qtr A-2 2nd Qtr A-3 3rd Qtr A-4 4th Qtr A-5 GDS 150% GDS/3.

459 20 4.459 18 4.177 5 11.75% 6.81 19.90 4.91 4.52 7.Page 77 of 120 of Publication 946 15:26 .000 3 12.90 4.55 6.00% 25. 7-. 5-.888 8 4.75 8.00 9.55 5.462 16 2.65 5.39 5.93 10.461 19 4. 5-.00% 3.76 5.546 6 1. 15-.522 9 6.49 18.46 6.91 4.459 11 0.75 6.750% 2 44.91 4.52 8.459 9 6.99 5.90 4.219 3 14.713 6 5.90 4.00 21.461 11 3.461 21 2.20 8.460 21 0.55 5.56 7. and 20-Year Property Half-Year Convention Depreciation rate for recovery period Year 3-year 5-year 7-year 10-year 15-year 20-year 1 33.13 7.90 4.52 12. 10-.55 5.50 7.38 8.55 5.460 13 5.459 14 5.23 5.285 7 8.461 17 4.459 16 0.00% 17.00 24.90 4.60 15.74 4.55 5.29% 10.49 14.460 15 5. 7-.45 32.74 6.49 11.93 6.28 5.565 Publication 946 (2009) Page 77 .22 6. and 20-Year Property Mid-Quarter Convention Placed in Service in First Quarter Depreciation rate for recovery period Year 3-year 5-year 7-year 10-year 15-year 20-year 1 58.677 4 7.459 12 5.90 4.33% 20.55 5. 10-. 15-.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.461 15 5.40 8.76 8.00% 14.78 26.91 4.21 6.50 9.462 20 4.462 18 4.09 6.91 4.996 5 11.482 4 1.56 5.92 7.20 17.460 19 4.462 12 5.231 Table A-2.90 4.91 4. MUST be removed before printing.82 5.37 6. 3-.130 7 8.45 6.43 16.91 4.460 17 4.35 15.563% 2 27.00% 5.91 4.90 4.462 14 5.462 10 6.90 4.459 10 6.461 13 5.54 11.01 8.746 8 1. Table A-1. 3-.93 9.01 10.31 13.93 5.56 5.70 6.33% 35.50% 8.41 11.95 4.

02 5. MUST be removed before printing.336 7 8.461 16 3.148 3 14.56 5.59 6.20 7.66 6.463 17 4.25% 4.742 4 8.460 17 4. 3-.566 9 6.55 5.84 7.67 20.00% 15.673 Table A-4.80 6.24 13.841 8 3.91 4.463 11 2.55 5.90 4.460 10 6.14 18.233 7 8.460 11 4.87 8. 15-.02 11.463 12 5. Table A-3.813% 2 50.40 18.91 4.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.86 6.75% 2.769 6 7.658 6 4. 5-. 5-.91 4.22 14.51 18.91 4.47 17.69 4.461 14 5.87 7.15 5.90 4.50 9.31 5.56 5.788 Page 78 Publication 946 (2009) .17 6.00 23.462 18 4.289 3 16.85% 12. 10-.460 12 5. and 20-Year Property Mid-Quarter Convention Placed in Service in Third Quarter Depreciation rate for recovery period Year 3-year 5-year 7-year 10-year 15-year 20-year 1 25.33 12.83 5.463 19 4.63 7.478 9 6.50% 6. 7-.10 5.58 6.00% 17.00 16. 7-.463 13 5. 10-. and 20-Year Property Mid-Quarter Convention Placed in Service in Second Quarter Depreciation rate for recovery period Year 3-year 5-year 7-year 10-year 15-year 20-year 1 41.Page 78 of 120 of Publication 946 15:26 .460 13 5.44 6.34 6.90 4.90 4.936 8 5.55 5.688% 2 38.89 30.91 4.30 11.21 4.463 21 1.90 4.463 10 6.00 8.116 5 11.76 14.90 4.91 4.85 7.38 7.461 20 4.460 19 4.30 9.461 18 4.06 8.87 6.462 20 4.50 9.26 8.37 11.460 15 5.97 11.47 7.460 21 2.80 8.96 6.46 5. 3-.71% 7.237 5 11.91 4.00% 10.30 9.37 8.90 4.55 5.00 25. 15-.90 4.53 6.463 14 5.50% 3.91 4.00 34.91 4.55 5.55 5.462 16 2.67% 25.90 4.463 15 5.612 4 5.

636 3.636 3.637 3.637 3.636 3.637 3.636 3.636 3.637 3.637 3.637 12 3.636 3.637 3.637 3.637 3.654 9 6.637 3.636 3.637 3.636 3.636 3.636 3.458 17 4.636 3.91 4.636 3.64 6.19 13.636 3.636 3.061 1.636 3.637 26 3.636 3.636 3.00 27.637 3.637 3.60 8.94 10.637 3.458 20 4.636 3.48 5.637 3.637 3.636 3.637 3. Residential Rental Property Mid-Month Convention Straight Line—27.459 21 3.636 3.636 3.636 3.636 3.872 4 10.637 3.880 6 9.636 3.637 3.637 28 1.636 3.636 3.637 14 3.88 7.636 3.637 3. Table A-5.90 4.637 3.90 4.636 3.637 3.758 1.485% 3.152% 2–9 3.636 3.636 3.636 3.357 5 10.458 11 5.636 3.636 3.636 3.55 5.455 0.637 3.636 3.636 3.636 23 3.90 4.031 8 7.637 3.637 3.636 3.636 3.637 3.58 8.37 22.667 Publication 946 (2009) Page 79 .68 14.00 6.637 3.97 2.636 3.636 3.458 15 5.637 3.637 3.25% 0.938% 2 61.637 3.636 3.637 3.636 11 3.91 4.637 3.636 3.637 3.90 4.57% 2.430 3 20.636 3.73 7.637 3.637 3.636 3.637 3.636 3.636 3.637 3.637 3.637 3.636 3.636 3.636 3.636 3.637 3.55 19.636 3.74 5. 3-.637 3.637 3.636 3.637 3.636 3.879% 2.89 6.637 3.636 3.636 10 3.637 3.637 3.636 3.636 3.637 18 3.637 3.636 3.637 3.879 3.636 3.152 0.636 3.637 3.637 3.637 3.637 3.636 3.636 3.637 20 3.636 3.667% 1.637 3.98 7.637 3.636 15 3.636 3.637 3.637 22 3.636 3.636 17 3.637 3.636 3.637 3.637 3.636 3.458 13 5.636 21 3.636 3.636 3.56 5.182% 2.636 3.11 38.576 2.90 5.273% 1.637 3.637 3.636 27 3.637 3. 10-.458 14 5. 7-.637 3.637 16 3.636 3.636 3.439 7 8.636 3.636 3.20 5.636 3.50 9.55 5.636 3.636 3.636 3.637 3.636 3.636 3.455% 0.636 3.636 3.637 3.73 6.458 16 5.637 3.636 3.637 3.637 3.637 3.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.637 3. 15-.636 3.458 18 4.99 6.576% 2.80 19. and 20-Year Property Mid-Quarter Convention Placed in Service in Fourth Quarter Depreciation rate for recovery period Year 3-year 5-year 7-year 10-year 15-year 20-year 1 8.458 10 6.637 3.636 3.637 3.636 3.637 3.364 1.636 3.636 3.637 3.637 3.637 3.637 3.636 3.636 3.636 3.33% 5.5 Years Month property placed in service Year 1 2 3 4 5 6 7 8 9 10 11 12 1 3.636 3.637 3.364% 1.636 13 3.758% 0.636 3.636 3.636 3.636 3.00% 3.636 3.68 15.061% 0.637 3.637 3.636 19 3.637 3.636 3.636 3.636 3.637 3.637 3.637 3.636 3.637 3.636 3.485 3.970% 1.182 3.636 3.50% 1.636 3.637 3.636 3. 5-.637 3.636 3.273 2.636 3.637 3.637 3.637 3.637 3.636 3.637 3.636 3.636 3.04 9.458 12 5.637 3.637 3.55 5. MUST be removed before printing.637 3.Page 79 of 120 of Publication 946 15:26 .90 4.637 3.48 8.636 3.637 24 3.636 3.637 3.901 Table A-6.636 3.637 3.06 12.637 3.459 19 4.636 29 0.637 3.636 3.636 25 3.91 4.17 4.636 3.637 3.636 3.

455 Table A-7a.175 3.174 3.175 3.564 2.174 3.174 3.175 3.174 3.107 0.175 3.984% 1.175 30 3.175 3.461 Page 80 Publication 946 (2009) .175 3.984 2.605% 1.174 3.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.174 3.175 3.175 3.174 3.174 3.564 2.175 3.174 3.174 3.175 3.174 31 3.174 3.564 2.174 3.174 3.175 3.175 3.175 28 3.174 3.042% 2.175 3.535% 0.174 3.175 3.174 3.174 3.174 3.175 26 3.175 3.175 3.175 3.175 3.175 3.174 3.175 3.175 3.174 3.175 3.174 3.174 3.174 3.174 3.175 3.175 3.175 3.174 3.175 3.175 3.175 3.461% 2.321% 0.175 3.397% 0.174 3.175 3.174 27 3.174 3.174 3.174 3.174 3.174 3.175 3.175 3.174 3.175 3.174 3.174 3.175 3.175 3.Page 80 of 120 of Publication 946 15:26 .175 3.174 3.033% 1.174 3.175 3.175 3.174 3.661% 0.175 3.175 9 3.175 3.175 3.174 3.175 3.564 2.174 13 3.174 3.391 1.175 3.174 3.175 16 3.175 3.175 3.247% 2. Nonresidential Real Property Mid-Month Convention Straight Line—39 Years Month property placed in service Year 1 2 3 4 5 6 7 8 9 10 11 12 1 2.661 0.175 3.174 3.174 3.177% 0.174 3.175 3.564 2.174 3.174 3.564 2.513 2.174 3.174 3.174 3.175 3.778% 2.175 20 3.174 11 3.564 2.175 3.175 3.174 3.175 3.174 3.174 3.175 3.720 1.175 3.175 3.174 3.174 3.175 3.174 3.174 3.174 3.190 1.175 3.175 3.175 3.174 3.564 2.174 3.174 3.175 3.174 3.175 3.391% 1.174 3.174 3.174 3.455% 1.174 3.174 3.174 3.175 3.175 3.175 3.175 3.247 2.175 3.963 1.564 2.175 3.175 3.175 3.175 3.175 3.175 3.175 3.175 3. Table A-7.175 3.174 3.174 3.175 3.174 3.175 3.174 3.175 3.175 3.174 3.175 3.175 3.174 3.175 3.175 3.175 3.174 3.174 25 3.174 3.175 3.175 10 3.175 3.249% 1.175 3.174 3.175 3.749% 0.175 3.175 3.175 3.175 3.174 3.175 22 3.605 1.174 3.175 3.175 14 3.174 3.132% 2–7 3.819 2.174 17 3.174 3.175 3.175 3.174 3.926 1.175 3.175 3.397 0.175 3.175 32 1.175 3.174 3.174 3.174 3.175 3.174 3.174 19 3.513% 2.564 2.175 12 3.174 15 3.175 3.535 0.174 3.175 3.175 3.175 3.174 3.175 3. Nonresidential Real Property Mid-Month Convention Straight Line—31.175 3.174 3.174 3.926% 0.175 3.174 3.175 3.190% 0.175 3.174 3.175 3.174 3.174 3.174 3.174 3.174 3.175 3.175 3.175 3.175 3.175 3.175 3.174 3.175 3.174 3.174 3.174 3.174 3.175 3.175 3.107% 2–39 2.174 33 0.175 3.175 3.174 3.174 23 3.174 3.174 3.175 3.042 3.132 0.175 3.174 3. MUST be removed before printing.175 3.174 3.175 3.174 3.564 2.174 3.175 3.174 3.177 1.174 21 3.174 3.175 3.175 3.174 3.819% 1.175 3.175 3.5 Years Month property placed in service Year 1 2 3 4 5 6 7 8 9 10 11 12 1 3.720% 1.174 3.174 3.174 3.321 0.249 2.175 3.175 3.174 3.175 3.174 3.564 40 0.174 3.174 3.175 3.174 3.175 3.175 3.175 18 3.175 3.175 3.175 3.174 3.175 3.174 3.749 0.778 3.175 3.174 3.175 3.175 3.175 3.033 2.963% 0.175 3.174 3.174 3.174 3.174 3.174 3.174 29 3.175 3.175 24 3.175 3.174 3.174 3.175 3.174 3.175 3.174 3.174 3.175 8 3.174 3.

09 8.38 14.88 7 10.06 5.66 6.33 8.0 7.33 12.15 6.0% 8.0 16.69 8.41 7.25 6.0 7.69 7.5 4 5 6 6.88 3 10.14 6.53 7 8.29% 12.69 7.88 11 5.06 5.50 11.33% 7.13% 3.76 11.0 16.14 6.67 6.41 7.06 5.14 6.06 5.0 33.06 5.33 12.5 20.50 11.52 8 7.17 8.0% 3.50 11.57 25.53 9.0 7.38 14.14 6.70 8.12 6.76 11.5 13 13.67 6.11 10.11 10.34 8.53 9.40 7.70 8.25 11.33% 3.50 11.0 9. ( Continued) Recovery periods in years Year 10 10.50 11.15 6.66 6.52 9.39 14.69% 7.52 10 5.52 9.33 28.06 5.17% 4.67 6.06 5.57% 3.69 7.25 6.55% 4.69 8.09 8.76% 4.5 11 11. Straight Line Method Half-Year Convention Recovery periods in years Year 2.34 8.33 8.0 7.53 9 6.14 13.25 6.40 7.69 8.28 13.70 8.69 7.25 6.0% 4.34 12.53 9.06 5.56% 5.33 12.14 6.11 10.0 9.69 7.14 6.88% 5.67 6.0 7.09 8.29 13.41 7.41 7.67% 14. Table A-8.25 6.09 8.29 13. MUST be removed before printing.33 28.88 15 3.25 6.0 7.0 7.14% 6.0 9.15 6.5 7 7.57 6.5 17 1 5.88 10 10.5 8 8.41 7.55 8.70 7.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.66 6.0 33.52 9.0 9.77 11.88 6 10.33 8.41 7.67 15.5% 10.0 9.67 6.14 6.25 6.41 7.29 13.25 6.69 7.89 16 3.14 6.88 13 4.0 16.89 18 2.94% 2 10.Page 81 of 120 of Publication 946 15:26 .70% 3.33 12.11 10.25% 5.5 14 15 16 16.0 9.09 8.70 8.67 15.88 5 10.53 Table A-8.52 6 10.33 6.0% 16.0 7.69 8.52 9.09 8.77 11.67 15.09 8.57 25.25 6.33 8.67 28.50 11.0 9.25 6.06 5.33 8.11 10.67 6.66 15.25 6.67 6.25 6.0 20.69 7.09 8.34 12.41 7.39 14.11 10.33 8.88 17 3.33 8.03% 2.41 7.07 5.33 12.06 5.85 7.67 6.85% 3.15 6.89 14 3.89 12 4.67 6.06 5.57 25.77 11.5 3 3.66 6.09 8.5 12 12.14 6.88 9 10.94 Publication 946 (2009) Page 81 .53 3 40.67% 6.5 1 20.0 7.0 7.5 9 9.28 13.0 9.06 5.67 6.70 8.25 6.09 8.11 10.77 11.70 8.0 9.0 20.53 9.0 7.26% 2 40.56 10.53 5 12.0 7.0 16.0 9.35% 4.76 11.0 20.41 7.69 8.34 8.0 16.76 11.33 15.69 7.69 7.25 6.70 7.52 9.53 4 16.52 9.33 8.40 7.06 5.67 15.88 4 10.50 11.06 5.39 14.25 6.38 14.69 7.29 13.88 8 10.06 5.11 10.

50 2.857 2.0 3.0 33 2.0 4.222 2.0 4.56 5.0 11 5.222 2.0 35 2.0 28 3.0 41 1.55 5.50 2.223 2.222 2.0 4.572 3.571 3.571 3.0 3.857 2.0 37 2.222 2.26 5.26 5.887% 1.63% 2.0 3.50 2.223 2.0 3.083% 2.26 5.0 12 5.222 2.0 4.545 4.774 3.857 2.0 4.857 2.857 2.55 5.333 2.774 3.773 3.167 4.857 2.222 2.571 3.333 2.0 3.333 2.786 3.Page 82 of 120 of Publication 946 15:26 .166 4.50 2.0 3.0 4 5.0 36 1.27 5.333 2.166 4.571 3.222 2.0 43 2.572 3.167 4.773 3.50 2.0 4.50 2.167 4.774 3.0 3.166 4.222 2. ( Continued) Recovery periods in years Year 18 19 20 22 24 25 26.0 3.0 3.857 2.0 17 5.26 5.774 3.0 20 2.0 8 5.50 2.222 2.545 4.774 3.0 3.167 4.333 2.0 4.546 4.334 2.50 2.857 2.333 2.334 2.0 32 2.0 4.571 3.334 2.773 3.0 4.0 3.0 3.774 3.56 5.571 3.857 2.572 3.773 3.0 5 5.167 4.0 4.857 2.50 2.223 2.773 3.0 46 1.333 2.63 5.774 3.56 5.0 45 2.50 2.571 3.26 5.546 4.773 3.774 3.429 2.0 24 4.56 5.50 2.571 3.857 2.5 4.0 3.50 2.333 2.334 2.222 2.50 2.546 4.222 2.0 3.25 2.857 2.0 6 5.167 4.167 4.223 2.222 2.333 2.50 2.083 4.50 2.0 23 2.334 2.26 5.0 4.26 5.50 2.429% 1.546 4.166 4.222 2.223 2.56 5.0 4.222 2.857 2.0 4.50 2.546 4.222 2.773 3.222 2.50 2.857 2.50 2.27 5.222 2.571 3.167 4.0 10 5.222 2.0 4.222 2.0 27 3.571 3.333 2.111 2.545 4.222 2.0 40 2.222 2.50 2.50 2.571 3.857 2.223 2.0 34 2.545 4.773 3.50 2.786% 1.333 2.857 2.858 2.27 5.222 2.0 22 4.167 4.333 2.167 4.545 4.223 2.50 2.5% 2.572 3.546 4.334 2.167 4.334 2.167 4.0 26 2.0 9 5.545 4.857 2.0 31 1.333 2.50 2.774 3.55 5.0 3.546 4.55 5.56 5.273 4.26 5.50 2.0 4.0 3.50 2.0 51 1.857 2.572 3.166 4.857 2.222 2.55 5.5 28 30 35 40 45 50 1 2.50 2.0 30 3.857 2.56 5.857 2.0 3.571 3.167 4.0 38 2.774 3.50 2. MUST be removed before printing.0 44 2.774 3.858 2.773 3.56 5.0 Page 82 Publication 946 (2009) .773 3.857 2.223 2.545 4.0 42 2.545 4.545 4.546 4.572 3.571 3.222 2.333 2.546 4.0 4.50 2.166 4.0 3.222 2.50 2.774 3.774 3.167 4. Table A-8.0 25 2.0 39 2.857 2.0 4.0 3 5.334 2.333 2.0 16 5.545 4.545 4.0% 2 5.222 2.0 3.333 2.0 7 5.0 19 2.50 2.27 5.334 2.25% 1.857 2.222 2.0 4.78 5.56 5.50 2.545 4.27 5.0 3.572 3.222 2.333 2.50 2.78% 2.857 2.571 3.222 2.222 2.774 3.0 4.572 3.26 5.0 21 2.50 2.857 2.50 2.55 5.50 2.572 3.50 2.222 2.0 3.26 5.333 2.667% 1.571 3.857 2.333 2.222 2.857 2.857 2.858 2.571 3.55 5.858 2.572 3.166 4.0 47–50 2.27 5.333 2.0 18 5.26 5.273% 2.773 3.0 3.222 2.222 2.0 3.223 2.0 15 5.0 3.572 3.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.0 29 1.857 2.50 2.0 13 5.167 4.50 2.667 2.111% 1.26 5.223 2.167 4.55 5.0 14 5.0% 1.774 3.0 3.

0 7.67 6.66 6.34 12.25 6.76 11.00 9.88 6 10.0 7.69 7.50% 11.29 13.0 7.5 16.00 9.41 7.0 33.25 6.33 8.83 6.46% 12.41 7.66 15.89 13 1.62 14.75% 8.52 8 1.47% 5.95% 7. Straight Line Method Mid-Quarter Convention Placed in Service in First Quarter Recovery periods in years Year 2.09 8.53 9.5 12 12.14 6.50 11.14 6.83% 5.0 7.00 9.15 6.67 6.00 20.33 8.33 28. Table A-9.77 11.09 8.14 6.25 6.08 9.94% 10.58% 13.5 11 11.25 6.0 7.25 6.57 25.0 16.88 16 0.0% 29.66 6.0 7.53 4 4.06 5.57 25.0 7.06 5.15 6.88 18 0.69 8.15 6.69 7.67 15.09 8.09 8.39 14.21% 2 40.06 5.67 6.5 9 9.53 9.07 5.88 10 10.04 5.0 7.67 15.41 7.00 20.74 Publication 946 (2009) Page 83 .5 7 7.39 6.0 16.25 6.33 8.67 15. MUST be removed before printing.58 Table A-9.69 7.11 10.00 9.06 5.41 7.72% 9.06 5.06 5.88 12 1.5 14 15 16 16.40 7.50 11.66 6.06 5.52 10 1.52 9.50 11.70 8.0 16.53 9.34 8.67 6.89 15 0.35 11.12 20.25 6.69 7.52 9.67 6.17 17.67 6.28 13.11 10.09 8.06 5.88 11 1.0% 6.14 5.50 11.29% 9.70 7.70 8.14 6.25 6.33 8.15 6.53 9 1.95 9.25 6.14 6.76 11.33 8.53 7 2.09 8.40 7.88 5 10.11 10.70 8.11 10.25 6.14 6.76 11.14 6.11 10.15% 2 10.14 6.06 5.33 28.66 6.50 11.34 8.11 10.33% 7.67 6.33 12.41 7.48% 6.25 5.25 6.0 7.09 8.69 8.39 14.0 16.41 7.Page 83 of 120 of Publication 946 15:26 .33 12.67 15.11 10.38 14.53 3 25.5 17 1 8.33 12.33 8.25 6.33 12.25 6.00 9.70 7.41 7.79 8.53 5 3.52 9.61% 7.52 9.52 9.0 33.00 20.00 9.89 6.09 8.5 1 35.06 5.88 4 10.29 13.00 9.70 8.5% 14.77 11.52 6 2.34 8.25 6.70 7.69 8.25 6.69 7.69 7.69 8.67 6.70 8.88 8 10.17% 25.73% 6.34 8.06 5.25% 5.69 7.50 11.88 7 10.79 5.29% 7.69 7.0 7.28 13.0 7.14 6.06 5.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.5 13 13.89 17 0.10 8.56 7. ( Continued) Recovery periods in years Year 10 10.88% 17.63 7.06 5.38 14.33 8.70 8.12 10.67 6.43 8.33 12.53 9.09 8.77 11.00 9.50 11.88 9 10.00 9.28 13.67 6.5 3 3.5 4 5 6 6.86 25.77 11.88 14 0.88 3 10.41 7.38 14.67% 10.06 5.5 8 8.69 7.0 7.34 12.40 7.00% 21.30% 5.96 4.29 13.78 3.41 7.

