Section C Lines 20a Through 20c
Complete lines 20a through 20c for assets, other than automobiles and other listed property, placed in service only during the tax year
beginning in 2