000 4.500 2.334 2.500 2.00 44 2.858 2.167 4.333 2.00 3 5.27 5.166 4.167 4.572 3.857 2.568 4.546 4.56 5.222 2.222 2.00 51 0.000 4.545 4.26 5.000 4.0 3.0 3.00 34 2.546 4.166 4.773 3.334 2.00 10 5.55 5.500 2.0 3.26 5.167 4.0 3.571 3.572 3.500 2.00 12 5.00 7 5.572 3.222 2.521 4.00 42 2.333 2.500% 2.545 4.222 2.56 5.500 2.500 2.500 2.0 3.167 4.857 2.00 47–50 2.857 2.223 2.333 2.857 2.56 5.334 2.00 38 2.546 4.00 23 0.222 2.857 2.500 2.56 5.00 5 5.773 3.56 5.773 3.00 32 2.333 2.26 5.500 2.571 3.333 2.774 3.0 3.222 2.500 2. ( Continued) Recovery periods in years Year 18 19 20 22 24 25 26.857 2.500 2.500 2.545 4.00 26 0.223 2.000 4.00 17 5.773 3.571 3.55 5.917% 2.00 20 0.56 5.222 2.571 3.858 2.302% 3.0 3.55 5.500 2.774 3.312 2.0 3.858 2.357 2.500 2.222 2.0 3.222 2.222 2.500 2.222 2.222 2.500 2.546 4.333 2.222 2.546 4.571 3.00 43 2.222 2.572 3.333 2.546 4.858 2.857 2.55 5.00 29 0.223 2.571 3.500 2.00 28 3.857 2.572 3.00 18 5.334 2.55 5.646% 3.222 2.00 30 3.223 2.774 3.26 5.334 2.26 5.25 Page 84 Publication 946 (2009) .00 39 2.167 4.66 5.26 5.446 3.857 2.000 4.00 13 5.774 3.857 2.222 2.000 4.546 4.334 2.545 4.222 2.572 3.857 2.773 3.27 5.0 3.5 28 30 35 40 45 50 1 4.572 3.00 15 5.857 2.333 2.774 3.222 2.27 5.0 3.545 4.000 4.333 2.546 4.222 2.333 2.00 27 2.571 3.00 14 5.222 2.500 2.000 4.000 4.572 3.167 4.75% 2 5.500 2.166 4.572 3.545 4. Table A-9.500 2.500 2.0 3.857 2.358 3.00 19 0.333 2.572 3.857 2.00 11 5.166 4.500 2.546 4.571 3.222 2.000 4.333 2.00 6 5.167 4.167 4.857 2.223 2.278 2.773 3.27 5.500 2.334 2.5 3.571 3.500 2.546 4.222 2.167 4.857 2.625 4.5% 3.773 3.000 4.Page 84 of 120 of Publication 946 15:26 .00 25 0.000 4.000 4.222 2.0 3.571 3.00 4 5.222 2.167 4.333 2.166 4.375% 3.56 5.000 4.857 2.00 16 5.857 2.774 3.545 4.571 3.571 3.222 2.857 2.222 2.56 5.545 4.222 2.00 36 0.222 2.00 40 2.545 4.167 4.223 2.167 4.167 4.857 2.00 8 5.000 4.857 2.857 2.0 3.0 3.27 5.00 35 2.500 2.774 3.26 5.0 3.333 2.167 4.500 2.166 4.334 2.857 2.774 3.0 3.61% 4.857 2.0 3.857 2.0 3.545 4.00 22 4.000 4.26 5.858 2.500 2.26 5.857 2.222 2.773 3.333 2.857 2.222 2.500 2.500 2.500 2.500 2.571 3.571 3.125% 2.223 2. MUST be removed before printing.00 45 2.223 2.86% 4.26 5.500 2.500 2.774 3.188% 1.222 2.773 3.000 4.00 33 2.333 2.223 2.56 5.26 5.00 9 5.571 3.500 2.166 4.500 2.500 2.774 3.00 24 4.773 3.222 2.0 3.0 3.69 5.26 5.333 2.774 3.500 2.500 2.56 5.26 5.55 5.944% 1.0 3.572 3.00 41 0.417 2.167 4.00 46 0.333 2.774 3.0 3.222 2.00 31 0.774 3.333 2.000 4.333 2.545 4.334 2.774 3.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.00 37 2.223 2.857 2.000 4.166 4.977% 3.572 3.222 2.774 3.0 3.55 5.00 21 0.857 2.500 2.

14 6.69 7.39 14.53 3 35.09 8.58% 2 40.83% 17.14 6.0 7.52 9.09 8.06 5.67 6.28 13.88 16 2.0 7.70 8.38 14.33 12.06 5.21 Table A-10.06 5.11 10.70 8.0 7.69 8.53 4 12.86% 15.5 17 1 6.0 7.5 1 25.53 9.70 8.06 5.06 5.69 10.33 8.09 8.0% 20.5 11 11.25 6.00 9.76 11.67 6.41 7.77 11. ( Continued) Recovery periods in years Year 10 10.75 8.88 9 10.0 16.00 25.11 10.41 7.52 8 5.5 16.70 8.25% 5.57 25.5 9 9.34 12.88 4 10.00 9.34 12.Page 85 of 120 of Publication 946 15:26 .21% 5.50 6.5 13 13.09 8.53 9 4.0 7.0 7.41 7.33 8.14 6.69 7.52 9.69 7.25 6.53 9.67 6.89 13 3.69 7.53 7 6.33 12.88 14 2.50 11.09 8.09 8.25 6.33 8.81% 7.0 7.34 28.38 14.33 8.41 7.14 6. MUST be removed before printing.89 17 2.25 6.66 6.06 5.61 8.0 7.88 11 3.67 6.70 8.25 6.25 6.33 9.67 6.11 10.06 5.0 7.09 8.77 11.41 7.28 13.0 7.25 6.53 9.29 13.15 6.25 6.25 6.33 12.67 6.50 11.41 7.33 12.00 9.77 11.33% 7.11 10.67 6.63% 4.70 7.06 5.0% 4.00 9.31 5.88 18 2.35% 6.0 16.09 8.68% 5.0 16.06 5.40 7.00 20.15 6.66 6.88 10 10.06 5.5 4 5 6 6.06 5.88 7 10.69 7.89 6.29 13.46 14.76 11.15 6.25 6.14 6.0 7.25 6.93% 8.17 9.12 10.41 7.09 8.06 5.11 10.40 7.50 11.88 6 10.5 3 3.00 9.37 20.50 11.88 8 10.00 9.76 11.68 6.34 8.67 15.10 8.67 15.91% 3.81% 4.70 8.40 7.41 7.17% 3.33 28.5 8 8.66 15.29 13.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.25 13.66 15.34 8.53 9.06 5.50 11.50 25.36 11.41 7.00 9.33 8.50 11.0 33.00 20.88 5 10.41 7.63% 12.28 13.52 6 7.67 6.42% 9.67 15.66 6.39 14.33 8.25 6.00 9.66 6.11 10.0 7.88 12 3.33 8.69 8.43% 5.69 7.14 6.48 7.89 15 2.69 7.50 11.69 8.95% 5.68% 2 10.79% 3.15 6.62% 8.52 9.00 9.14 6.00 20.77 11.38 14.11 10.14 6.21 Publication 946 (2009) Page 85 .0 33.66 6.57 25.5% 10.34 5.67 12.69 7.69 7.06 5.53 5 9.29 11.06 5.69 7.69 8.5 12 12. Straight Line Method Mid-Quarter Convention Placed in Service in Second Quarter Recovery periods in years Year 2.0 16.14 6.25 6.46% 4.5 14 15 16 16. Table A-10.13 7.25 6.33 8.52 9.88 3 10.34 8.52 10 4.70 7.94% 6.5 7 7.25 6.67 6.52 9.

333 2.500 2.00 31 1.774 3.500 2.500 2.000 4.545 4.358% 2.546 4.223 2.222 2.167 4.0 3.572 3.857 2.857 2.000 4.334 2.0 3.56 5.222 2.29% 3.857 2.545 4.333 2.27 5.500 2.546 4.26 5.222 2.333 2.500 2.500 2.56 5.26 5.55 5.500 2.773 3.00 22 4.773 3.546 4.000 4.00 30 3.222 2.000 4.00 26 1.500 2.0 3.572 3.00 47–50 2.166 4.841% 2.08 5.774 3.857 2.500 2.500 2.223 2.00 21 1.0 3.774 3.167 4.222 2.333 2.500 2.222 2.00 33 2.546 4.333 2.125% 2.500 2.773 3.774 3.0 3.167 4.222 2.333 2.500 2.27 5.Page 86 of 120 of Publication 946 15:26 .222 2.500 2.222 2. Table A-10.0 3.167 4.500 2.5 28 30 35 40 45 50 1 3.222 2.47% 3.0 3.00 10 5.00 43 2. MUST be removed before printing.302 3.0 3.500 2.00 16 5.167 4.000 4.222 2.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.0 3. ( Continued) Recovery periods in years Year 18 19 20 22 24 25 26.0 3.55 5.222 2.857 2.571 3.00 51 0.572 3.545 4.00 39 2.167 4.562 4.334 2.00 8 5.500 2.167 4.000 4.0 3.857 2.26 5.000 4.500 2.223 2.222 2.0 3.546 4.334 2.500 2.774 3.334 2.857 2.56 5.00 24 4.500 2.000 4.56 5.26 5.26 5.00 13 5.000 4.389% 1.00 25 1.223 2.774 3.083% 1.0 3.858 2.857 2.333 2.774 3.571 3.00 41 0.222 2.334 2.222 2.875 4.858 2.00 4 5.00 29 1.000 4.26 5.56 5.572 3.571 3.00 19 2.26 5.223 2.0 3.546 4.545 4.0 3.857 2.500 2.857 2.333 2.857 2.223 2.500 2.000 4.00 7 5.857 2.222 2.0 3.546 4.222 2.25% 2 5.222 2.55 5.00 23 1.500 2.56 5.222 2.545 4.00 36 1.222 2.500 2.00 35 2.571 3.500 2.5% 2.333 2.0 3.857 2.00 18 5.571 3.572 3.774 3.00 6 5.774 3.500 2.334 2.223 2.571 3.333 2.333 2.333 2.572 3.166 4.334 2.333 2.5 3.333 2.00 12 5.167 4.857 2.857 2.232% 2.334 2.00 34 2.773 3.773 3.00 44 2.222 2.857 2.563% 1.0 3.572 3.000 4.00 42 2.572 3.500 2.572 3.167 4.773 3.571 3.333 2.00 9 5.858 2.339 3.222 2.0 3.546 4.857 2.571 3.00 45 2.222 2.222 2.774 3.857 2.26 5.00 15 5.222 2.000 4.00 38 2.858 2.500 2.27 5.571 3.00 14 5.00 17 5.27 5.000 4.500 2.705 4.55 5.572 3.27 5.857 2.000 4.26 5.334 2.333 2.774 3.773 3.072 2.857 2.0 3.545 4.500 2.56 5.166 4.167 4.500 2.0 3.55 5.774 3.774 3.250 2.572 3.857 2.00 40 2.167 4.334 2.500 2.857 2.545 4.857 2.571 3.000 4.222 2.222 2.773 3.773 3.937 2.0 3.26 5.167 4.773 3.223 2.857 2.223 2.00 46 0.857 2.545 4.000 4.000 4.500 2.222 2.857 2.222 2.500 2.545 4.55 5.857 2.222 2.545 4.75 Page 86 Publication 946 (2009) .545 4.00 27 3.604% 2.166 4.333 2.26 5.222 2.545 4.546 4.774 3.857 2.00 28 3.56 5.571 3.00 32 2.166 4.56 5.00 20 1.333 2.571 3.00 11 5.857 2.500 2.222 2.167 4.167 4.166 4.774 3.167 4.572 3.27 5.166 4.833 2.500 2.223 2.00 37 2.00 5 5.222 2.857 2.167 4.0 3.786% 1.55 5.222 2.26 5.500 2.97 5.56 5.00 3 5.500 2.0 3.571 3.333 2.571 3.571 3.500 2.000 4.

06 5.95% 2 40.89 15 0.77 11.38 14.06 5.53 3 40.41 7.5 9 9.78% 2.29 13.39 14.70 8.38% 7.92 8.53 9.10 8.81 7.0 7.62 20.77 11.33 8.06 5.00 9.0 16.0 33.14 6.11 10.52 11 1.88 18 0.19 5.88 12 1.00 9.06 5.66 6.77% 5.33 28.50 11.33 8.77 11.09 8.0 7.69 7.11 10.25 6.88 14 1.00 9.06 5.34 8.40 7.34 12.11 10.41% 3.25% 5.88 6 10.14 6.69 8.40 7.33 8.00 9.06 5.88% 2.Page 87 of 120 of Publication 946 15:26 .25 6.5 11 11.68 Publication 946 (2009) Page 87 .00 9.33 8.69 7.33 8.88 3 10.41 7.67 6.33 8.06 5.33 12.50 11.00% 4.93 4.06 5.67 6.0 7.88 8 10.88 11 6.25 6.68% 2.25 6.0 7.66 6.88 9 10.06 5.09 5.69 8.38 14.69 7.25 6.50 11.69 7.5 8 8.28 13.53 4 5.17% 3.0% 2.25 6.88 7 10.06 5.93 13.11 10.00 9.67 6.41 7.39 14.09 8.25 6.89 13 1.00 20. MUST be removed before printing.0 16.11 10.50% 10.50 11.50 11.40 7.69 8.76 11.88 4 10.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.41 7.09 8.32 Table A-11.29 13.06 5.41 7.69 7.25 6.70 8.17 6.25 6.34 8.41 7.5% 6.68 8.21% 2 10.89 17 3.0 33.52 9.25 6.41% 4.57 15.25 9.0 4.57% 3.0 7.33 12.25 6.09 8.13% 3.0 7.34 28.14 6.25 6.66 6.42 15.66 15.11 10.09 8.25 6.41 7.06 5.57 25.67 6.69 7.5 12 12.50 11.28 13.0 16.5 16.14 6.76 11.25 6.52 9.53 8 1.88 16 4.53 6 12.66 6.66 6.77 11.66 15.57 25.0 20.53 9.67 7.88 10 10.0 7.0 7.67 15.69% 4.67 6.69 7.06 5.00 9.00 9.28 13.41 7.34 8.33 8.11 10.81 11.67 6.50% 2.69 7.00 20.06 5.5 3 3.29 13.14 6.33 8.26% 3.52 9.67 15. Table A-11.11 10.75% 3.58 25.67 6.15 6.33 12.25 6.34% 2.53 10 1.38 14.00 20.09 8.0 7.27% 2.33 12.67 15.70 7.67 6.76 11.76 3.67 6.70 8.33 12.5 13 13.14 6.15 6.09 8.52 9.52 9. Straight Line Method Mid-Quarter Convention Placed in Service in Third Quarter Recovery periods in years Year 2.70 8.07 5.06 5.69 8.52 5 3.70 7.09 8.0 7.36% 5.53 9.14 6.21 8. ( Continued) Recovery periods in years Year 10 10.76 11.14 6.70 8.91 6.00 9.69 8.39 14.50 11.47 6.70 7.52 7 10.0 7.0 7.88 5 10.5 7 7.5 17 1 3.83 28.52 9.14 6.5 4 5 6 6.70 8.5 1 15.5 14 15 16 16.14 6.47 6.95 10.34 12.0 16.09 8.53 9.40 7.41 7.52 9 1.15 6.0% 12.71% 9.69 7.

545 4.00 32 2.500 2.26 5.166 4. ( Continued) Recovery periods in years Year 18 19 20 22 24 25 26.222 2.572 3.773 3.858 2.083 2.571 3.223 2.500 2.334 2.000 4.167 4.500 2.333 2.572 3.26 5.000 4.222 2.00 27 3.500 2.571 3.00 40 2.222 2.0 3.773 3.55 5.00 6 5.167 4.000 4.571 3.00 17 5.00 37 2.500 2.546 4.167 4.545 4.857 2.0 3.333 2.5 3.773 3.500 2.222 2.000 4.774 3.0 3.857 2.572 3.857 2.Page 88 of 120 of Publication 946 15:26 .0 3.167 4.166 4.333 2.00 33 2.00 41 1.0 3.333 2.857 2.572 3.222 2.333 2.773 3.26 5.774 3.334 2.00 29 2.222 2.545 4.572 3.56 5.857 2.26 5.000 4.773 3.00 34 2.166 4.571 3.125 4.774 3.55 5.545 4.857 2.571 3.222 2.500 2.222 2.55 5. Table A-11.500 2.562 2.333 2.572 3.571 3.500 2.250% 1.333 2.571 3.500 2.00 35 2.774 3.571 3.166 4.774 3.00 19 3.000 4.5% 1.00 9 5.339% 1.333 2.0 3.222 2.545 4.000 4.774 3.75% 2 5.167 4.604 4.334 2.26 5.563% 1.857 2.858 2.571 3.0 3.00 3 5.500 2.222 2.333 2.00 42 2.500 2.222 2.500 2.857 2.00 20 3.56 5.705% 1.571 3.858 2.27 5.572 3.773 3.334 2. MUST be removed before printing.774 3.000 4.00 39 2.167 4.500 2.571 3.333 2.222 2.857 2.857 2.545 4.334 2.222 2.774 3.545 4.857 2.0 3.222 2.167 4.333 2.858 2.500 2.223 2.00 31 2.222 2.97% 1.774 3.167 4.774 3.00 15 5.222 2.334 2.00 28 0.29 5.000 4.546 4.500 2.545 4.774 3.389 2.222 2.0 3.000 4.0 3.857 2.546 4.938% 0.500 2.25 Page 88 Publication 946 (2009) .415% 1.546 4.857 2.500 2.56 5.56 5.222 2.222 2.334 2.333 2.00 26 2.334 2.0 3.500 2.167 4.00 45 2.222 2.774 3.500 2.500 2.55 5.56 5.00 46 1.00 11 5.857 2.857 2.857 2.857 2.773 3.333 2.166 4.000 4.333 2.26 5.545 4.774 3.0 3.223 2.857 2.071% 0.833% 0.00 16 5.572 3.27 5.0 3.56 5.0 3.546 4.223 2.00 7 5.00 18 5.223 2.167 4.786 2.857 2.222 2.500 2.000 4.26 5.571 3.545 4.00 13 5.857 2.222 2.56 5.232 3.00 12 5.500 2.222 2.223 2.27 5.500 2.773 3.222 2.166 4.00 5 5.857 2.55 5.167 4.55 5.500 2.00 43 2.572 3.222 2.545 4.166 4.000 4.27 5.222 2.571 3.00 8 5.167 4.333 2.334 2.00 36 1.223 2.222 2.500 2.546 4.00 23 2.00 51 1.00 21 3.222 2.857 2.26 5.167 4.773 3.0 3.47 5.0 3.500 2.222 2.0 3.857 2.00 44 2.546 4.572 3.500 2.500 2.546 4.167 4.222 2.00 25 2.857 2.500 2.0 3.000 4.222 2.222 2.546 4.222 2.571 3.222 2.000 4.572 3.773 3.472 3.26 5.0 3.572 3.0 3.857 2.56 5.857 2.26 5.00 10 5.500 2.223 2.00 30 3.00 14 5.000 4.26 5.500 2.223 2.773 3.55 5.00 24 4.545 4.000 4.500 2.166 4.27 5.333 2.857 2.571 3.000 4.875% 1.841 4.167 4.333 2.500 2.774 3.500 2.857 2.5 28 30 35 40 45 50 1 2.56 5.0 3.000 4.27 5.334 2.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.500 2.333 2.500 2.223 2.857 2.500 2.500 2.00 22 4.333 2.858 2.56 5.00 47–50 2.00 4 5.0 3.00 38 2.774 3.0 3.08% 1.26 5.0 3.

47 6.17 28.34 8.67% 1.34 8.0 33.41 9.67 6.53 6 17.69 7.69 7.Page 89 of 120 of Publication 946 15:26 .88 3 10.00 20.41 7.77 12.58 15.69 7.88 18 2.00 9.38 14.69 8.0 7.0 16.14 6.77 11.25 6.66 6.0% 0.09 8.0 7.50 11.06 5.57 25.67 6.77 11.69 7.09 8.00 9.52 9.76% 0.14% 1.94 11.66 6.15 Publication 946 (2009) Page 89 .41 7.77 11.70 8.33 8. MUST be removed before printing.0 33.06 5.67 6.5 8 8.57 25.96% 0.5 7 7.29 13.40 7.69 8.39 14.52 9.88 4 10.41 7.39 14.29 13.25 6.09 8.53 9.33 8.53 10 4.88 9 10.14 6.40 7.95 Table A-12.70 8.39 14.96 8.52 9.33 8.25 6.04% 1.50 11.67 15.67 6.88 7 10.50 11.11 10.09 8.14 6.53 8 5.5 14 15 16 16.09 8.06 5.70 7.0 7.67 15.00 20.33 8.88 6 10.69 8.33 12.25 6.06 5.79% 1.70 7.25 6.09 8.11 10.25 6.67 15.00 20.66 6.00 9.40 7.25 6.50 11.28 13.00 9.78 6.76 11.69 7.88 8 10.57 7.06 5.34 8.67 6.33 12.25% 1.06 5.34 12.66 6.5 13 13.25 6.87 20.06 5.09% 1.70 8.77 11.11 10.67 6.76 11.5 1 5.41 7.06 5.73 7.0 7.41 7.28 13.0 29.39% 1.78% 0.67 6.5 16. Straight Line Method Mid-Quarter Convention Placed in Service in Fourth Quarter Recovery periods in years Year 2.0 7.09 8.13% 2.57% 3.00 9.69 7.50 11.25 6.19% 1.00 9.15 6.50 11.33 12.11 10.52 7 14.14 6.52 9.26 7.25 6.09 8.70 8.53 3 40.72 21.70 7.07 5.11 10.89 17 5.29 13.14 6.5 17 1 1. ( Continued) Recovery periods in years Year 10 10.0 7.66 15.14 6.33 8.33 8.88 11 8.0 6.17% 3. Table A-12.88 12 3.88 5 10.25 6.33 28.41 7.25 6.25 6.69 8.47% 1.25 6.14 6.0 7.50 11.0 7.5 4 5 6 6.89% 0.06 5.41 7.53 9.0 16.32% 2 40.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.33 12.06 5.09 8.83 6.34 8.73 10.06 5.67 15.00 10.14 6.69 8.52 9 5.88 16 5.33 8.69 7.5 12 12.50 13.53 4 15.56% 1.92% 1.0 7.76 11.11 10.67 6.38 14.0 7.06 5.38 14.70 8.53 9.67 6.11 10.06 5.41 7.15 6.53 9.88 10 10.27 5.0% 4.75 9.11 10.5% 2.89 15 2.5 3 3.06 5.93% 0.0 7.74% 2 10.15 6.33 28.5 11 11.00 9.70 8.52 9.52 9.69 7.28 13.25 6.15 6.69 7.14 6.89 13 3.67 6.5 9 9.00 9.57 25.88 14 3.29 8.06 5.41 7.52 5 10.25 6.33 12.34 12.08% 1.76 11.0 16.52 11 3.0 7.83% 0.0 16.40 7.00 9.09 8.

545 4.56 5.545 4.774 3.166 4.571 3.000 4.26 5.500 2.774 3.0 3.572 3.56 5.857 2.0 3.0 3.857 2.572 3.61 5.774 3.000 4.222 2.222 2.857 2.222 2.00 37 2.222 2.500 2.773 3.222 2.571 3.56 5.857 2.00 51 1.00 11 5.00 9 5.774 3.546 4.500 2.857 2.571 3.167 4.0 3.00 34 2.546 4.500 2.00 24 4.333 2.500 2.857 2.00 19 4.167 4.857 2.545 4.00 6 5.773 3.500 2.00 20 4.222 2.00 12 5.571 3.774 3.572 3.222 2. ( Continued) Recovery periods in years Year 18 19 20 22 24 25 26.222 2.545 4.334 2.86 5.545 4.0 3.572 3.858 2.500 2.500 2.858 2.545 4.000 4.222 2.00 31 2.857 2.546 4.26 5.333 2.223 2.222 2.572 3.857 2.334 2.313% 0.857 2.571 3.500 2.333 2.333 2.545 4.773 3.56 5.500 2.546 4.222 2.222 2.167 4.00 40 2.0 3.857 2.222 2.00 29 3.500 2.333 2.500 2.167 4.00 33 2.26 5.167 4.857 2.773 3.000 4.857 2.334 2.000 4.55 5.417% 0.00 45 2.166 4.571 3.857 2.222 2.858 2.167 4.00 13 5.000 4.222 2.167 4.773 3.500 2.545 4.00 4 5.000 4.00 46 1.334 2.56 5.571 3.167 4.222 2.167 4.167 4.00 42 2.222 2.333 2.0 3.500 2.773 3.857 2.357% 0.00 8 5.27 5.55 5.572 3.166 4.26 5.774 3.857 2.223 2.333 2.125 3.858 2.222 2.334 2.0 3.546 4.773 3.00 30 3.500 2.222 2.858 2.00 18 5. Table A-12.00 7 5.166 4.773 3.26 5.26 5.572 3.500 2.26 5.472% 0.546 4.0 3.334 2.00 39 2.00 16 5.0 3.774 3.774 3.500 2.55 5.500 2.222 2.0 3.857 2.69% 0.222 2.572 3.26 5.774 3.167 4.0 3.333 2.000 4.167 4.857 2.545 4.571 3.26 5.917 2.521% 0.500 2.26 5.857 2.000 4.500 2.75 Page 90 Publication 946 (2009) .568% 0.00 15 5.222 2.000 4.334 2.00 21 4.00 14 5.56 5.27 5.571 3.571 3.26 5.334 2.27 5.00 36 2.000 4.222 2.500 2.00 25 3.546 4. MUST be removed before printing.222 2.500 2.0 3.167 4.500 2.334 2.166 4.773 3.545 4.000 4.222 2.571 3.333 2.56 5.000 4.0 3.0 3.774 3.625% 0.222 2.500 2.571 3.857 2.857 2.500 2.55 5.546 4.166 4.774 3.500 2.0 3.000 4.500 2.500 2.857 2.500 2.00 3 5.0 3.00 22 4.773 3.56 5.5 28 30 35 40 45 50 1 0.26 5.223 2.857 2.774 3.222 2.Page 90 of 120 of Publication 946 15:26 .500 2.5 3.167 4.00 26 3.223 2.773 3.00 35 2.0 3.00 5 5.857 2.166 4.222 2.333 2.00 27 3.000 4.333 2.00 23 3.000 4.572 3.857 2.00 43 2.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.857 2.56 5.375 4.223 2.572 3.55 5.545 4.857 2.500 2.55 5.571 3.222 2.572 3.546 4.223 2.500 2.00 28 1.00 47–50 2.415 3.166 4.222 2.572 3.222 2.000 4.222 2.333 2.0 3.333 2.223 2.977 4.500 2.0 3.857 2.546 4.500 2.56 5.945 2.500 2.500 2.66% 0.26 5.187 2.00 17 5.000 4.0 3.774 3.333 2.446% 0.00 41 2.00 10 5.646 4.774 3.774 3.27 5.00 38 2.27 5.0 3.5% 0.500 2.333 2.000 4.25% 2 5.333 2.333 2.333 2.0 3.223 2.500 2.222 2.222 2.278% 0.571 3.0 3.00 44 2.500 2.500 2.55 5.222 2.857 2.223 2.333 2.00 32 2.571 3.333 2.167 4.

150% Declining Balance Method Half-Year Convention Recovery periods in years Year 2.52 6.37 7.37 10.39 5.00 16.82 9.66 14.93 5.03 5.500 2.35 8.23 15 3.74 8.02 7.90 5.79 6.17 7.05 6.54% 10.5 12 12.64 9.02 9.32 5.81 13.50% 7.09 12.0% 21.35 7.39 5.5 14 15 16 16.65 9.54 5.33 14.00% 9.79 6.39 5.28 14.63 7.85 7.90 5.938% 0.97 7.23 12 3.97 8.33% 7.52 10.55 5.55 5.61 10.79 6.38 5.5 33.38 5.50 8.60 10.05 8.25 11.27 12.937 1.36% 5.23 16 2.23 13 3.500 2.17 6 8.23 11 4.94 8.55 5.729 0.64 9.31 5 10.67 30.39 5.65 6.79 6.73 8.98 7.55 6. Table A-13.13 11.75 9.55 6.69% 4.45 20.74 8.05 6.188% 1.74 8.09 15.80 10.32 5.23 10 8.5 1 30.146% 0.500 2.08 12.05 6.563% 1.03 13.25 4 12.49 10.500 2.16 Table A-14.771% 1.52 10.79 6.14 9.91 10.39 5.33 7.32 8 8.5 17 1 7.85 16.729% 0.82% 8.89% 2 42.99 7.09 12.63 7.5 7 7.14% 6.25 12.80 10.33 7.104 0.74 8.75% 15.77% 5.04 6.22 10.23 9 8.74 8.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.89 7.32 5.45 20.68 8.52 11.39 6 8.521% 0.55 5.05 6.38 5.28 10.35 7.39 5.10 7.73 12.23 6.31 16.62 Publication 946 (2009) Page 91 .70 7.31 5.05 6.55 6.04 6.52 10.79 6.18 9.55 5.500 2.500 2.36 7.88 20.55 6.396 Table A-14.31 17.0% 25.82% 6.56% 5.41 15.72 11.23 18 2.47 25.17 8 6.500 2.40 10.55 6.48 9. Straight Line Mid-Month Convention Month property placed in service Year 1 2 3 4 5 6 7 8 9 10 11 12 1 2.187 2.06 13.53 7.39 5.93 6.41 19.35 7.50% 11.313% 0.06 13.5 9 9.66 7.40 13.54 5.55 5.354% 1.50 21.16 5.55% 4.5 4 5 6 6.44 6.0 22.74 8.500 2.32 5.23 17 2.71% 10.64 7.34 7.90 5.88 13.5 13 13.979% 1.37 8.69 4 10.32 5.979 2.77 5.65 9.70 15.5 22.521 0.33 7.52 10.91 5.39 5.55 6.55 8.33 7.500 41 0.Page 91 of 120 of Publication 946 15:26 .771 1.33 7.33 7.354 1.97 7.5 11 11.16 16.99 16.22 6.43% 18.03 14.55 6.562 1.32 7. MUST be removed before printing.55 5.19 9.55 6.17 9 5.01 5 8.64 7.0 25.56 6.00% 4.06 13. ( Continued) Recovery periods in years Year 10 10.0 37.78 6.71 12.19 11.87 10.500 2.62 9.97 7.13 18.18 9.396% 2.09 12.93 9.25% 6.17 7 7.35 7.90 5.95 5.5 8 8.80 10.66 14.25 11.19 9.98 7.52% 6.17 10 4.500 2.79 11.90 5.65 9.08 7.39 6.312 0.41% 2 13.22 8.98 7.91 5.33 9.43 3 11.36 7.32 5.97 10.83 7 8.91 5.32 5.00% 12.51 8.25 11.25 9.25 11.63 7.55 5.29 8.38% 8.500 2.5 3 3.69 7.104% 2–40 2.79 6.146 1.04 6.18 8.64 7.91 5.00% 5.64 7.80 10.23 14 3.54 3 28.19 9.

005 1.95% 3.417 2.729 3.063 3.94 4.462 4.461 4.205 3.806 31 1.730 3.806 32 2.934 4.954 2.253 2.875 4.674 2.584 3.806 34 2.729 3.462 4.004 1.961 2.877 3.69 4.926 2.461 4.806 41 1.205 2.451 3.572 2.416 2.572 2.729 3.205 2.862 2.462 4.205 2.040 2.583 3.17% 3.994 2.971 3.710 2.086 2.815 19 2.205 2.500 5.143% 1.064 3.94 4.004 1.583 3.830% 2.384 3.805 51 0.005 1.409% 3.137 5.5 28 30 35 40 45 50 1 4.875% 1.286 2.583 3.994 2.253 2.993 2.253 2.806 35 2.806 46 1.004 1.404 3.004 1.063 3.94 4.713 5.180 3.126 2.205 2.253 2.993 2.383 3.806 30 2.854 3.590 2.039 1.806 21 2.000% 2.234 2.69 4.679% 2.253 2.780 5 6.747 3.730 3.383 3.278 2.03 4.005 1.842 3.384 3.805 43 2.205 2.806 27 3.994 2.179 13 4.583 3.806 44 2.063 3.335 2.571 2.15 5.69 4.383 3. ( Continued) Recovery periods in years Year 18 19 20 22 24 25 26.182 2.806 42 2.002 1.583 3.729 3.772 3.729 3.004 1.063 3.253 2.063 3.584 3.316 11 4.005 1.461 4.383 3.98 6.571 2.005 1.571 2.993 2.806 25 1.729 3.409 3.584 3.004 1.69 4.005 1.205 2.903 Page 92 Publication 946 (2009) .357 4.064 3.989 16 4.46 5.252 2.252 2.194 3.032 3.253 2.994 2.584 3.792 3.169 2.063 3.584 3.677 4.895 4.627 4.99 7.125% 3.383 3.602 2.729 3.571 2.542 3.806 38 2.571 2.189 4.35 4.64 5.697 6 5.955 3 7.253 2.94 4.004 1.004 1.70 4.253 2.993 2.420 4.004 1.806 24 3.544 4.730 3.205 2.571 2.050 15 4.471 5.385 4.219 6.806 37 2.253 2.143 4.32 6.94 4.828 2.400 3.252 2.806 36 1.064 3.718 5.522 4.253 2.94 4.94 4.005 1.005 1.871 18 4.571 2.71 6.95 4.461 4.064 3.388 10 4.677 6.356 3.004 1.806 50 1.805 49 1.993 2.58 7.834 4.730 3.246 12 4.994 2.500% 2 7.005 1.994 2.69 4.005 1.055 5.063 3.384 3.584 3.994 2.750% 3.994 2.271 4.253 2.520 3.253 2.989 4.005 1.253 2.571 2.461 4.583 3.571 2.865 3.993 2.004 1.571 2.500% 2.631 4.805 45 2.383 3.005 1.369 3.69 4.806 20 2.618 4.253 2.805 47 1.667% 1.806 26 1.511 2.383 3.253 2.571 2.584 3.806 33 2.571 2.43 6.311 4.609 2.572 2.866 4 6.111 4.072 2.994 2.005 1.929 17 4.806 22 4.730 3.253 2.063 2.806 29 1.205 2.69 4.253 2.729 3.328 4.231 4.767 2.706 2.69 4.583 3.383 3.214 4.205 2.383 3.252 2.205 2.572 2.177 5.994 2.69 4.383 3.253 2.546 3.965 4.005 1.253 2.820 5.015 3. MUST be removed before printing.005 1.322 5.816 2.994 2.584 3.383 3.Page 92 of 120 of Publication 946 15:26 .69 4.205 2.114 14 4.571 2.806 48 1.959 3.584 3.257 2.994 2.497 2.730 3.063 3.806 39 2.253 2.110 3.064 3. Table A-14.616 7 5.571 2.461 4.461 9 4.005 1.93 5.183 3.95 4.205 2.69 4.670 4.205 2.571 2.585 2.729 3.806 28 3.014 3.994 2.205 2.538 8 4.583 3.384 3.205 2.225 2.658 3.676 5.462 4.005 1.17 5.774 3.326 2.571 2.95 4.383 3.462 4.383 3.063 3.005 1.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.806 40 2.285 4.95 4.586 6.110 1.281 2.158 2.47 4.806 23 2.253 2.571 2.677 3.680 3.888 4.462 4.571 2.499 2.205 2.

42 10.09 5.65 Publication 946 (2009) Page 93 .71 5.78 6.13 10.32 7.31 5.20% 7.36 5.03 12.74 5.92 14.31 5.10% 9.54 5.53 6.35 6.52 14.23 12 1.23 28.15 8 1.13% 12.19% 18.22 15 0.73 19.41 6.71 10.22 13 0.92 8.33 7.32 7.17 13.5 3 3.03 12.76 10.77 5 8.92 4.72 Table A-15. Table A-15.33 7.31 7.15 9 1.74 9.5 12 12.71 8.47 16.03 12.55 5.23 11 1.52 14.77 10.54 5.08 6.17 6 8.67 14.04 6.00 4.52 8.37 9.91 5.15 6 2.99 5.38 5.54 5.07 6.75% 8.74 8.64 7.04 6.71 8.65 14.5 9 9.32 8.38 5.44% 14.33 7.77 10.13 10.38 5.96 7.90 5.54 5.50% 32.33 7.04 6.38 5.29 11.53 6.46 7.31 5.76 10.19 9.91 5.18 8.93% 11.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.71 8.75% 37.71 8.38 5.41 9.90 5.08 10.82% 2 29.79 25.64 7.23 8 8.5 11 11.88% 20.54 6.31 5.29 6.77 6.31 5.89 9.01 11.95% 7.5 17 1 13.76 16.32 7.54 5.42 17.20 7.27 25.41 10.31 5.38 5.04 6.58% 13.61 7.64 7.65 6.76 16.Page 93 of 120 of Publication 946 15:26 .32 7.20 12.18 8.69 3.04 6.72% 2 13.54 6.91 5.38 5.65 5 2.77 6.96 7.75% 17.74 12.74 10.50% 43.53 6.65 9.37 10.77 7.40 6.03 9.86 11.04 6.23 18 0.20 9.65 9.90 5.23 9 8.23 14 0.53 18.64 7.67 8.97 7.19 9. 150% Declining Balance Method Mid-Quarter Convention Property Placed in Service in First Quarter Recovery periods in years Year 2.23 16 0.92 6.14 3 11.14 10 1.64 7.05 9.64 9.64 9.90 5.31 5.90 5.18 7.68 13.5 4 5 6 6.61 8.52 7.32 7.13 19.94% 10.38 5.78 6.06 13.06 13.02 12.45 9.00 21.41% 15.23 10 8.74 7.5 13 13.32 7.41 16.64 7.31 5.16 11.12 13.42 10.50% 10.5 1 52.96 7.79 5.96 7. ( Continued) Recovery periods in years Year 10 10.56 11.96 7.77 6.22 17 0.54 5.93 7.54 5.25% 21.38 5.55 5.04 6.37 5.16 11.96 7.32 7.76 8.13 26.63 7 8.42 4 9.63 7.71 8.85 4.5 7 7.32 5.80 5.50 15.77 10.20 9.20 9.5 14 15 16 16.54 6.16 11.64 9.77 6.52 14.15 7 1.06 13.14 12.50% 11.53 6.81% 26.39 7.38% 8.72% 9.16 11.50% 16.37 10.54 5.54 6.12 7.21 7.98 19.32 7.5 8 8.33 7. MUST be removed before printing.71 8.80 7.13 8.91 6.61 3 18.96 8.20 22.50 12.91 5.06 14.46 4 3.03 6.24 13.21 5.42 10.78 6.78 6.71 9.37 8.41% 10.

400 2.662 2.204 2.375% 3.994 2.252 2.994 2.004 1.582 3.466 3.571 2.571 2.251 1.253 2.385 2.73 7.994 2.834 4 6.459 4.005 1.448 3.700 3.563% 5.172 2.571 2.204 2.315 3.806 46 0.253 2.252 2.459 4.004 1.005 1.95 4.004 1.061 3.996 2.460 4.383 3.542 3.253 2.994 2.075 4.099 3.552 2.570 2.29 5.571 2.252 2.69 4.806 20 0.08 6.036 2.459 4.805 35 2.314 2.061 3.005 1.77 6.671 2.805 37 2.868 4.994 2.582 3.806 23 0.459 4.59 4.617 3.383 3.172 4.290 11 4.68 4.806 26 0.564 4.45 5.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.806 50 1.582 3.253 2.805 43 2.994 2.567 5.805 33 2.113 2.252 2.004 1.005 1.571 2.95 4.460 4.730 3.060 3.832 4.805 29 0.582 3.730 3.571 2.252 2.994 2.87 4.128 2.204 2.993 2.921 3 7.781 2.253 2.687 3.252 2.94 4.806 27 2.582 3.204 2.384 3.993 2.517 4.061 3.806 32 2.013 2.557 4.203 2.581 3.005 1.908 5.013 1.69 4.383 3.360 10 4.253 2.68 4.69 4.384 3.688% 4.806 44 2.29% 6.204 2.669 3.994 2.95 5.806 21 0.805 41 0.204 2.253 2.907 17 4.640 2.234 2.204 3.293 2.49 6.69 4.187 4.253 2.005 1.850 18 4.74 5.806 24 3.460 4. Table A-15.571 2. ( Continued) Recovery periods in years Year 18 19 20 22 24 25 26.581 3.061 3.061 3.383 3.906 2.204 2.729 3.281% 2.993 2.005 1.473 3.996 5.090 14 4.439 4.94 4.23 5.570 2.262 4.253 2.172 2.94 4.253 2.004 1.685 5.024 2.083 1.004 1.95 4.515 3.380 5.805 51 0.571 2.204 2.005 1.197 4.252 2.571 2.060 3.020 3.282 2.384 3.781 4.571 2.69 4.953% 4.384 3.94 4.806 36 0.582 3.253 2.806 40 2.95 4.011 3.459 4.578 3.469% 5.570 2.788 4.462 3.061 3.193 5.130 4.730 3.750% 3.433 9 4.252 2.061 3.571 2.384 3.061 3.732 2.005 1.004 1.834 4.287 3.729 3.004 1.229 2.994 2.749 5 5.221 12 4.826 2.005 1.806 34 2.571 2.917% 2.482 5.252 2.62 4.570 2.779 3.459 4.061 3.581 3.360 3.994 2.061 3.252 2.027 15 4.460 4.004 1.729 3.94 4.582 3.306 2.571 2.806 38 2.005 1.226 Page 94 Publication 946 (2009) .460 4.005 1.993 2.806 25 0.884 2.993 2.570 2.730 3.586 7 5.504 4.571 2.411 5.805 45 2.730 3.383 3.203 2.582 3.384 3.582 3.008 6.95 4.68 4.966% 5.571 2.994 2.966 16 4.Page 94 of 120 of Publication 946 15:26 .491 3.005 1.805 39 2.627 3.203 2.005 1.805 47 1.571 2.571 2.321 2.154 2.154 13 4.574 4.806 22 4.005 1.539 5.570 2.203 2.097 3. MUST be removed before printing.204 2.974 5.729 3.279 4.35 7.384 3.729 3.69 4.923 2.253 2.125 3.91% 6.877 3.383 3.581 3.204 2.329 4.994 2.69 4.252 2.806 19 0.793 3.004 1.236 2.383 3.761 3.69 4.509 8 4.374 2.204 2.383 3.806 28 3.805 31 0.806 48 1.459 4.729 3.115 3.729 3.475 2.252 2.730 3.625% 2 7.382 2.004 1.805 49 1.582 3.546 5.582 3.666 6 5.582 3.250% 4.204 2.106 4.722 4.344 5.69 4.730 3.005 1.948 3.459 4.383 3.023 4.204 2.729 3.994 2.384 3.061 3.776 2.806 30 2.005 1.571 2.252 2.922 3.339 3.00 4.5 28 30 35 40 45 50 1 7.061 3.467 2.005 1.806 42 2.508 3.94 4.252 2.894 3.746 4.994 2.

82 15.93 14.06 15. ( Continued) Recovery periods in years Year 10 10.39 5.22 11.93 12.37 19.54 5.73 8.65 9.91 5.98 7.52% 8.77 9.55 11.44% 18.34 7.5 12 12.93% 8.00 25.23 9 8.55 6.38 31.42% 13.87% 2 37.55 5.83 6.91 5.25% 5.92 8.23 17 2.09 19.33 7.48 10.90 5.34 10.24 14 2.08 9.79 6.68 7.33 7.57 8.32 5.47 9.55 6.55 16.21% 6.04 6.91 5.80 7.06 8.23 3 25.73 8.96 Publication 946 (2009) Page 95 .03% 10.98 4 9.58 14.38 21.29 14.90 5.98 7.50 34.37 10.38 8.64 7.55 6.88 7.04 6.38 5.32 5.23 13 2.5 14 15 16 16.32 5.54 5.33 7.08 4.32 5.Page 95 of 120 of Publication 946 15:26 .01 12.70% 6.23 10 8.78 6.56 17.19 9.32 6 8.07 12.59 7.55 6.38 5.75 18.05 6.16 7 5.65 10.79 6.60 4 9.79% 23.57 6.54 5.23 15 2.00 9.63% 14.92 9.25% 26.25 7.17 7.82 10.38% 8.32 5.49 10.26 7.73 8.72% 11.04 7.38 28.42% 9.99 7.5 3 3.56 9.15 10.79 6.82 9.38 5.95 5.81% 7.06 13.54 5.55 5.86% 5.00 22.5 17 1 9.75% 15.00 13.64 7.93 10.45 12.54 6.28 7.33 7.44 11.79 6.05 6.90 5.23 12 2.73 8.99 7.49 10.56 7.52 20.50% 31.09 6.35 7.34 7.24 16 2.16 6 6.73 8.71 5.44 6.39 5.09 5 7.34 7.02 Table A-16. MUST be removed before printing.22 11.31 20.70 14.07 13.73 6.78 6.73 8.90 5.33 7.34 8.37 5.38 5.82 10.39 5.04 6.49 10.5 9 9.5 11 11.24 18 1.86 5.55 5.98 11.43 12.55 15.82 8.5 7 7.99 6.78 6.5 4 5 6 6. Table A-16.55 6.32 5.51% 2 13.54 5.38 5.17 9 4.15 16.76 14.64 9.32 7.94% 6.39% 12.76 7 8.27 11.15 17.15% 7.75 6.62 8.58 10.22 11.00 7.34 3 11.72 7.71 10.41 7.68% 5.42 10.39 5.06 8.50 16.19 14. 150% Declining Balance Method Mid-Quarter Convention Property Placed in Service in Second Quarter Recovery periods in years Year 2.55 5.19 9.5 8 8.60 8.34 7.64 9.16 10 3.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.59 13.91 5.16 6.44 8.19 8.21 5.05 10.55 5.10 10.35 6.15 5.04 6.83 10.54 6.12 6.64 7.64 9.98 7.97 7.06 13.32 5.83 8.98 7.64 7.23 11 3.23 11.76 14.78 6.77 10.16 8 4.55 5.5 1 37.47 11.19 9.5 13 13.54 6.30 7.93 5 8.33 5.33 7.82 10.50% 7.52 11.20 9.39 5.65 9.91 5.25 8 8.50% 11.71 24.63 7.38 8.64 7.07 12.31 9.07 12.05 6.

583 3.383 3.204 2.730 3.204 2.806 43 2.729 3.501 3.478 4.583 3.253 2.992 3.383 3.499 2.123 2.429 5.94 4.69 4.Page 96 of 120 of Publication 946 15:26 .806 25 1.806 31 1.668 5.864 18 4.994 2.205 2.94 4.730 3.253 2.994 2.994 2.463 4.205 2.063 3.205 2.571 2.688% 4.252 2.805 46 0.855 4 6.523 3.806 34 2.125% 2.662 3.460 5.005 1.994 2.005 1.572 2.528 6.770 5 6.154 3.571 2.729 3.204 2.806 24 3.463 4.004 1.253 2.994 2.993 2.85 4.463 4.561 3.148 6.631 3.612 6.384 3.775 5.948 2.806 40 2.922 17 4.806 26 1.253 2.463 4.602 3.673 4.806 51 0.582 3.51 7.238 12 4.005 1.383 3.571 2.806 39 2.063 3.005 1.638 4.583 3.062 3.253 2.729 3.062 3.005 1.173 2.463 4.583 3.08 5.981 16 4.571 2.463 4.938 2.583 3.383 3.823 3.005 1.004 1.384 3.806 33 2.692 2.004 1.875% 2 7.078 3.596 2.004 1.383 3.583 3.730 3.687 6 5.261% 3.204 2.264 2.053 2.912 2.584 4.859 4.265 2.844 4.063 3.993 2.004 1.205 2.806 29 1.005 1.004 1.351 3.343 3.333 3.572 2.205 2.384 3.063 3.583 3.462 4.574 2.94 4.69 4.155 2.95 4.21% 4.571 2.69 4.384 3.399 3.273 4.806 47 1.658 5.571 2.307 11 4.253 2.806 21 1.58 5.91 6.730 3.64 6.993 2.583 3.729 3.806 27 2.384 3.101 1.062 3.279 5.677 Page 96 Publication 946 (2009) .984 3.730 3.806 49 1.384 3.452 9 4.426 3.944 3 7.062 3.949 4.281 4.806 38 2.849 3.213 2.806 44 2.383 3.90 7. MUST be removed before printing.384 3.812 2.797 4.729 3.006 5.994 2.583 3.005 1.325 4.004 1.005 1.406 2.204 2.993 2.393 3.586 4.042 15 4.004 1.69 4.994 2.994 2.083 5.663 2.806 20 1.697 2.583 3.253 2.004 1.252 2.721 3.205 2.900 4.153 3.994 2.845 2.253 2.525 3.489 2.679% 2.730 3.371 3.462 4.69 4.752 1.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.571 2.253 2.062 3.945 3.522 3.40 5.806 41 0.383 3.571 2.98 4.95 4.463 4.961 3.95 4.462 4.205 2.252 2.808 19 1.639 4.571 2.205 3.583 3.106 14 4.050 2.253 2.204 2.204 2.004 1.325 2.806 23 1.805 50 1.383 3.69 4.802 2.069 2.207 2.806 30 2.171 3.69 4.238 4.253 2.76 4.233 4.463 4.69 4.005 1.572 2.253 2. ( Continued) Recovery periods in years Year 18 19 20 22 24 25 26.86 5.344% 2.572 2.583 3.389 4.253 2.95 4.729 3.993 2.572 2.572 2.151 4.729 3.005 1.205 2.080 3.116 5.248 2.631 5.806 28 3.083% 1.805 48 1.5 28 30 35 40 45 50 1 5.005 1.69 4.994 2.37 6.528 8 4.729 3.252 2.103 4.932 3.004 1.994 2.253 2.69 4.755 2.384 3.69 4. Table A-16.005 1.583 3.850 2.745 3.748 3.063 3.509 4.93% 4.906% 3.806 37 2.063 3.253 2.202 2.993 2.063 3.463 4.252 2.576 2.205 2.11 4.315 2.349 4.583 3.94 4.253 2.171 13 4.005 1.571 2.583 3.24 6.348% 3.571 2.572 2.657 3.69 4.253 2.994 2.571 2.841 4.94 4.405 2.253 2.063 3.729 3.253 2.178 4.143 2.253 2.004 1.94 4.606 7 5.205 2.062 3.252 2.806 35 2.806 32 2.806 36 0.806 45 2.005 1.993 2.005 1.95 4.572 2.821 3.571 2.921 4.383 3.806 22 4.750% 3.005 1.025 2.378 10 4.571 2.031 1.964 2.538% 3.806 42 2.

77 9.20 7.00 5.47 5.63 7.90 7 8.78 10.20 7.10 12.26 7.39 5.94 12.45 5.33 8.38 5.33 7.82 3.71 18.18 10 1.75% 3.69 5.05 8.90 5.55 5.64 7.5 11 11.64 8.18 9.98 7.46 9.33% 4.31 5.65 9.34 7.38 5.10 12.17 6 10.28 9.5 4 5 6 6.09 5 8.25% 9.35 7.48 10.33 7.55 5.5 14 15 16 16.66 8.75% 16.95 5.55 6.5 9 9.11% 4.28 11.32 5.33 7.59 11.43 10.31 5.39 5.78 10.93 9.48 14.99 16.33 7.50 40.5 8 8.08 9.5 3 3.64 7.32 5.06 13.90 5.62 22.79 6.03 9.58 7.47 8.54 6.17 9 1.00 22.5 1 22.50% 7.48 10.55 5.67 3.95 4.63 7.02 12.05 6.5 12 12.55 5.79 10.39 5.69% 4.81 7.04 10.23 13 0.07% 14.38% 8.75 8.46 16.05 6.11 12.63 35.12 8.04 6.35 14.50 17.80 7.17 9.22 18 0.36% 5.31 6.18 9.05 6.79 6.48 10.31 5.46 11.27 Publication 946 (2009) Page 97 .34 7.34 7.43 7.31% 2 14.73 6.41 11.38 5.18 10.54 6.60 6.85 3 27.34 7.33 7.39 5.62% 6.96 7.57 20.17% 4.57 14.53 5 2.51 4 3.55 5.65% 8.82 12.27 11.97 7.05 6.44 6.51 11.63 9.31 5.75 8.50% 4.78 8.34 7.79 16.80 14.06 13.66 21.32 7.02% 3.03% 6.55 5.75 8.57 20.57 13.79 6.38 8 8.55 5.31 5.38 5.63 7.27 11.65 9.10 6.98 7.63 7.55 5.39 5.23 12 1.18 10.67 11.17 7 8.64 9.90 5.64 7.23 17 3.74 10.55 5.32 5.65 9.28 11.90 5.63 7.89% 4.75 8.17 11 1.79 6.02 6.55 6.03 11.5 17 1 5.32 7.08 19.18 9.64 9.52 12.41% 3. 150% Declining Balance Method Mid-Quarter Convention Property Placed in Service in Third Quarter Recovery periods in years Year 2.79 6.05 6.92% 2 46.79 10.23 9.54 6.85 10.55 6.25% 5.56 25.23 9 8.05 6.43 16.17 9.91 5.32 7.97 32. MUST be removed before printing.46 18.48 15.64 9.06% 11.74 8.80 6.91 5.79 6.65 10.79 6.06 13.44 15.88 4.16 13.27 6.56 14.05 6.78 4 10. Table A-17.54 6.97 7.78 10.55 5.15 Table A-17.63 7.97 7.23 15 0.38 5.63% 5.10 12.18 8.63 14.18 8 1.23 11 5.04 4.48 7.98 7.55 6.5 13 13.23 26.91 11.64 16.63 22.16 7.84 11.5 7 7.79 13.74 8.22 14 0.16 13.23 10 8.50% 18.04% 7.52% 3.97 7.Page 97 of 120 of Publication 946 15:26 .47 6 8. ( Continued) Recovery periods in years Year 10 10.22 15.54 6.22 16 3.48 10.38 9.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.53 3 12.41 8.88 8.51 8.65 6.91 5.25 6.90 5.97 7.91 5.

970 2.607 3.242 2.584 3.344% 2.029 4.07 7.005 1.69 4.729 3.539 3.005 1.383 3.966 3 7.996 3.250% 2.729 3.205 2.103 2.005 1.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.004 1.253 2.584 3.994 2.70 4.571 2.005 1.375 5.936 4.337 2.571 2.005 1.729 3.996 16 4.064 3.730 3.95 4.048 1.571 2.806 43 2.205 2.450 4.205 2.806 25 2.94 4.973 2.93 4.173 2.607% 1.644 6.349 4.005 1.182 4.513 5.805 38 2.005 1.253 2.584 3.994 2.240 3.253 2.004 1.584 3.571 3.571 2.69 4.460 4.584 3.064 3.652 4.191 5.878 18 4.205 2.523 2.806 23 2.064 3.69 4.584 3.698 3.994 2.005 1.730 3.806 22 4.571 2.877 4 6.004 1.70 4.571 2.806 21 2.076 2.661 4.621 2.237 5.94 4.046 3.994 2.005 1.730 3.253 2.940 2.993 2.566 4.065 3.806 47 1.408 2.128 Page 98 Publication 946 (2009) .993 2.460 4.460 4.806 35 2.585 3.69 4.5 28 30 35 40 45 50 1 3.769 5.383 3.460 4.69 4.212 3.78 6.69 4.253 2.426 2.863 3.822 19 3.253 2.227 4.70 5.Page 98 of 120 of Publication 946 15:26 .267 2.937 17 4.993 2.994 2.004 1.253 1.993 2.707 6 5.805 50 1.004 1.50 6.289 6.388 4.875% 1.009% 1.931 4.23 5.461 4. Table A-17.584 3.064 3.255 2.95 4.805 46 1.968 4.297 2.004 1.460 4.557% 2.571 2.304 4.806 32 2.064 3.773 3.250 4.730 3.253 2.584 3.09 4.255 12 4.729 3.806 24 3.584 3.206 2.806 41 1.806 34 2.383 3.584 3.579 4.125% 2 8.054 2.460 4.250% 1.69 4.667 4.94 4.383 3.994 2.70 4.206 2.460 4.005 1.906 3.605 2.94 4.383 3.253 2.064 3.461 4.005 1.004 1.584 3.571 2.571 2.571 2.192 2.547 8 4.383 3.325 11 4.584 3.065 3.003 2.118 1.205 2.540 3.702 4.476 3.871 2.036 3.803 3.788 4.626 7 5.69 4.205 2.064 3.383 3.993 2.206 2.005 1.571 2.994 2.004 1.005 1.064 3.064 3.730 3.806 30 2.796 3.004 1.064 3.993 2.182 2.065 3.806 37 2.805 42 2.806 51 1.571 2.383 3.723 2.205 2.730 3.721 2.805 40 2.994 2.986 3.66 7.009 4.806 28 0.22 5.004 1.994 2.460 4.994 2.13% 2.791 5 6.005 1.806 45 2.95 4.69 4.004 1.571 2.585 3.379 3.383 3.571 2.205 2.428 2.596 2.253 2.005 1.510 2.253 2.205 2.217 3.253 2.206 2.715 4.140 3.397 10 4.697 3.122 14 4.806 49 1.383 3.843 2.336 5.205 3.829 2.253 2.253 2.364 5.383 3.253 2.292 2.253 2.064 3.806 29 2.253 2.571 2.806 20 2.730 3.383 3.94 4.729 3.571 2.345 2.51 5.253 2.686 2.207 3.187 13 4.806 31 1.420 4.729 3.058 15 4.331 3.94 4.96% 2.253 2.426 3.571 2.906 4.425 3.253 2.885 3.865 5.423 3.585 3.994 2.005 1.092 2.144 4.607 2.382 3.382 3.729 3. MUST be removed before printing.005 1.778 2.571 2.123% 2.805 44 2.253 2.40 7.99 5.08 4.104 5.254 2.206 2.206 2.383 3.254 2.253 2.742 6.06 6.540 5.571 2.685 3.805 48 1.584 3.461 4.874 2.994 2.559 3.428 3.571 2.806 36 1. ( Continued) Recovery periods in years Year 18 19 20 22 24 25 26.205 2.729 3.806 39 2.769 5.406% 1.813% 2.95 4.383 3.471 9 4.383 3.806 26 2.461 4.005 1.871 4.571 2.94 4.253 2.206 2.387 3.994 2.253 2.571 2.806 33 2.253 2.806 27 3.722 5.

08% 1.06 13.86 6.75 6.31 7.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.47 19.27 8.97% 2 55.78 6.33 7.16 9.31 5.17 7.17% 1.17 9 4.73 3 12.43 8.16 10.16 17.50 18.26 12.44 Table A-18.38 5.58 11.09 6.03 13.50 8 8.88% 2.68% 2.63 10.79% 1.39% 1. Table A-18.72 8.05 6.74 10.91 10.72 8.5 13 13.55 5.17 9.53 6.09 21.33 7.40 8.81 8.54 6.17 8 4.50% 1.22 13 2.32 7.16 9.05 6.25 6.10 12.89 8.23 12 3.50 46.40 10.61 7.19 11.69% 3.83 12.87 12.53 6.87 22.51 12.90 5.91 5.54 5.60 14.5 17 1 1.55 5.62 7.85 19.82 11.18 22.56 35.00 23.32 7.96 7.5 12 12.96 6.25 5 9.64 9.30 5.50% 2.25% 1.18 11 3.75% 3.17 7 12.78 6.54 6.13% 2.38 5.52 5.78 6.33 7.72 6.23 10 8.28 9.23 16 5.00 9.18 11. MUST be removed before printing.31 7.95 7.00 7.78 6.32 7.91 5.34% 2.10 12.37 5.50% 6.87 7.72 8.31 5.90 5.99 8.58 5.88 14.38 5.37 5.40 14.03 7 8.37 10.43 7.26 16.96 10.53 6.38 5.88 40.06 7.18 11.54 6.44 8.5 8 8.05 6.60 13.43 17.96 7.90 8.56% 1.57 9.88% 1.21% 2.5 7 7.95 7.63 7.41 14.33 10.78 6.42 9.5 11 11.37 16.90 6.86 16. 150% Declining Balance Method Mid-Quarter Convention Property Placed in Service in Fourth Quarter Recovery periods in years Year 2.10 12.74 9.33 7.31 10.22 15 2.16 9.06 13.53 6.77 10.94 6.38 5. ( Continued) Recovery periods in years Year 10 10.55 5.41 10.32 15.41 7.Page 99 of 120 of Publication 946 15:26 .38 5.09 11.20 6.40 10.71 8.32 7.66 11.96 7.5 9 9.23 14 2.63 8.62 7.84 6.5 4 5 6 6.05 6.30 5.48 12.25% 5.70 9.65 9.53 6.41 10.91 25.23 18 2.39 15.04 8.06 13.05 6.52 7.54 5.57 Publication 946 (2009) Page 99 .85 5.5 14 15 16 16.98 5 8.54 5.90 5.63 7.34 20.74 28.70 11.78 6.78 6.14% 1.5 3 3.75 10.95 7.31 11.72 8.10% 2 14.03 11.05 6.33 7.88 24.65 9.63 8.88 9.03 4 10.17 10 3.44 9.31 5.48 3 26.91 5.38 5.02 4.16 9.5 1 7.63 7.54 5.06 9.90 5.83 8.44% 1.31 5.64 5.31 5.24 8.12 6.63 7.70% 1.22 17 4.40 12.14 6.96 7.74 10.54 5.41 10.22 11 7.21 18.48 6.66 8.96 4 10.65 9.90 5.36% 4.45 5.44 8.38 5.35 14.21 13.41 10.31 13.24 16.32 7.64 9.31 7.04 6.22 22.90 5.54 5.72 14.69 7.31 17.22 9 8.15 8.62 7.61 6 8.66 5.63% 1.75 10.31 5.34% 1.24 6 14.17 5.41 20.

204 2.625% 0.729 3.63 5.205 2.459 4.994 2.729 3.633 2.994 2.754 1.806 42 2.062 3.Page 100 of 120 of Publication 946 15:26 .872 6.124 3.005 1.729 3.630 3.905 3.582 3.005 1.005 1.730 3.458 4.110 4.69 4.382 3.253 2.806 32 2.253 2.582 3.95 4.93 6.382 3.708% 0.571 2.805 29 2.893 18 4.005 1.424 3.994 2.319 2.805 47 1.137 2.571 2.383 3.570 2.061 3.582 3.469 5.870 5.570 2.94 4.730 3.136 2.005 1.570 2.994 2.571 2.458 4.20 6.253 2.271 2.252 2.69 4.005 1.805 31 2.062 3.94 4.806 30 2.582 3.806 20 4.570 2.805 33 2.253 2.204 2.260 3.458 4.382 3.005 1.242 3.946 4.806 22 4.749 2.571 2.802 2.253 2.005 1.262 5.806 48 1.382 3.458 4.68 4.94 4.670% 0.998 2.253 2.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.719 4.582 3.447 2.253 2.526 3.69 4.005 1.005 1.804 2.204 2.452 4.269 4.806 36 2.458 4.994 2.33 4.321 4.646 7 5.708 2.10 4.511 4.061 3.571 2.204 2.751 2.649 4.469% 0.34 5.738 3.047 3.993 2.253 2.750% 0.201 5.592 3.458 4.578 3.653 3.253 2.25 7.760 6.806 24 3.994 2.82 7.204 2.302 5.357 5.383 3.805 27 3.730 3.619 2.531 2.004 1.899 4 6.203 2.004 1.806 34 2.253 2.955 5.065 1.69 4.252 2.728 6 5.583 3.732 3.95 4.004 1.278 2.570 2.582 3.971 2.458 3.200 4.547 2.205 2.342 11 4.062 3.263 3.536% 0.268 3.806 46 1.5 28 30 35 40 45 50 1 1.003 2.69 4.618 2.730 3.074 15 4.458 4.805 35 2.63 6.989 3 7.994 2.69 4.570 2.968 2.852% 0.383 3.582 3.582 3.570 2.491 4.002 4.993 2.005 1.062 3.962 3.812 5 6.994 2.994 2.253 2.856 2.69 4.061 3.947 3.95 4.041 3.619 3.94 4.806 40 2.004 1.994 2.730 3.806 28 1.425 4. Table A-18.729 3.252 2.252 2.210 4.062 3.005 1.994 2.383 3.375% 2 8.805 45 2.005 1.004 1.430 6.383 3.286 2.646 2.993 2.108 3.204 13 4.450 5.82 5.730 3.451 2.99% 0.836 19 4.296 3.209 2.135 3.805 49 1.249 2.204 2.061 3.252 2.036 4.567 8 4. MUST be removed before printing.204 2.582 3.570 2.582 3.253 2.062 3.382 3.94 4.938% 0.806 50 1.738 3.253 2.993 2.880 5.766 4.004 1.806 21 3.204 2.56 7.383 3.383 3.204 2.210 2.370 4.571 2.571 2.383 3.205 2.729 3.35 6.806 26 3.94 4.458 4.011 16 4.845 3.898 2.439 5.415 10 4.730 3.299 5.11 5.874 2.490 9 4.68 4.204 2.484 3.571 2.138 14 4.583 3.749 4.272 12 4.95 4.04% 0.805 43 2.814 5.470 3.805 39 2.005 1.365 2.005 1.004 1.204 2.005 1.993 2.458 4.654 4.031 4.382 3.781% 0.901 4.729 3.004 1.598 5.951 17 4.458 4.77 4.383 3.790 4.005 1.263 3.583 3.132 2.730 3.204 2.382 3.720 4.080 3.18 5.359 2.252 2.994 2.005 1.806 44 2.862 3.061 3.004 1.583 3.382 3.328 2.570 2.993 2.570 2.102 2.459 4.426 3.805 25 3.252 2.570 2.69 4.806 23 3.204 2.571 2.253 2. ( Continued) Recovery periods in years Year 18 19 20 22 24 25 26.097 4.805 41 1.062 3.580 Page 100 Publication 946 (2009) .729 3.253 2.253 2.571 2.083 2.824 3.253 2.571 2.583 3.805 51 1.620 5.806 38 2.062 3.004 1.94 4.417% 0.969 4.994 2.204 2.252 2.805 37 2.554 3.005 1.69 4.

8% 41.0% 22.9% –3.4% –12.2% Table A-20.0% 15.1% –12.2% 40.1% –27.3% 23.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.8% 31.1% –33.4% 37.4% –12.5% Publication 946 (2009) Page 101 .7% 31.4% –12.1% –27.4% –12.3% 33.6% –23.3% –26.0% More than 10 years 0.1% –7.0% 15.4% –12. Amount A Percentages First Tax Year During Lease in Which Recovery Period Business Use is 50% or Less of Property Under ADS 1 2 3 4 5 6 7 8 9 10 11 12 & Later Less than 7 years 2.7% 12.7% 12.5% 29.8% –17.0% 10.7% –19.7% 12. RATES TO FIGURE INCLUSION AMOUNTS FOR LEASED LISTED PROPERTY Table A-19.8% –20.6% 30.6% 40. MUST be removed before printing.7% –12.0% 10.7% 12.3% 35.1% 26.9% –25.7% 12.7% –14.7% –14.6% –29.6% –1. Amount B Percentages First Tax Year During Lease in Which Recovery Period Business Use is 50% or Less of Property Under ADS 1 2 3 4 5 6 7 8 9 10 11 12 & Later Less than 7 years 0.4% –12.4% –12.6% –16.4% 7 to 10 years 3.2% 12.2% 20.7% –25.0% 15.8% –27.Page 101 of 120 of Publication 946 15:26 .9% –31.7% 12.7% –14.0% 9.0% 21.8% 12.4% 39.2% –27.7% 12.8% 32.5% 25.1% –32.2% –19.7% More than 10 years 6.7% 7 to 10 years 0.8% –35.

52 15.69 7.37 40.50% 4.20 5 9.78 23.88 9.87 9.17% 2 27.50 12.25% 18.44 21.50 12. MUST be removed before printing.50 87.50 87. 6-Year Qualified Indian Reservation Property Half-Year and Mid-Quarter Conventions Half-Year Year Q-4 Q-4 Q-4 Q-4 Convention 1 16.19 20.35 10.88 9.81 10.50 Table A-22.70 6.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.94 Table A-23.00% 43.50 87.44 4 12.50% 12.96 14.17% 20.50 87.88 9.75% 6.73 12.64 Page 102 Publication 946 (2009) .49 11.Page 102 of 120 of Publication 946 15:26 .59 19.75% 31.50 12.63 46.88 9.87 3 18.88 7 4.50% 12.25 1. Qualified Indian Reservation Property Tables Table A-21.94 1. 2-Year Qualified Indian Reservation Property Half-Year and Mid-Quarter Conventions Half-Year Year Q-4 Q-4 Q-4 Q-4 Convention 1 12.06 17.83% 12.13 34.67% 29.50 12.87 9.74 17. 4-Year Qualified Indian Reservation Property Half-Year and Mid-Quarter Conventions Half-Year Year Q-4 Q-4 Q-4 Q-4 Convention 1 25.50% 12.87 6 9.50 5 6.50 28.61 26.31 23.88 9.50% 2 87.56 4.39 29.17 8.25% 2 37.30 4 12.94 3 18.75 14.23 3.17 31.88 9.50% 12.

545 18 4.977% 4.546 4. MUST be removed before printing.546 4.546 7 4.546 4.545 4.220% 2.545 4.545 4.545 4.546 4.545 4.546 4.546 4.546 4.545 4.546 4.545 4.545 4.545 4.546 4.546 4.545 4. Table A-24.546 4.545 4.546 4.546 4.546 4.546 4.546 4.545 4.545 4.545 4.545 4.545 4.546 4.545 4.545 4.546 4.546 9 4.545 4.545 4.545 4.545 4.220% 3.356% 3.545 4.546 4.545 4.546 4.545 4.546 4.705% 2.568% 0.546 4.546 4.545 4.546 4.545 4.546 15 4.546 4.545 14 4.545 4.545 4.545 4.546 4.545 4.545 4.545 4.546 4.545 4.545 4.545 4.545 4.545 4.545 4.545 4.546 4.545 4.546 4.545 20 4.545 4.326% 1.545 4.546 4.545 4.546 4.546 4.545 4.545 4.545 4.Page 103 of 120 of Publication 946 15:26 .545 4.545 4.546 4.546 4.545 4.546 4.546 4.545 4.546 4.546 4.462% 2.545 4.545 4.545 4.545 4.545 4.546 4.546 4.546 4.546 4.546 4.545 4.545 4.568% 0.546 11 4.545 4.545 10 4.546 4.545 4.545 4.545 4.546 4.546 4.546 4.546 5 4.546 4.545 4.546 4.545 4.947% 1.546 4.546 4.546 17 4.545 4.546 4.546 4.546 4.546 4.545 4.545 4.545 4.546 19 4.083% 2.545 4.545 4 4.546 4.546 4.546 4.546 13 4.546 4.546 4.546 4.546 4.841% 3.545 4.546 4.545 4.545 4. Qualified Nonresidential Real Indian Reservation Property Mid-Month Convention Straight Line—22 Years Month property placed in service Year 1 2 3 4 5 6 7 8 9 10 11 12 1 4.546 4.546 4.545 4.546 4.545 4.545 4.546 4.546 4.545 4.545 4.546 4.545 4.546 4.546 4.545 4.546 4.545 4.546 4.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.545 4.545 4.545 4.546 4.189% 2-3 4.546 4.545 4.546 4.546 4.841% 2.545 4.545 4.545 4.546 4.546 4.546 4.947% 0.462% 2.546 4.545 4.545 4.545 4.545 4.546 21 4.705% 1.546 4.545 4.546 4.545 4.545 4.189% 0.545 4.545 4.545 4.546 4.546 4.083% 1.546 4.598% 3.326% 0.546 4.545 22 4.546 4.545 4.546 4.546 4.546 23 0.546 4.545 4.545 4.546 4.545 4.546 4.546 4.546 4.545 4.546 4.545 4.546 4.546 4.545 12 4.356% Publication 946 (2009) Page 103 .545 4.546 4.545 4.545 6 4.545 4.546 4.545 4.545 16 4.545 4.546 4.977% 3.545 8 4.545 4.546 4.546 4.546 4.545 4.545 4.546 4.598% 3.546 4.545 4.545 4.545 4.

If Richard only looked at As Noted.3. 20-year class life and a 15-year recov- property. governmen. If he Used In All Business Activities. During the year. cash registers are not listed in Table under a leasing arrangement to a cated. or foreign person or entity 00. He then checks Table B-2 and 9-year class life and a 5-year recovery (other than a partnership). read the text (if improvements for gas utility for use in her business. 2010. desk. also check Table placed in service before January Example 3. products. the recovery period Property not in either table. If she elects to use the under asset class 26. ery period shown in that table. Appendix B — Table of Class Lives and Recovery Periods The Table of Class Lives and Recov.0 because lease term for any property leased land on which his paper plant is lo.1. If he elects to use before January 1. he would select asset class in all business activities. check Table B-2 to find ery period under this asset class be- the activity in which the property is cause it specifically includes land ■ Page 104 Publication 946 (2009) . under asset class 30. For the cash regis- cannot be less than 125 percent of the made substantial improvements to the ter. The recovery period for ADS per manufacturer. If it is. Check Table B-1 for a description of the property. He uses the recov.Page 104 of 120 of Publication 946 15:26 . Pam Martin owns a re- B-2 to find the activity in which the 1. describes assets used only property generally has a recovery pe- in certain activities. B-2 to find Certain Property for Which rectly use a recovery period of 15 ciable Assets Used In The Following Recovery Periods Assigned. land improvements under asset class business. This asset class does not is specifically excluded from that asset specifically list office furniture or a class. Land Improvements. 2005. retail trade. The land improvements have a recovery period of your depreciable • Any qualified leasehold improve. which in- activity is described but the property ity for sale and placed in service cludes assets used in wholesale and either is not specifically included in or after April 11. provements. improvements. period for GDS. If the activity is • Initial clearing and grading land purchased a desk and a cash register described in Table B-2. If the activity property used in the transmission store. Manufacture of Rubber Products. and incor- Table B-1. riod of 7 years for GDS or 12 years for Example 2. Sam uses the ity in that table. the recovery period is 9 Table B-2. he period is 10 years. then use the recovery period • Natural gas gathering and distri. If it is de. She then checks umn of Table B-2 following the • Certain electric transmission Table B-2 and finds her activity.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.1. tail clothing store.3. see Appendix A. Specific Depreciable Assets following the description. she uses asset class 57.3. During the year. classes in Table B-1. the recovery a lease. being used and use the recovery pe.11 for the in Table B-1. ADS. producing rubber listed in Table B-1 you use the recov. See Which Property Class Ap. 2010. Richard Green is a pa. rubber products.3. If the is 13 years. • Any qualified restaurant property scribed in Table B-1. The second section. The cash register has a tal unit. Activities. Cash regis- asset class. She looks back at Table shown in the appropriate column fol.11. Table B-1. land improvements under asset class and B-2 to find the correct recovery • Residential rental property and 00. The desk has a 10-year class life and a 7-year recovery period for GDS. Except elects to use ADS. Table B-1 and finds office furniture property is specifically included in that mission and distribution plants. Tax-exempt use property subject to Example 1. she property is being used.1. He then checks Table B-2 and period. he plies Under GDS and Which Recovery made substantial improvements to the Period Applies in chapter 4 for the How To Use the Tables class lives or the recovery periods for land on which his rubber plant is lo- cated. Distribu- is not described in Table B-2 or if the at 69 or more kilovolts of electric. you use the plex placed in service before finds that it does not include land im- recovery period listed under the activ. Chart 2). ever. During the year. tive Trades and Services. 2005. It is shown as Ta. if the property is nonresidential real property (also finds his activity. the recovery period is 20 years. Depre. generally lists assets used activity or the property is not included Table B-1. use the recovery ters are not listed in any of the asset period shown in the appropriate col. ADS. 2010. MUST be removed before printing. Therefore. Sam Plower produces ble B-2. check the end of Table 00. recovery period under asset class 00. bution lines placed in service af- lowing the description of the property ter April 11. retail description of the activity. finds his activity. He checks Table B-1 and finds B-1 but it is an asset used in her retail tax-exempt organization. Reading the headings and descrip- listed in Table B-2 under the type of • A motorsport entertainment com. paper manufacturing. tions under asset class 30. This years for GDS or 20 years for ADS. If she elects to use ADS. if the property is specifically • Qualified rent-to-own property. He checks Table B-1 and finds You will need to look at both Table B-1 GDS and ADS for the following. B-1 and uses asset class 00. If the property is not listed of Pulp and Paper. The land improve- ery Periods has two sections. Sam activity in which it is used. 7-year recovery period for GDS. The first riod shown in the appropriate column ments have a 13-year class life and a section. Use the tables in the order shown below to determine the • Any retail motor fuels outlet. cash register. Manufacture ADS method. ment property placed in service ery period for GDS. She checks any) under the title to determine if the property and electric utility trans. How. It is shown as in either table.0. years. under asset class 57. January 1. under asset class 00. • Any water utility property. Generally. in Table B-1.

B.000 pounds) 4 5 5 00. fences. plotters. magnetic tape feeds. except those used 18 10 18 in marine construction 00. and supplying the results of these processes with or without human intervention. except those used in commercial or contract carrying 6 5 6 of passengers or freight. safes.Width = 44 picas Depth = 58 picas Table B-1.11 Office Furniture. calculators. Assets used to generate and/or distribute electricity or steam of the type described above. and collators. disc packs. and communications equipment. electronic desk calculators. used by the taxpayer in its industrial manufacturing process or plant activity. landscaping shrubbery. Information systems are defined as: 1) Computers: A computer is a programmable electronically activated device capable of accepting information.21 Airplanes (airframes and engines). disc files. Peripheral equipment may be used on-line or off-line.22 Automobiles. MUST be removed before printing.48-1(e) of the regulations. etc. 00.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.23 Buses 9 5 9 00. arithmetic. bridges. 00. files. data entry devices. canals.. and buildings and structural components as defined in section 1.242 Heavy General Purpose Trucks: Includes heavy general purpose trucks. An example of an excluded steam and chemical recovery boiler system is that used in the pulp and paper manufacturing industry. computers used primarily for process or production control. 00. wharves and docks. Examples of such assets might include sidewalks. but are included in the appropriate manufacturing equipment classes elsewhere specified. Excludes public utility initial clearing and grading land improvements as specified in Rev. Rul. Taxis 3 5 5 00.4 Industrial Steam and Electric Generation and/or Distribution Systems: Includes assets. and automating distributive trades and services such as point of sale (POS) computer systems. tape drives. Does not incude equipment that is an integral part of other capital equipment that is included in other classes of economic activity. disc drives. drainage facilities. except those owned by railroad transportation 15 7 15 companies 00. applying prescribed processes to the information. 72-403. terminals. whether such assets are section 1245 property or 1250 property. Does not include buildings and structural components as defined in section 1. visual image projector tubes. An example of an excluded steam and chemical recovery boiler system is that used in the pulp and paper manufacturing equipment classes elsewhere specified. and all helicopters (airframes and engines) 00. provided such improvements are depreciable.13 Data Handling Equipment.241 Light General Purpose Trucks: Includes trucks for use over the road (actual weight less than 13. but of lesser rated capacity. Does not include land improvements that are explicitly included in any other class. and control capabilities.Page 105 of 120 of Publication 946 15:26 . Barges. providing 22 15 22 such assets are depreciable. Publication 946 (2009) Page 105 . their retrieval and analysis. logic.12 Information Systems: Includes computers and their peripheral equipment used in administering normal business 6 5 5 transactions and the maintenance of business records. waterways. i. Does not include communications equipment that is included in other classes.13. which may utilize steam produced by a waste reduction and resource recovery plant. card sorters. 00. or radio and television transmitting towers. concrete ready mix-trucks. Steam and chemical recovery boiler systems used for the recovery and regeneration of chemicals used in manufacturing.. switching. copiers.28 Vessels. It usually consists of a central processing unit containing extensive storage.27 Trailers and Trailer-Mounted Containers 6 5 6 00. Excluded from this category are adding machines. and 6 5 6 duplicating equipment. sewers (not including municipal sewers in Class 51).26 Tractor Units for Use Over-The-Road 4 3 4 00.3 Land Improvements: Includes improvements directly to or added to land. card punches. keypunches. channeling. and Similar Water Transportation Equipment.48-1(e) of the regulations. 1972-2 C. roads. optical character readers.25 Railroad Cars and Locomotives.500 pounds per hour for use by the taxpayer in its industrial manufacturing process or plant activity and not ordinarily available for sale to others. high speed printers. and ore trucks. tape cassettes. Fixtures. Table of Class Lives and Recovery Periods Recovery Periods (in years) Asset Class Life GDS class Description of assets included (in years) (MACRS) ADS SPECIFIC DEPRECIABLE ASSETS USED IN ALL BUSINESS ACTIVITIES. for use 6 5 6 over the road (actual unloaded weight 13. Nonlimiting examples are: Card readers. EXCEPT AS NOTED: 00. mass storage units. adding and accounting machines. 102. 2) Peripheral equipment consists of the auxiliary machines which are designed to be placed under control of the central processing unit. paper tape equipment. Includes such 10 7 10 assets as desks. with specifically related distribution and return systems are not included but are included in appropriate manufacturing equipment classes elsewhere specified. and other equipment described in class 00. except Computers: Includes only typewriters. with rated capacity in excess of that described above. Also. Also includes electric generating and steam distribution assets. whether such improvements are section 20 15 20 1245 property or section 1250 property.e. Tugs. and Equipment: Includes furniture and fixtures that are not a structural component of a building. are not included. teleprinters. EPS Filename: 13081f31 Size . used in the production and/or distribution of electricity with rated total capacity in excess of 500 Kilowatts and/or assets used in the production and/or distribution of steam with rated total capacity in excess of 12. does not include equipment of a kind used primarily for amusement or entertainment of the user.000 pounds or more) 00.

cereals. and fur farms. *** 7 if property was placed in service before 1989.221.24 Sheep and Goats.4. 12 7 12 20.222** 01.221 Any breeding or work horse that is 12 years old or less at the time it is placed in service** 10 7 10 01.3 and 20.224. the performance of agriculture.1 Drilling of Oil and Gas Wells: Includes assets used in the drilling of onshore oil and gas wells and the provision of 6 5 6 geophysical and other exploration services.225 Any horse not described in classes 01. 13. special trade. Does not include general purpose small tools such as wrenches and drills. nurseries.5 5 7. and trees. or finished sugar from sugar cane 18 10 18 or sugar beets.224 * 7 12 01. and 01.23). and other general purpose equipment such as conveyors. and in Class 49.225 are assigned recovery periods but have no class lives. grain bins. greenhouses. towboats and crewboats.3 Manufacture of Vegetable Oils and Vegetable Oil Products: Includes assets used in the production of oil from vegetable materials and the manufacture of 18 10 18 related vegetable oil products. Does not include assets used in the performance of any of these activities and services by integrated petroleum and natural gas producers for their own account. 10 7 10 that are used in the production of crops or plants. and other grain and 17 10 17 grain mill products. and materials handling devices.25). plugging and abandoning of wells and cementing or perforating well casings. and clay) and the milling. and fences but no other land improvements.3 Farm buildings except structures included in Class 01.Width = 44 picas Depth = 58 picas Table B-2.5 other drilling vessels. fractionation. Also includes petroleum and natural gas offshore transportation facilities used by producers and others consisting of platforms (other than drilling platforms classified in Class 13. cranberry bogs. vines. and liquid holding or storage facilities (other than those classified in Class 49.1 Manufacture of Grain and Grain Mill Products: Includes assets used in the production of flours. barges. platforms. both hand and power-driven. 20. real estate subdividers and developers. EPS Filename: 13081f32 Size . self-propelled and 7. and horticultural services. 13. compression or pumping equipment.5 Manufacture of Food and Beverages—Special Handling Devices: Includes assets defined as specialized materials handling devices such as returnable pallets. Breeding 5 5 5 01.2 Manufacture of Sugar and Sugar Products: Includes assets used in the production of raw sugar.224 Any horse that is more than 12 years old at the time it is placed in service and that is * 3 12 neither a race horse nor a horse described in class 01. 01. stone. 13.0 Offshore Drilling: Includes assets used in offshore drilling for oil and gas such as floating.222. 20. Does not include support vessels. 20. operative and investment builders.0 Mining: Includes assets used in the mining and quarrying of metallic and nonmetallic minerals (including sand. sod farms. including gathering pipelines and related storage facilities. syrup. barges. MUST be removed before printing. beneficiation and other primary preparation of such materials. 10 7 10 gravel.223. Excludes oil and gas production assets. 20. livestock feeds. and the provision of such oil and gas field services as chemical treatment.3 Petroleum Refining: Includes assets used for the distillation.2 and 20. The assets used in the first onshore transshipment facility are also included and consist of separation equipment (used for separation of natural gas. apiaries.Page 106 of 120 of Publication 946 15:26 . Table of Class Lives and Recovery Periods Recovery Periods (in years) Asset Class Life GDS class Description of assets included (in years) (MACRS) ADS DEPRECIABLE ASSETS USED IN THE FOLLOWING ACTIVITIES: 01. and flaking trays used in activities as defined in classes 20. mushroom cellars. ** A horse is more than 2 (or 12) years old after the day that is 24 (or 144) months after its actual birthdate. 20. carts. heavy and marine 6 5 6 construction contractors. baskets.222 Any breeding or work horse that is more than 12 years old at the time it is placed in service** 10 3 10 01. Page 106 Publication 946 (2009) .11 Cotton Ginning Assets 12 7 12 01. 01.3.2. or 01. Breeding 3 3 3 01. liquids.1 Agriculture: Includes machinery and equipment. and fish processing equipment including boxes.223 Any race horse that is more than 2 years old at the time it is placed in service** * 3 12 01. 13. 20. 20. livestock. 01.1.4 25 20 25 01.1. 15.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. and catalytic cracking of crude petroleum 16 10 16 into gasoline and its other components. 01.23 Hogs. and others except railroads.0). * Property described in asset classes 01.223.0 Construction: Includes assets used in construction by general building. the operation of farm dairies.2 Exploration for and Production of Petroleum and Natural Gas Deposits: Includes assets used by petroleum and natural gas producers for drilling of wells and production of 14 7 14 petroleum and natural gas. and gathering and transmission lines to the first onshore transshipment facility. transfer equipment.4 Single purpose agricultural or horticultural structures (within the meaning of section 15 10*** 15 168(i)(13) of the Code) 10. animal husbandry. and drilling equipment and support vessels such as tenders.21 Cattle. 4 3 4 palletized containers. Breeding or Dairy 7 5 7 01.4 Manufacture of Other Food and Kindred Products: Includes assets used in the production of foods and beverages not included in classes 20.

dyeing. other than apparel. and sewing. which are used to manufacture nonwovens are elsewhere classified when located in the same plant in an integrated operation with man-made fiber producing assets. such as the preparation of carpet and fabric samples.2 Manufacture of Yarn. mattresses. 10 7 10 24. 23. by creasing.4 Manufacture of Wood Products. trimming. rugs.Width = 44 picas Depth = 58 picas Table B-2. Includes pollution control assets and all land improvements associated with the factory site or production process such as effluent ponds and canals. cutting.48-1(e)(1) of the regulations. printing. Table of Class Lives and Recovery Periods Recovery Periods (in years) Asset Class Life GDS class Description of assets included (in years) (MACRS) ADS 21. 15 7 15 snuff. dyeing. blending.3 Sawing of Dimensional Stock from Logs: Includes machinery and equipment in sawmills characterized by temporary foundations and a 6 5 6 lack. printing. folding. and assets used in the joining together of backing with carpet yarn or fabric. EPS Filename: 13081f33 Size . bleach processing. and furs. 24. flooring. fluid entanglement. rubber. and other 9 5 9 tufted products. 22. other textile products. and stuffer box texturing equipment and related highspeed twisters and winders. and other similar finishing processes. dyeing. with any rated capacity. and melt bonding. Assets. furniture. mats. chenille. as described above.1 Cutting of Timber: Includes logging machinery and equipment and roadbuilding equipment used by logging and 6 5 6 sawmill operators and pulp manufacturers for their own account. flocks.0 Manufacture of Apparel and Other Finished Products: Includes assets used in the production of clothing and fabricated textile products by the cutting 9 5 9 and sewing of woven fabrics. and packaging. The principal machines involved are falsetwist. bleaching. are elsewhere classified. drying. and Packaging of Textile Products and Manufacture of Medical and Dental Supplies: Includes assets used in the production of carpets. 24. and residue disposal equipment and facilities.2 Sawing of Dimensional Stock from Logs: Includes machinery and equipment installed in permanent or well established sawmills. threads. which are used to further process man-made fibers are elsewhere classified when located in the same plant in an integrated operation with man-made fiber producing assets. Assets. are elsewhere classified. of lumberhandling. used for the recovery and regeneration of chemicals used in manufacturing. or similar joining together processes (other than the production of scrim reinforced paper products and laminated paper products) such as the sewing and folding of hosiery and panty hose. beam-to-beam.3 Manufacture of Carpets and Dyeing. trimming. and other tobacco products. 22. man-made fibers. and Woven Fabric: Includes assets used in the production of spun yarns including the preparing. woven fabric. and fillings. Finishing. provided such improvements are depreciable but does not include buildings and structural components as defined in section 1. and the processing of textile mill waste to recover fibers. or in the manufacture of hardboard. braided fabric. and shoddies. and 11 7 11 twisting of fibers into yarns and threads. and industrial belts. and nonwovens. Publication 946 (2009) Page 107 .Page 107 of 120 of Publication 946 15:26 . bleaching. twisted jute for packaging. printing. as described above. 22. pulp mill processing. and 10 7 10 other wood products. and Furniture: Includes assets used in the production of plywood. printing. and other similar finishing processes. dyeing. Does not include assets used either in pulpwood logging. warping. web bonding. sheets.1 Manufacture of Knitted Goods: Includes assets used in the production of knitted and netted fabrics and lace.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. including the treatment of poles and timber. Thread. are elsewhere classified. Nonwoven fabrics are defined as fabrics (other than reinforced and laminated composites consisting of nonwovens and other products) manufactured by bonding natural and/or synthetic fibers and/or filaments by means of induced mechanical interlocking. hardboard.5 Manufacture of Nonwoven Fabrics: Includes assets used in the production of nonwoven fabrics.1 Manufacture of Pulp and Paper: Includes assets for pulp materials handling and storage. woven carpet backing. and cutting of fabrics to produce nonwoven products. Specifically includes assets used to make flocked and needle punched products other than carpets and rugs. draw. texturing. chemical adhesion. the preparation of yarns such as twisting. and other similar finishing processes. and other similar finishing processes. smoking and chewing tobacco. Includes assets used in washing. and cork.0 Manufacture of Tobacco and Tobacco Products: Includes assets used in the production of cigarettes.5 yarn preparation. paper and 13 7 13 paperboard manufacturing. Includes steam and chemical recovery boiler systems. and the creasing. and winding. cigars. veneers. and on-line finishing. batting. and hard surface floor covering such as tile. Such means include resin bonding. such as disposable diapers and sanitary products. drying. thermal or solvent reaction. oakum. Assets used in 7. forming. pads. and other textile goods.4 Manufacture of Textile Yarns: Includes assets used in the processing of yarns to impart bulk and/or stretch properties to the 8 5 8 yarn. 22. Assets used to manufacture man-made fibers and assets used in bleaching. printing. Assets used to manufacture man-made fibers and assets used in bleaching. padding. dyeing. or minimum amount. and assets used in texturing. or by combination thereof other than natural hydration bonding as ocurs with natural cellulose fibers. and similar finishing processes applied to textile fabrics. 10 7 10 wadding. scouring. cordage. felt goods including felt hats. Assets used to manufacture carpets. Assets used in the manufacture of nonwoven carpet backing.5 5 7. tire fabric. are elsewhere classified. 22. from new materials and from textile mill waste. bleaching. Also includes assets used in the production of medical and dental supplies other than drugs and medicines. 24. Includes assets used in the production and packaging of textile products. MUST be removed before printing. yarns. 26. spinning. but does not include assets used in the manufacture of apparel from rubber and leather. are elsewhere classified. the production of covered elastic yarn and thread.

such as bookbinding. and finished chemical products. balata. Does not include general purpose small tools such as wrenches and drills. Includes assets used to further process man-made fibers. 11 7 11 gravure. 30. Does not include assets used in the manufacture of basic plastics 11 7 11 materials nor the manufacture of phonograph records. plumbing fixtures. typesetting. Does not include assets used in the manufacture of lenses. 32. synthetic. or screen. rubber footwear. and in the recapping. and other general purpose equipment such as conveyors. or gutta siak.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. and rubber sundries. retreading. and rebuilding of tires.Width = 44 picas Depth = 58 picas Table B-2. and other general purpose equipment such as conveyors. used in activities as defined in class 30. 4 3 4 specialty containers. and by-products of natural gas production plants. Special tools are specifically designed for the production or processing of particular parts and have no significant utilitarian value and cannot be adapted to further or different use after changes or improvements are made in the model design of the particular part produced by the special tools. Table of Class Lives and Recovery Periods Recovery Periods (in years) Asset Class Life GDS class Description of assets included (in years) (MACRS) ADS 26. both power and hand-driven. the performance of services for the printing trade. lasts. pottery and related products. transfer equipment. Also includes assets used to manufacture photographic supplies. Does not include tire building drums and accessory parts and general purpose small tools such as wrenches and drills. butane.1 Manufacture of Glass Products: Includes assets used in the production of flat. sensitized photographic paper. paper bags. Publishing. dies. 3. and specialty transfer 2. and also includes assets used in manufacture of concrete and concrete products.21 Manufacture of Finished Plastic Products—Special Tools: Includes assets defined as special tools. gauges.5 and shipping devices such as steel racks to transport automotive glass. but does not include assets used in the 20 15 20 manufacture of concrete and concrete products nor in any mining or extraction process. books. patterns. Special tools are specifically designed for the production or processing of particular parts and have no significant utilitarian value and cannot be adapted to further or different use after changes or improvements are made in the model design of the particular part produced by the special tools. and luggage. and Allied Industries: Includes assets used in printing by one or more processes.5 to be used in further manufacture. pallets. 31.5 3 2. such as tires. glass containers.0 Manufacture of Chemicals and Allied Products: Includes assets used to manufacture basic organic and inorganic chemicals. and to manufacture nonwoven fabrics. such as jigs. such as footwear.1. mandrels. flooring. patterns. provided such land improvements are depreciable but does not include buildings and structural components as defined in section 1. or pressed products of glass. and electrotyping. currying. chemical products 9. heels and soles. and developing chemicals. the processing 11 7 11 of fur pelts.2 Manufacture of Converted Paper. 32. both hand and power-driven. and other general purpose equipment such as conveyors and transfer equipment. and pipe.5 5 9. such as 14 7 14 float and window glass. gutta percha. and the manufacture of finished leather products. and periodicals. photo-engraving.11 Manufacture of Glass Products—Special Tools: Includes assets defined as special tools such as molds.2 Manufacture of Cement: Includes assets used in the production of cement. Does not include assets used in the manufacture of finished rubber and plastic products or in the production of natural gas products. such as vitreous-china. such as effluent ponds and canals. and accessory parts such as rings and insert plates used in activities as defined in class 30. Does not include general purpose small tools such as wrenches and drills. Page 108 Publication 946 (2009) .11 Manufacture of Rubber Products—Special Tools and Devices: Includes assets defined as special tools. propane. transfer equipment. photographic paper. engraving. 27. and the publication of newspapers. used in activities as defined in class 32.1 Manufacture of Rubber Products: Includes assets used for the production of products from natural. Includes all land improvements associated with plant site or production processes. both hand and power-driven. and materials handling devices. apparel. 30. MUST be removed before printing. to manufacture plastic film.2. such as paper coated off the paper machine. lithography.2 Manufacture of Finished Plastic Products: Includes assets used in the manufacture of plastics products and the molding of primary plastics for the trade. and finishing of hides and skins. Paperboard. blown. EPS Filename: 13081f34 Size . or remanufacture of paper and pulp into converted 10 7 10 products. tubes. and tire molds. and Pulp Products: Includes assets used for modification. or reclaimed 14 7 14 rubber. when such assets are located in the same plant in an integrated operation with chemical products producing assets. 30. cartons and envelopes. and materials handling devices.48-1(e) of the regulations. dies.1. such as letter-press. molds.3 Manufacture of Other Stone and Clay Products: Includes assets used in the manufacture of products from materials in the form of clay and 15 7 15 stone. shells. such as jigs. 28. belting. Does not include assets used in any mining or extraction processes.0 Manufacture of Leather and Leather Products: Includes assets used in the tanning. 32.5 3 3. such as synthetic fibers and plastics materials. 30. pallets.0 Printing. paper boxes. such as brick. earthenware and ceramic insulating materials. patterns. tile.5 and specialty transfer and shipping devices. 32. fixtures.Page 108 of 120 of Publication 946 15:26 . Does not include assets used for manufacture of nonwovens that are elsewhere classified. glassware and fiberglass. such as film. mechanical rubber goods. molds.

13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. Does not include general small tools such as wrenches and drills.1 Any Semiconductor Manufacturing Equipment 5 5 5 Publication 946 (2009) Page 109 . jigs. all special tools and related land improvements. molds. Products. molds. forgings. and magnetic media devices. photographic equipment. wire. refining.0 Manufacture of Electrical and Non-Electrical Machinery and Other Mechanical Products: Includes assets used to manufacture or rebuild finished machinery and equipment and 10 7 10 replacement parts thereof such as machine tools. fixtures. reduction. or parts. tubing. and other basic products of nonferrous metals. Rolls. products. MUST be removed before printing. instruments. assets used in the manufacture of primary ferrous and nonferrous metals. Also includes related land improvements and all special tools used in the above activities.1. lasers. 35.2. and cable. jigs. both hand and power-driven. 36. video recorders. gauges. Does not include assets used to manufacture non-electric heating apparatus. and electronic instruments. the manufacture of nails. the rolling. metal stampings. pig.Width = 44 picas Depth = 58 picas Table B-2. farm and garden machinery. and refrigeration systems. provided their primary use is products and systems defined above such as electron tubes.Page 109 of 120 of Publication 946 15:26 .4 and assets elsewhere classified. 33. 6 5 6 instrumentation and control system. Includes assets used by manufacturers or rebuilders of such finished machinery and equipment in activities elsewhere classified such as the manufacture of castings. postage meters and other electromechanical and mechanical business machines and instruments that are elsewhere classified. typewriters. capacitors.11 through 00. and materials handling devices. 36. EPS Filename: 13081f35 Size . tubing. and ophthalmic goods. 6. electronic subassemblies or other manufacturing activities if the interim products are used by the same manufacturer primarily in the manufacture. switches. and refining of iron and steel from ore. printed circuit substrates. harness cables. carbon and graphite products. including airborne applications. and electrolysis of nonferrous metals from ore.2. Does not include assets used in mining. the rolling. spikes. assets included in class 00. vending and amusement machines. both hand and power-driven. and Systems: Includes assets used in the manufacture of electronic communication.01 Manufacture of Fabricated Metal Products—Special Tools: Includes assets defined as special tools such as dies. and have no significant utilitarian value and cannot be adapted to further or different use after changes or improvements are made in the model design of the particular part produced by the special tools. or scrap. assembly. ferrous metal forges. 34.4 Manufacture of Primary Steel Mill Products: Includes assets used in the smelting. and other general purpose equipment such as conveyors. and other ferrous and nonferrous metal and wire products not elsewhere classified. photocopiers. internal combustion engines (except those elsewhere classified). record players and tape recorders. and clocks. or 15 7 15 scrap.0. drawing and alloying of steel. construction machinery. and assets used in coke production. tinware. 14 7 14 pig. and distribution systems.21 Manufacture of Primary Nonferrous Metals—Special Tools: Includes assets defined as special tools such as dies. and cable. 33. lamps and lighting fixtures. Does not include semiconductor manufacturing equipment included in class 36.0 Manufacture of Fabricated Metal Products: Includes assets used in the production of metal cans.5 5 6. patterns. resistors. fixtures. 3 3 3 and returnable containers and drawings concerning such special tools used in the activities as defined in class 34. fabricated structural metal 12 7 12 products.21 but are included in class 33. Does not include general purpose small tools such as wrenches and drills. transmission. Also includes assets used in the finishing of castings and patternmaking when performed at the foundry.3 Manufacture of Foundry Products: Includes assets used in the casting of iron and steel. transfer equipment. and materials handling devices. Manufacture of Primary Nonferrous Metals.2 Manufacture of Primary Nonferrous Metals: Includes assets used in the smelting. spikes. cooling. and alloying of nonferrous metals. also includes assets used in the manufacture of electronic products such as frequency and amplitude modulated transmitters and receivers. rubber and plastic products. Table of Class Lives and Recovery Periods Recovery Periods (in years) Asset Class Life GDS class Description of assets included (in years) (MACRS) ADS 33.0 Manufacture of Electronic Components. computers and computer peripheral machines. coils. television cameras. fiber optic devices. 33. gauges.5 and drawings concerning such special tools used in the activities as defined in class 33. and other general purpose equipment such as conveyors. transfer equipment. including related operations such as 14 7 14 molding and coremaking. or rebuilding of such finished machinery and equipment. medical and dental equipment and appliances. watches and clocks. the manufacture of castings. patterns. electronic switching stations. mining and oil field machinery. batteries. drawing. space heating. Special tools are specifically designed for the production or processing of particular products or parts and have no significant utilitarian value and cannot be adapted to further or different use after changes or improvements are made in the model design of the particular part produced by the special tools. watches. mandrels and refractories are not included in class 33. also includes assets used in the manufacture of components. forgings. turbines (except those that power airborne vehicles). Specifically excludes assets used to manufacture electronic products and components. electrical power generation. 34. and the manufacture of nails. Special tools are specifically designed for the production or processing of particular machine components. structural shapes. Includes assets used by steel service centers. general industrial and special industry machinery. wire. commercial and home appliances. structural shapes. computation. and electromechanical and mechanical products including business machines. regardless of ownership.

leather.. transfer equipment. Railroad Transportation: Classes with the prefix 40 include the assets identified below that are used in the commercial and contract carrying of passengers and freight by rail. toys and sporting 12 7 12 goods. MUST be removed before printing. and foundry and forging operations. Jewelry. graving docks. Parts that are produced as a normal replacement stock complement in connection with the manufacture and assembly of finished motor vehicles are considered used for the manufacture assembly of finished motor vehicles.33 Ship and Boat Building—Special Tools: Includes assets defined as special tools such as dies. trailers.5 7 11. where such activities are incidental to and an integral part of the manufacture and assembly of finished motor vehicles such as the manufacture of parts and subassemblies of fabricated metal products. textiles. sewer. molds. patterns. and mechanical systems. Special tools are specifically designed for the production or processing of particular machine components.4.32. 12 7 12 motor homes. electricity. pencils. and special fabrications not included in asset classes 37. marine drilling 12 7 12 rigs. Specifically includes all manufacturing and repairing machinery and equipment. etc. products. after changes or improvements are made in the model design of the particular part produced by the special tools. test. Does not include assets of railroad transportation companies or assets of companies which manufacture components of railroad cars but do not manufacture finished railroad cars.32 Ship and Boat Building Dry Docks and Land Improvements: Includes assets used in the manufacture and repair of ships.33. 37. patterns.31 and 37. and other general purpose equipment such as conveyors. marine drilling 16 10 16 rigs. transfer equipment. or parts. radiation. 37. Special tools are specifically designed for the production or processing of particular motor vehicle components and have no significant utilitarian value. and buses. caissons. electrical. boats. fixtures. brushes. or steam. both hand and power-driven. which are classified elsewhere. Does not include assets used in the manufacture of component parts if these assets are used by taxpayers not engaged in the assembly of finished motor vehicles. shipways. navigation.1 and 00.33. Includes assets used in manufacturing activities elsewhere classified other than those excluded above. and special fabrications not included in asset classes 37.2 above. Page 110 Publication 946 (2009) . and Other Goods: Includes assets used in the production of jewelry.11 through 00. 37. owned by manufacturers of finished motor vehicles and used in qualified activities as defined in class 37. Does not include any assets not classified in manufacturing activity classes. batteries. industrial chemicals.31 Ship and Boat Building Machinery and Equipment: Includes assets used in the manufacture and repair of ships. 39.42 Manufacture of Railroad Cars: Includes assets used in building or rebuilding railroad freight or passenger cars (including rail 12 7 12 transit cars). and materials handling devices. Does not include general purpose small tools such as wrenches and drills.32.11. Excludes the assets included in classes with the prefix beginning 00. and have no significant utilitarian value and cannot be adapted to further or different use after changes or improvements are made in the model design of the particular part produced by the special tools. such as jigs. and all other land improvements such as water. jigs. and materials handling devices. caskets.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. production of primary metals. 37. fixtures. Does not include assets of railroad transportation companies or assets of companies which manufacture components of locomotives but do not manufacture finished locomotives. plastics.Width = 44 picas Depth = 58 picas Table B-2. computation. electrical equipment. Excludes buildings and their structural components. Does not include general purpose small tools such as wrenches and drills. e. Specifically includes floating and fixed dry docks.0 Manufacture of Athletic. and cannot be adapted to further or different use. dies. office and art supplies. brooms. or the manufacture of glass.2 Manufacture of Aerospace Products: Includes assets used in the manufacture and assembly of airborne vehicles and their component 10 7 10 parts including hydraulic. boats. 6. 37.5 industrial locomotives). and pens. 37.32 and 37. Excludes buildings and their structural components. and other general purpose equipment such as conveyors. Assets of electrified railroads will be classified in a manner corresponding to that set forth below for railroads not independently operated as electric lines. pneumatic.31 and 37. 3 3 3 and specialty transfer and shipping devices.Page 110 of 120 of Publication 946 15:26 . gauges. molds. Does not include assets used in the production of electronic airborne detection. or rubber products. piers. Does not include assets used in mining. musical instruments.5 5 6. caissons.g. does not include any assets classified in asset guideline classes 00. control. and communication equipment or the components thereof.41 Manufacture of Locomotives: Includes assets used in building or rebuilding railroad locomotives (including mining and 11. Table of Class Lives and Recovery Periods Recovery Periods (in years) Asset Class Life GDS class Description of assets included (in years) (MACRS) ADS 37. and electric systems. including machinery and equipment used in the operation of assets included in asset class 37. and also excludes any non-depreciable assets included in Interstate Commerce Commission accounts enumerated for this class. gauges. 37.5 and drawings concerning such special tools used in the activities defined in classes 37. both hand and powerdriven. ship basins. Activities will be considered incidental to the manufacture and assembly of finished motor vehicles only if 75 percent or more of the value of the products produced under one roof are used for the manufacture and assembly of finished motor vehicles. printing and publishing.11 Manufacture of Motor Vehicles: Includes assets used in the manufacture and assembly of finished automobiles. EPS Filename: 13018f36 Size .12 Manufacture of Motor Vehicles—Special Tools: Includes assets defined as special tools. motion picture and television films and tapes. guidance. trucks.

B.167(a)-11(d)(2)(vi) of the regulations and which would be charged to property and equipment accounts in the Civil Aeronautics Board uniform system of accounts. 46. 45.0 Pipeline Transportation: Includes assets used in the private.0 Motor Transport—Freight: Includes assets used in the commercial and contract carrying of freight by road. 1976. trestles. or improvement.2. 1972-2. For purposes of section 1. Excludes initial clearing and grading land improvements as specified in Rev. except the 8 5 8 transportation assets included in classes with the prefix 00.0 Air Transport: Includes assets (except helicopters) used in commercial and contract carrying of passengers 12 7 12 and freight by air. section 312(c)(1).1 Air Transport (restricted): Includes each asset described in the description of class 45.52 Railroad Nuclear Electric Generating Equipment 20 15 20 40. 44.51 Railroad Hydraulic Electric Generating Equipment 50 20 50 40. Table of Class Lives and Recovery Periods Recovery Periods (in years) Asset Class Life GDS class Description of assets included (in years) (MACRS) ADS 40. and culverts (7) Elevated structures (13) Fences.2. maintenance.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.2 Railroad Structures and Similar Improvements: Includes assets classified in the following Interstate Commerce Commission road accounts: 30 20 30 (6) Bridges. 60).B. 45. 1976. (4). maintenance burden (exclusive of expenses pertaining to maintenance buildings and improvements) as defined by Civil Aeronautics Board accounts 5300. and at all times thereafter.0 Water Transportation: Includes assets used in the commercial and contract carrying of freight and passengers by 20 15 20 water except the transportation assets included in classes with the prefix 00. snowsheds. This criterion of classification based on binding contract concept is to be applied in the same manner as under the general rules expressed in section 49(b)(1). 1. 102. (d). Table B-2. rehabilitation. and contract carrying of petroleum. and signs (16) Station and office buildings (stations and other operating structures only) (17) Roadway buildings (18) Water stations (19) Fuel stations (20) Shops and enginehouses (25) TOFC/COFC terminals (operating structures only) (31) Power transmission systems (35) Miscellaneous structures (39) Public improvements construction 40. 1978-3 C. and expenditures which are not “excluded additions” as defined in section 1. Compressed Air. (5) and (8) of the Code (as in effect prior to its repeal by the Revenue Act of 1978. binding on the taxpayer. except the transportation assets included in classes with the prefix 00. Includes all related land improvements.1 Railroad Machinery and Equipment: Includes assets classified in the following Interstate Commerce Commission accounts: 14 7 14 Roadway accounts: (16) Station and office buildings (freight handling machinery and equipment only) (25) TOFC/COFC terminals (freight handling machinery and equipment only) (26) Communication systems (27) Signals and interlockers (37) Roadway machines (44) Shop machinery Equipment accounts: (52) Locomotives (53) Freight train cars (54) Passenger train cars (57) Work equipment 40. MUST be removed before printing.4 Railroad Track 10 7 10 40.” shall consist of direct maintenance expenses (irrespective of airworthiness provisions or charges) as defined by Civil Aeronautics Board uniform accounts 5200. Rul. or is acquired by the taxpayer pursuant to a contract which was.Page 111 of 120 of Publication 946 15:26 . 42.0 which was held by the taxpayer 6 5 6 on April 15. The trunk lines and related storage facilities of integrated petroleum and natural gas producers are included in this class. expenditures for “repair. but includes all other related land improvements. 72-403.0 Motor Transport—Passengers: Includes assets used in the urban and interurban commercial and contract carrying of 8 5 8 passengers by road. gas and 22 15 22 other products by means of pipes and conveyors. commercial.53 Railroad Steam Electric Generating Equipment 28 20 28 40.167(a)-11(d)(2)(iv)(a) of the regulations.54 Railroad Steam.3 Railroad Wharves and Docks: Includes assets classified in the following Interstate Commission Commerce accounts: 20 15 20 (23) Wharves and docks (24) Coal and ore wharves 40. and Other Power Plan Equipment 28 20 28 41. on April 15. Publication 946 (2009) Page 111 . C.2.

13 7 13 transmission lines from equipment to antenna. 48. and site improvements.45 is comparable to telephone distribution plant described in Class 48. and 234. 48.14 and used for 2-way exchange of voice and data communication which is the equivalent of telephone communication. wire-telegraph. Channeling. control.121 Computer-based Telephone Central Office Switching Equipment: Includes equipment whose functions are those of a computer or peripheral equipment (as 9. Cable Television (CATV): Includes communications-related assets used to provide cable television community antenna television services. 26.11 Telephone Central Office Buildings: Includes assets intended to house central office equipment. and Satellite Communications (TOCSC) includes communications-related assets used to provide domestic and international radio-telegraph. telephones. in-house cabling. 6 5 6 Telegraph. 242.13 which is qualified technological equipment as defined in section 168(i)(2) is assigned a 5-year recovery period. as defined in Federal 45 20 45 Communications Commission Part 31 Account No. private switching center. tracking. 48. 241. MUST be removed before printing. 48.Page 112 of 120 of Publication 946 15:26 . 48. antennas.3.13 Telephone Station Equipment: Includes such station apparatus and connections as teletypewriters. and test and laboratory assets. Comparable equipment does not include cable television equipment used primarily for 1-way communication.36 TOCSC—Satellite Ground Segment Property: Includes assets such as fixed earth station equipment. Does not include assets used to provide subscribers with two-way communications services. and related land improvements as defined in Federal Communications Commission Part 31 Account Nos.5 repeaters. private 10 7* 10* exchanges. aerial wire.38 TOCSC—Equipment Installed on Customer’s Premises: Includes assets installed on customer’s premises. switching. teleprinters. transmitter cooling systems. terminal equipment. and Associated Control Equipment: Includes central office switching computers. Does not include cable and long-line systems. 48.32 TOCSC—High Frequency Radio and Microwave Systems: Includes assets such as transmitters and receivers. rectification. 48.31 TOCSC—Electric Power Generating and Distribution Systems: Includes assets used in the provision of electric power by generation. 48. ocean-cable. 232. 242. ocean cables. Table of Class Lives and Recovery Periods Recovery Periods (in years) Asset Class Life GDS class Description of assets included (in years) (MACRS) ADS Telephone Communications: Includes the assets classified below and that are used in the provision of commercial and contract telephonic services such as: 48.4.5 and shop tools. and control and amplification equipment. teleprinter equipment.2. Does not include computer-based telephone central office switching equipment included in class 48. interfacing computers. cable. If property described in Classes 48. multiplexing equipment patching and monitoring facilities. and interface equipment used in satellite communications.35 TOCSC—Computerized Switching.5 control equipment. 231. also includes related land improvements. 243.5 7 13.33 TOCSC—Cable and Long-line Systems: Includes assets such as transmission lines. 48. Includes store. Does not include general purpose equipment or equipment used in satellite space segment property. and distribution. Table B-2. * Property described in asset guideline class 48. 10 7 10 power generation and distribution systems. 242. and comparable 24 15 24 equipment.5 defined in section 168(i)(2)(B) of the Code) used in its capacity as telephone central office equipment.1. other associated specialized 10. and monitoring of communications signals 16. pole lines. 48.34 TOCSC—Central Office Control Equipment: Includes assets for general control. and monitoring when 8 5 8 used in satellite communications. and associated site improvements. and other related assets.37 TOCSC—Satellite Space Segment Property: Includes satellites and equipment used for telemetry.121. facsimile equipment and other associated and related equipment.2 Radio and Television Broadcastings: Includes assets used in radio and television broadcasting. underground conduits.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. antennas. modulation. 212 whether section 1245 or section 1250 property.5 7 10. 48. repeater stations. and satellite communications services. and comparable equipment as defined in Federal Communications Commission Part 31 Account Nos. 19 10 19 channelization.31–48. Does not include high frequency radio or microwave systems.5 20 26.12 Telephone Central Office Equipment: Includes central office switching and related equipment as defined in Federal Communications 18 10 18 Commission Part 31 Account No. except transmitting towers. warehouse 13. buried cable and conduit. 48. booths.5 5 9.5 10 16. Does not include these assets when they are installed on customers premises. control. antenna supporting structures. 221. Page 112 Publication 946 (2009) .5 including electromechanical switching and channeling apparatus. Does not include private exchange (PBX) equipment. 48.39 TOCSC—Support and Service Equipment: Includes assets used to support but not engage in communications. Does not include private branch exchange (PBX) equipment. 48. such property is assigned a class life of 24 years under this revenue procedure.14 Telephone Distribution Plant: Includes such assets as pole lines. satellite communications 10 7 10 equipment. and 244. Ocean Cable. such as computers. 242.

instrumentation equipment and controls. and other internal combustion engines.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs.Page 113 of 120 of Publication 946 15:26 .45 CATV—Microwave Systems: Inlcudes assets such as towers.. Does not include assets used in the direct mining and treatment of coal prior to the gasification process itself. vaporizers and odorizers. 49. video tape recorders. Gas. matching 10 7 10 transformers. their associated power turbines and/or generators. pedestals. 49.e. steam.24 Gas Utility Trunk Pipelines and Related Storage Facilities: Excluding initial clearing and grading land improvements as specified in Rev. water supply and treatment facilities. gasoline engines. Utility Services: Includes assets used in the production. preamplifiers.12 Electric Utility Nuclear Production Plant: Includes assets used in the nuclear power production and electricity for sale and related land 20 15 20 improvements.25 Liquefied Natural Gas Plant: Includes assets used in the liquefaction.11 Electric Utility Hydraulic Production Plant: Includes assets used in the hydraulic power production of electricity for sale. field strength meters. MUST be removed before printing. Rul. drop cables. and related land improvements.223 Substitute Natural Gas—Coal Gasification: Includes assets used in the manufacture and production of pipeline quality gas from coal using the basic Lurgi 18 10 18 process with advanced methanation. or high temperature gas reactor used in the production of electricity. combusion turbines operated in a 28 20 28 combined cycle with a conventional steam unit and related land improvements.221 Gas Utility Manufactured Gas Production Plants: Includes assets used in the manufacture of gas having chemical and/or physical properties 30 20 30 which do not permit complete interchangeability with domestic natural gas. multiple set connector equipment.13 Electric Utility Steam Production Plant: Includes assets used in the steam power production of electricity for sale.121 Electric Utility Nuclear Fuel Assemblies: Includes initial core and replacement core nuclear fuel assemblies (i. and broad 9. and convertors. 22 15 22 49.5 testing equipment. 49. Includes all process plant equipment and structures used in this coal gasification process and all utility assets such as cooling systems. gas. Table B-2. film chains. Does not include combustion turbines operated in a combined cycle with a conventional steam unit. such as dams. directional taps. Electric. and related land improvements. Rul. and cable 8. 102. 1972-2 C. combustion turbines. Publication 946 (2009) Page 113 . 49. flumes. connecting hardware. 49. 49. Does not include nuclear fuel assemblies used in breader reactors. passive devices. Does not include gas-producing systems and related systems used in waste reduction and resource recovery plants which are elsewhere classified. 48. the composite of fabricated nuclear 5 5 5 fuel and container) when used in a boiling water. Also includes pipeline interconnections with gas transmission lines and distribution systems and marine terminal facilities. Table of Class Lives and Recovery Periods Recovery Periods (in years) Asset Class Life GDS class Description of assets included (in years) (MACRS) ADS 48. lighting.5 band microwave assets is used in the provision of cable television services.222 Gas Utility Substitute Natural Gas (SNG) Production Plant (naphtha or lighter hydrocarbon feedstocks): Includes assets used in the catalytic conversion of feedstocks or naphtha or lighter 14 7 14 hydrocarbons to a gaseous fuel which is completely interchangeable with domestic natural gas. 49. and program 11 7 11 non-duplication systems. power equipment. transmission and distribution of electricity. Does not include nuclear fuel assemblies. antennas. and waterways. canals. Does not include buildings and their structural components.44 CATV—Service and Test: Includes assets such as oscilloscopes. amplifiers. 49. electric generators and related assets such as electricity and steam distribution systems as used by a waste reduction and resource recovery plant if the steam or electricity is normally for sale to others. modulation equipment. diesel engines. tanks.14 Electric Utility Transmission and Distribution Plant: Includes assets used in the transmission and distribution of electricity for sale and related land 30 20 30 improvements. but does not include vehicles. Excludes initial clearing and grading land improvements as specified in Rev. pumps. 48. Also includes all other related land improvements. 72-40. storage. 50 20 50 or water for sale including related land improvements.15 Electric Utility Combustion Turbine Production Plant: Includes assets used in the production of electricity for sale by the use of such prime movers as jet 20 15 20 engines. including related land improvements.42 CATV—Subscriber Connection and Distribution Systems: Includes assets such as trunk and feeder cable. 49. 48. and regasification of natural gas including 22 15 22 loading and unloading connections.5 5 8. spectrum analyzers. 49. 48. and remote location 9 5 9 equipment excluding vehicles. Water and Steam.B.43 CATV—Program Origination: Includes assets such as cameras. antennas. 49. Also includes package boilers.21 Gas Utility Distribution Facilities: Includes gas water heaters and gas conversion equipment installed by utility on customers’ 35 20 35 premises on a rental basis. 72-403. pressurized water.23 Natural Gas Production Plant 14 7 14 49. and assets used in the production and distribution of electricity and steam for use by the taxpayer in a gasification plant and attendant coal mining site processes but not for assets used in the production and distribution of electricity and steam for sale to others. transmitting and receiving equipment. Does not include assets used in the provision of common carrier services. Does not include headend buildings and program origination assets. pressure taps.5 5 9.41 CATV—Headend: Includes assets such as towers. converters.

and personal and professional services.5 and amusement parks.1) and warehouses.S. Personal Property With No Class Life 7 12 Section 1245 Real Property With No Class Life 7 40 B. 1996. as in the operation of bowling alleys. facades. or gaseous fuel. administration buildings. If an item of property described in paragraphs B. unless placed in service under a binding contract in effect before June 10. administration buildings. Does not include 28 20 28 assets used in waste reduction and resource recovery plants which are elsewhere classified. 9 5 9* Includes section 1245 assets used in marketing petroleum and petroleum products. Includes car wash buildings and related land improvements. or F is not described in any asset guideline class. no class life—12 E. souvenir vending and other nonlodging accommodations) if owned by the park and provided exclusively for the benefit of park patrons. steam and electricity. or F is determined by reference to the asset guideline classes.2). sorting. rides. theaters. but not including any of these facilities related to petroleum and natural gas trunk pipelines. Table of Class Lives and Recovery Periods Recovery Periods (in years) Asset Class Life GDS class Description of assets included (in years) (MACRS) ADS 49. C. all other utilities such as water supply and treatment facilities. E. E. Does include. landscaping. etc. 1996. life—12 796(17)(C)).221. as in effect on September 1. amusement or theme setting within the park such as ticket booths. 49.). and motels. attraction. 1986. Alternative energy property described in sections 48(l)(3)(A)(ix) (as in effect on the day before ** 5 class life if the date of enactment (11/5/90) of the Revenue Reconciliation Act of 1990).3 Water Utilities: Includes assets used in the gathering. hotels. hotels and motels. and attractions which are permanently situated on park land and open to the public for the price of admission.48-1(e) of the regulations. airplanes. shredding. Theme and amusement parks are defined as combinations of amusements.g. assets used in the provision of administrative services (asset classes with the prefix 00. Municipal Wastewater Treatment Plant 24 15 24 51.g. Page 114 Publication 946 (2009) . gas. as defined in section 168(i)(2). and separation systems. steam and manufactured gas production plants classified in classes 00. parking lots. Property Used in Connection with Research and Experimentation referred to in section ** 5 class life if 168(e)(3)(B). D.13. Includes billboards. See Gas station convenience stores in chapter 3. and commercial distribution of water.Page 114 of 120 of Publication 946 15:26 . buildings and structural components as defined in section 1. special purpose structures.0 Recreation: Includes assets used in the provision of entertainment services on payment of a fee or 10 7 10 admission charge. 50. which are included in asset guideline classes with the prefix 00. attractions. 79. This guideline class is a composite of all assets used in this industry except transportation equipment (general purpose trucks. no class life—12 * Any high technology medical equipment as defined in section 168(i)(2)(C) which is described in asset guideline class 57. ** The class life (if any) of property described in classes B. MUST be removed before printing.. Also includes all process plant equipment and structures at the site used to receive. F. ** 5 5 C.4 Central Steam Utility Production and Distribution: Includes assets used in the production and distribution of steam for sale. whether such assets are section 1245 property or section 1250 property.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. C. Certain Property for Which Recovery Periods Assigned A. such item of property has no class life.0 is assigned a 5-year recovery period for the alternate MACRS method. and at all times until placed in service. race tracks. or refuse derived fuel system to create hot water. liquid. Excludes all other land improvements. and process refuse or other solid waste or biomass in a waterwall. and 49. collecting. waterways. such as golf courses. 50 20*** 50 49. concert halls. ski slopes. 49. including service station buildings and depreciable land 20 15 20 improvements.C.. Table B-2. 57. fences. Qualified Technological Equipment. whether section 1245 property or section 1250 property. collect.1 Distributive Trades and Services—Billboard. combustion system. hot water.4. and miniature golf courses.0 Theme and Amusement Parks: Includes assets used in the provision of rides. oil or gas pyrolysis system. Energy property described in section 48(a)(3)(A) (or would be described if “solar or wind ** 5 class life if energy” were substituted for “solar energy” in section 48(a)(3)(A)(i)). 49. Service Station Buildings and Petroleum Marketing Land Improvements: Includes section 1250 assets. or electric generators and related assets such as electricity. treatment. 80. *** Use straight line over 25 years if placed in service after June 12. handling. Biomass property described in section 48(l)(15) (as in effect on the day before the date of ** 5 class life if enactment (11/5/90) of the Revenue Reconciliation Act of 1990) and is a qualifying small no class production facility within the meaning of section 3(17)(c) of the Federal Power Act (16 U. no class life—12 D. and includes appurtenances associated with a ride. sports stadia. classifying. used in the marketing of petroleum and petroleum products. Does not include any package boilers. Includes material recovery and support assets used in refuse or solid refuse or solid waste receiving. bridges. handle. and buildings other than warehouses. cars. food and beverage retailing. etc. and amusements in activities defined as theme 12.0 Distributive Trades and Services: Includes assets used in wholesale and retail trade. Does not include amusement and theme parks and assets which consist primarily of specialized land improvements or structures. and support functions (e. D. shop interiors. Municipal Sewer 50 20*** 50 57. and buildings which house the assets used in entertainment services. billiard and pool establishments.5 Waste Reduction and Resource Recovery Plants: Includes assets used in the conversion of refuse or other solid waste or biomass to heat or to a 10 7 10 solid. sidewalks.4. Includes all land improvements for or in support of park activities (e..5 7 12. however. ash handling and other related land improvements of a waste reduction and resource recovery plant. and props.

swap. such as an automo- obligated to sell. able for a specific use whether in a Fair market value (FMV): The price trade or business. A capital. Publication 946 (2009) Page 115 . liabilities to which the property trans. concern. is used for business and invest- who is willing or desires to buy but is erty under MACRS. property of a type gen- the cost of intangible property over its termined by dividing the declining bal. Placed in service: Ready and avail- property or services. the area of an individual’s tax home. mines the depreciation method. biles. real property other than residential Exchange: To barter. for the section 179 erty to another. poses. or to other ele- paid by a buyer to research the title of Commuting: Travel between a per. lowable as a deduction in a prior year. to its value. A mere passive in. such as goodwill. for sale by one who is willing but not item of property. area where business is transacted. Documentary evidence: Written rec- ferred is subject. and convention. MUST be removed before printing. Goodwill: An intangible property the meanings of the terms as used in tablishes the property class and recov. minus certain deduc. tem (GDS) and Alternative Deprecia. It is not confined to a name but slightly different meaning. The same term used ery period for most types of property ceived in property beyond its mere in another publication may have a under the General Depreciation Sys. deduction. has value but cannot be seen or property. ments of value in business as a going real property. recrea- useful life. conservator. transportation. It generally deter- ment purposes. Fiduciary: The one who acts on be- ized amount is not deductible as a half of another as a guardian. give. 150% and 200% declining balance Listed property: Passenger automo- methods for certain types of property. and computer software. Basis: A measure of an individual’s with. and cellular telephones or similar tele- bilities assumed by the buyer and any communications equipment. can also be attached to a particular tion System (ADS). Capitalized: Expended or treated as recovery period. that property brings when it is offered income. The drawal from use in a trade or business person operating the establishment). sonal home and work or job site within Active conduct of a trade or busi. amount realized also includes any lia. Intangible property: Property that Adjusted basis: The original cost of Declining balance method: An ac. such as the advantage or benefit re- this publication. part rental property. improvements. patents. to Abstract fees: Expenses generally a list of customers. Recapture: To include as income on current expense and must be included executor. tions such as depreciation allowed or System (GDS) of MACRS uses the allowable and casualty losses. erty. in place of another part. ate property both in the year the time you can use it. a tax-exempt activity. of property is recovered. the production of Business/investment use: Usually. appreciably lengthens the trade or business. or adapts it to a vestor in a trade or business does not property is placed in service and in the different use. such as real estate ords that establish certain facts. trustee. receiver. or a per- a percentage showing how much an sonal activity. The General Depreciation copyrights. any other property used for Amortization: A ratable deduction for A depreciation rate (percentage) is de. their peripheral equipment (unless money received plus the fair market used only at a regular business estab- value of all property or services re. not compelled to do so. value. Grantor: The one who transfers prop- ness: Generally. administrator. Disposition: The permanent with. computers and Amount realized: The total of all period for the property.Page 115 of 120 of Publication 946 15:26 . Circumstantial evidence: Details or Fungible commodity: A commodity Recovery period: The number of facts which indirectly point to other of a nature that one part may be used years over which the basis of an item facts.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. actively conduct the trade or business. Glossary The definitions in this glossary are Class life: A number of years that es. erally used for entertainment. or your return an amount allowed or al- in the basis of property. or from the production of income. a taxpayer is considered to Convention: A method established conduct a trade or business actively if under the Modified Accelerated Cost Improvement: An addition to or par- he or she meaningfully participates in Recovery System (MACRS) to deter- tial replacement of property that adds the management or operations of the mine the portion of the year to depreci. Nonresidential real property: Most taxes or a mortgage. plus certain additions and celerated method to depreciate prop. an item of a capital nature. or transfer property for other investment in property for tax pur. touched. year of disposition. and is bought by one Property class: A category for prop- bile. ance percentage by the recovery tion or amusement. lishment and owned or leased by the ceived from a sale or exchange.

the recovery period. vehicles. ing motors. floors. or an income interest in a an item of property can be expected to termining a tax deduction for trust. if it is estimated that a ma- products of petroleum. single purpose agricultural tures such as sinks. Sec. It is determined by estimating the and horticultural structures. units. Section 1245 property: Property that and all components of a central air 2006.13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. and number of units that can be produced facilities used in connection with the other parts that form the structure. provisions of a will have been satis. as well as claimed for clean-fuel vehicles or used under MACRS. such as buildings. together form an entire structure. or the fail- estate that is left after all the other depreciation for property that ratably ure of an event to occur. and any electric vehicle credit. the percent- erty (other than section 1245 property) age to figure depreciation for that year which is or has been subject to an Tax-exempt: Not subject to tax. ma. future interest in income from property produce income. erty. Term interest: A life interest in prop- Standard mileage rate: The estab. storage cal wiring and lighting fixtures. For distribution of petroleum or primary example. deducts the same amount for each fied.Page 116 of 120 of Publication 946 15:26 . The term includes those the section 179 deduction. of years. if 80% or more of its annual lier years but with adjustments for gross rental income is from dwelling Structural components: Parts that other amounts. see or touch. It also includes plumbing fix. The rate Unadjusted basis: The basis of an (in percentage terms) is determined by item of property for purposes of figur- Residential rental property: Real dividing 1 by the number of years in ing gain on a sale without taking into property. and it actually pro- Section 1250 property: Real prop. duces 100 units in a year. generally buildings or struc. parti. and equip. is 10% of the machine’s cost less its allowance for depreciation. It generally refers to a present or be usable in trade or business or to automobiles instead of deducting de. salvage value. furniture. Remainder interest: That part of an Straight line method: A way to figure the occurrence of an event. including amortization. Page 116 Publication 946 (2009) . or the right to use property that termi- ■ penses. to figure depreciation for certain prop- property. useful life ends. any permanent coverings such as clean-fuel vehicle refueling property paneling or tiling. windows and doors. any special Salvage value: An estimated value of parts of a building such as walls. account any depreciation taken in ear- tures. such as a building. compressors. an interest in property for a term Useful life: An estimate of how long lished amount for optional use in de. is or has been subject to an allowance conditioning or heating system includ- for depreciation or amortization. and ceilings. bathtubs. pipes and Unit-of-production method: A way tion 1245 property includes personal ducts. ment. preciation and actual operating ex. chine will produce 1000 units before its chinery. depreciation allowance. electri. any deduction property at the end of its useful life. erty. Not tions. before the property is worn out. placed in service before January 1. MUST be removed before printing. and railroad Tangible property: Property you can grading or tunnel bores. nates or fails upon the lapse of time. year in the recovery period.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. . . . . . . 51 Publication 946 (2009) Page 117 . . . . . . . . . . 13 Declining balance: Figuring MACRS: Apartment: Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Casualty loss. 17 Addition to property . . . . . . . . . . . . . . . . listed Before recovery period ends . 115 Recapture of clean-fuel vehicle deduction or credit . . . . . . . . . . . . . . . . . . . 5 Conventions . . . . . . . . . . . . . . . . . . . . . 5 How to claim depreciation . . . . . . . . . . . . . . . . . . . . . 2 allowance . . . . . . . . . . . . . . . . 12 Property owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Change in use . . . . . . . . . . . . . . . . . recapture of Determinable useful life . 40 Exclusion from MACRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Carryover of section 179 E Qualified infrastructure Election: property . . . . . . . . . . . . . . . Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us. . . . . . . . . . . . 55 Basis for depreciation . . . . . . . . . . . . 13 Nonrecognition transaction . 13 Section 179 deduction . . . . 33 year . . . . . . . . . . . . . . . . . . . . . 22. . . . . . . 47 Without using percentage Rental . . . . . . . . 61 Investment use of property. . . . . . . . . 21 ADS . . . . . . . . . . 13 partial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Depreciation allowed . . . . . . . . . . . . . . . . . . . . . . . 10 property . . . . 41 Business-use requirement. . . . . . 23 Indian reservation: C Car (See Passenger automobile) Defined . . 62 General asset account Incorrect depreciation property . . . . . . . . . 40 method . . . . . . 61 Abusive transaction . . . . . . . . . . . . . . . . . . . . . . . . . 61 General asset account: Basis: Listed property . . . . . . . . . . . . . . . . . . . . . 22 Depreciation method . . . . . . . . . . . . 62 I Business-use limit. . . . . . 58. .Page 117 of 120 of Publication 946 15:26 . . 4 Rates . 58 Inheritance (See Basis. . 5 Computer software . . . . . 5 Idle property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Changing accounting General asset account . . 10 Automobile (See Passenger Section 179 . listed Involuntary conversion of MACRS Cooperative apartment . . . . . . . . . . . . . 9 Computer (See Listed property) Employee: Inventory . 61 property . . . . . . . . . . 51 Alternative Depreciation System deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Deduction limit: tables . . . . . . . . . . . . . . . . . 43 property) Related person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Free tax services . . . . . . . 35 D Property . . . . . . . . . . . . . . . . 9. . . . please let us know if you have ideas for index entries. . . 5 Glossary . . . . . . . 10. . . . . . . 44 Determinable useful life . 4 property . . 44 Incorrect amount deducted . . . . . . . . . . . . . . . . . . . . 39 Depreciable basis . . . . . . . . . 55 deductions . . . . . . . . 11 Property lasting more than one (GDS). . . . . . . . . . . . . . . . . . 10 Commuting . To help us develop a more useful index. . . . . . . . . . 44 Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Amended return . . . . . . . . . 16 Depreciation deduction . . . . . . . . . . . . . other than method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. . . . . . 7 Section 179 deduction . . . . . . . . . . . . . . . . . . . 12 H Unadjusted . . . . . . . . . . . . . . . . . . . . . . . 14 Not to claim special depreciation cost) Comments on publication . . A Copyright (See also Section 197 Energy property . . . . . 40 deduction . . . . 12 Correcting depreciation property . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Adjustments . . 41 Farm: Required use . . . . . . . . . . . . . . . . . 12 Help (See Tax help) Business use of property. . . . . . . . 64 Term interest . . . . . . . . . . . . . . . . 33 Intangible property: Communication equipment (See Section 179 deduction . . . .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . effect of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Listed property . . . . . . . . . . . . . . . 73 automobile) Depreciation: Deduction: G B Employee . . . . . . 12 Methods . . . . . . . 46 Income forecast method . . . . . . . . . . . 6 Depreciation allowable . . . . 43 Qualified property . . other than cost) Other than cost . . . . . . . . . . . 5 Disposing of property . . . . . . . . . . . . . . . . . . . . . 6 Grouping property in . . . . . . . . . . . . . . . . . . . . . 35. . MUST be removed before printing. . . . . . . . 54 Casualty loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 F Recovery periods . . . 39 Excepted property . . 63 Electric vehicle . . . . . . . . . . . . . . 5 Gift (See Basis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Listed property) Straight line method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Films . . . . . . . . 13 (ADS): Cost basis . . 44 Recapture . . . . . . . . . . . . . . . . . . 47 Using percentage tables . . . . . . . . . . . . . . . . . . . . . . . recovery periods . . . . . . 44 Recovery periods for qualified Declining balance (150% DB) Cellular telephone (See Listed property . . . . . . 43 Income forecast method . . . . . 41 Employee deduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 General Depreciation System Cost . . . . . . . Depreciation deduction: partial . . . . . . . . . 67 Straight line method . . . . . . . 41 intangibles) . . . . . . 23 Disposition: Improvements . . . . . . . . . . . . . . . . 3 Property used in business . . . . . . . . . . . . . . . . . Containers . . . . . 47 Assistance (See Tax help) Automobile . . . . . 10 Exchange of MACRS Adjusted basis . . . . . . . .

. . . . . 23 (GDS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 property: Depreciation methods . 67 Leased . . . . . . . . . . . . . 26 Limits: Property classes . 60 Recapture: Electric vehicles . . . . . . . . . . . . . . . . . . 26. . . . . . . . . . 63 Before 1987 . . . . . . . . . . . . . 63 Rule . . . . . . . . . . incidents of . . . . . . . . . . . . . . . . . 35 Modified ACRS (MACRS): Term interest . . 37 Passenger automobiles . . 25. . . . . . . . . . . . . . . . . . . . abusive Section 179 . 61 Patent (See also Section 197 Section 179 deduction . . . . . . . . . . . 6 40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Qualified leasehold improvement Dollar . . . 20 special allowance . . . . . . . . . . . . . . . . . . 18 property. . . . . . . . . . . . . . . . . . . . 6. 38 Related persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Listed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Date . . .Page 118 of 120 of Publication 946 15:26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Married filing separate N Excepted property . . Partial business use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Q Conventions . . . . 35 Placed in service date test . . . . . . . . . . . . . . . . 22 (ADS) . . . . . . . . . . . . . . . . . . . . . 41 Publications (See Tax help) election . . 41 Qualified Gulf Opportunity Zone S Declining balance method . . 13 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Substantial use test . . . . . . . . 67 Limit on deduction: Clean-fuel vehicle deduction or Limit on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Straight line method . . . . . . . . 63 Reporting on Form 4562 . . . . . . . . . . . . . . 44 Automobile . . . . . . . . 22 Leased . . 64 5% owner . 61 Phonographic equipment (See Recordkeeping: Employer convenience . . . . . . . . . . . . . . . L O Qualified Liberty Zone property. . . . . . 59 Repairs . . . . . . . . . . . . . . . . . . . . . . recapture . . defined . . . . . . . . . . . . . . . . . . . . . . 58 Alternative Depreciation System Section 179 election . 70 Improvements to . . . . . . . . . . . . . . . . . . . . . M Idle . . . 3 Rented property. . . . . . . . . . . . . . . . . 17. . . . . . . . . . . . . . . . . . . . 25 Partnership rules . . . . . . . . 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Business-use. . . . 13 Rent-to-own property. . 56 Listed property: Trucks . . . . . . . 10 Special depreciation Defined . . . 61 intangibles) . . . . Land: Office in the home . . . . . . . . . . . . . . . 8 GDS . . . . . . . . . . . . . . . . . . . . . . . . 16 Acquisition date test . . . . . . . . . . . . . . . . . . . . . 68 Personal . . . . . . . . . . . . 68 Listed property . . . . . . 43 Section 179 deduction: Acquisition date test . . . . . . . . 16 Excepted property . . . . . . . . . . . . . . . . . 8 Retail motor fuels outlet . . . 18 deduction . . . . 25. . . . . . . . . . . . . 37 Mobile home (See Residential rental Retired from service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Property: Rental home (See Residential rental Lodging . . . 21 Original use test . . . 19 More information (See Tax help) Qualified Liberty Zone property: Partial business use . . . . . . . . . . . 4 Defined . . 23 Short tax year . . special Leased property . . . . 24 P Leasehold improvement property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Farm property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . short tax year . 39 property. . 7 improvements . . . . . . . requirements for the income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Vans . . . . . . . 61 Listed property) Listed property . 6 Ownership. . . . . . . . . . . . . . . . . . 16 ADS election . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Listed property) Recovery periods: Passenger automobile . . . . 59 Personal property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 depreciation allowance . . . . . . . . . . . . . . . . . . . 8. . . . . . . . . . . . . . . 8 interests) . . . . . . . . . MUST be removed before printing. . . . 66 transaction . . . . . . . . . . . . . . . . . . . . 24 Property: property . . . . . . . . . . . . . . . . . . . . . . . 8 allowance . . . . . . . . . 27 General Depreciation System Dispositions . . . 25 returns . . . 23 Condition of employment . . 24 Eligible . . . . . . . . . . . . . . . . . . . . . . 34 Employee deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Qualified Gulf Opportunity Zone Business (taxable) Recovery periods . . . . . . . . . . . . . 26 Electing . . . . . . . . . . . . . . . 21 Nontaxable transfer of MACRS Placed in service date test . . . . . . . 43 Business use required . . . . . 24 Preparation costs . . . . 17 defined . . . . . . 7 Revoking: property) Tangible personal . . . . . . 53 Carryover . . . . . . . . . . . 6 Qualified property. . . . 60 Photographic equipment (See Section 179 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Placed in service: ADS . .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. . . . . . . . . . . . . Related person . 8 Residential rental property . . . 66 Maximum depreciation General asset account. . . . . . . . 19 Nonresidential real property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. . . . . . . . . . . 68 Real . . . . . . . 13 Maximum deduction: Improvements . . . . . . . 40 requirements for the special Not depreciable . . . . . 51 Substantial use test . . 63 Vans . . . . . . . . . . . 39 Recordkeeping . 17 property) Classes . . . . Electric vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Page 118 Publication 946 (2009) . . . . . . . . . . . . 58 Computer . . . . . . 66 credit . . . 6 General asset account Addition or improvement . . . . . . . . . . . . 47 Sale of property . 68 MACRS depreciation . 27 Figuring. . . . . . . . . 35 Depreciable . . . . . . . . . 4 allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Qualified business use . . . . . . . . . . . . . . . . . 22 Percentage tables . . . . . . . . . . . . 38 R Passenger automobile: Life tenant (See also Term Real property . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Original use test . . 38 Enterprise zone business . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . constructive ownership V Purchase required . . . . . . . . . . . 45 Publication 946 (2009) Page 119 . . . . . 11 Short tax year: T Figuring depreciation . . . . . . 22 Created intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 When to use ADS . . . . . . 10 Trade-in of property . 35 Figuring placed-in-service Tax help . . . . . . . . . . . 45 Sound recording . 48 Video tape . . . . . . . . . . . . MUST be removed before printing. . . . . . . 9. . . . 65 Software. . . . . . 2 Listed property) Settlement fees . . . . . . . . . . . . . . . . . . . . . 16 of . . . . . . . . . 6 MACRS . . . . . . . . 23 Straight line method . . . . . . . . . . . . . . . . . . . . . . 17 Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Qualified Liberty Zone U property . . . . . . . . . . . . . . . . . . . . . 53 W Tangible personal property . 9 Vans . . . . . 5 Property: (Cont. . 10 Recordkeeping . . . . . . computer . . . . . 22 Suggestions for publication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. . . . . . . . . . . . . . . . . . . . . 73 Worksheet: date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Term interest . . . . . . . . . . . . . . . . . . . . 10 Video-recording equipment (See S corporation rules . . . . . . . . . . . . . . . . . . . . . . . 10. . 33 Trucks . . 68 Recapture . . 73 property . . . . . 24 Useful life . . . . . . . . . . . . . . . . . . . . . Section 179 deduction: Qualified property . . . . . . . . . 73 Leased listed property . . . . .) Recapture . . . . . 24 Unadjusted basis .Page 119 of 120 of Publication 946 15:26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Qualified Gulf Opportunity Zone TTY/TDD information . . . . . . . . . . . . . . . . . . . . . . 34 Excepted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Taxpayer Advocate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Special depreciation allowance: ■ Election not to claim . . . . . . . . . . . . . . . . . . . . .

S. Deductions. Return and Trusts 941 Employer’s QUARTERLY Federal Tax Return 2441 Child and Dependent Care Expenses 944 Employer’s ANNUAL Federal Tax Return 2848 Power of Attorney and Declaration of Representative 1040 U. F Profit or Loss From Farming 6252 Installment Sale Income Sch. Keep for Your Records General Guides 527 Residential Rental Property (Including 686 Certification for Reduced Tax Rates 1 Your Rights as a Taxpayer Rental of Vacation Homes) in Tax Treaty Countries 17 Your Federal Income Tax (For 534 Depreciating Property Placed in 901 U. including by computer. K-1 Shareholder’s Share of Income.S.S. H Household Employment Taxes 7004 Application for Automatic 6-Month Extension of Time To Sch.S. Corporation Income Tax Return 8829 Expenses for Business Use of Your Home 1120S U. Employer’s Tax Guide 544 Sales and Other Dispositions of $10. D Capital Gains and Losses Individual Income Tax Return Sch. Virgin 179 (Circular PR) Guı́a Contributiva Plans) Islands. Federal Para Patronos 561 Determining the Value of Donated and the Commonwealth of the Puertorriqueños Property Northern Mariana Islands 579SP Cómo Preparar la Declaración de 583 Starting a Business and Keeping 926 Household Employer’s Tax Guide Impuesto Federal Records 594SP Qué es lo Debemos Saber sobre El Specialized Publications 587 Business Use of Your Home Proceso de Cobro del IRS 225 Farmer’s Tax Guide (Including Use by Daycare 850 English-Spanish Glossary of Words 463 Travel. and Car Providers) and Phrases Used in Publications Expenses 594 What You Should Know About The Issued by the Internal Revenue 505 Tax Withholding and Estimated Tax IRS Collection Process Service 510 Excise Taxes 595 Capital Construction Fund for 1544SP Informe de Pagos en Efectivo en 515 Withholding of Tax on Nonresident Commercial Fishermen Exceso de $10. Agricultural Employer’s Rights. and Trusts 947 Practice Before the IRS and Power of 509 Tax Calendars 537 Installment Sales Attorney 910 IRS Guide to Free Tax Services 538 Accounting Periods and Methods 954 Tax Incentives for Distressed 541 Partnerships Communities Employer’s Guides 542 Corporations 1544 Reporting Cash Payments of Over 15 (Circular E). D Capital Gains and Losses 8606 Nondeductible IRAs Sch. and mail.000 (Received in a Trade or 15-A Employer’s Supplemental Tax Guide Assets Business) 15-B Employer’s Tax Guide to Fringe 551 Basis of Assets 1546 The Taxpayer Advocate Service of Benefits 556 Examination of Returns.S.000 (Recibidos en Aliens and Foreign Entities 597 Information on the United una Ocupación o Negocio) 517 Social Security and Other Information States-Canada Income Tax Treaty for Members of the Clergy and 598 Tax on Unrelated Business Income of Religious Workers Exempt Organizations Commonly Used Tax Forms See How To Get Tax Help for a variety of ways to get forms.000 Received in a 1040X Amended U.S. Information. and mail. Individual Income Tax Return 3800 General Business Credit Sch. Credits. Estates. Individual Income Tax Return Trade or Business 1065 U. R Credit for the Elderly or the Disabled Other Returns Sch. D-1 Continuation Sheet for Schedule D 5329 Additional Taxes on Qualified Plans (Including IRAs) and Sch. Guam.Page 120 of 120 of Publication 946 15:26 . etc. phone. Income Tax Return for an S Corporation Sch. C-EZ Net Profit From Business 4868 Application for Automatic Extension of Time To File U. Keep for Your Records Form Number and Form Title Sch. Sch.S. E Supplemental Income and Loss Other Tax-Favored Accounts Sch. phone. A & B Itemized Deductions & Interest and Ordinary 3903 Moving Expenses Dividends 4562 Depreciation and Amortization Sch. Tax Publications for Business Taxpayers See How To Get Tax Help for a variety of ways to get publications. Gift. Deductions. Entertainment. Estates. Appeal the IRS 51 (Circular A). K-1 Partner’s Share of Income. and Sch. Credits. and Qualified Employers in the U. D Capital Gains and Losses and Built-In Gains Page 120 Publication 946 (2009) . and Claims for Refund Tax Guide Spanish Language Publications 560 Retirement Plans for Small Business 80 (Circular SS).13-MAY-2010 The type and rule above prints on all proofs including departmental reproduction proofs. J Income Averaging for Farmers and Fishermen File Certain Business Income Tax. C Profit or Loss From Business 4797 Sales of Business Property Sch. 8822 Change of Address 1120 U. Tax Treaties Individuals) Service Before 1987 908 Bankruptcy Tax Guide 334 Tax Guide for Small Business (For 535 Business Expenses 925 Passive Activity and At-Risk Rules Individuals Who Use Schedule C or 536 Net Operating Losses (NOLs) for 946 How To Depreciate Property C-EZ) Individuals. etc. American Samoa. SE Self-Employment Tax 8283 Noncash Charitable Contributions 1040-ES Estimated Tax for Individuals 8300 Report of Cash Payments Over $10.S. Federal Tax Guide For 1SP Derechos del Contribuyente (SEP. MUST be removed before printing. including by computer. W-2 Wage and Tax Statement 2106 Employee Business Expenses W-4 Employee’s Withholding Allowance Certificate 2106-EZ Unreimbursed Employee Business Expenses 940 Employer’s Annual Federal Unemployment (FUTA) Tax 2210 Underpayment of Estimated Tax by Individuals. SIMPLE. Return of Partnership Income 8582 Passive Activity Loss Limitations Sch.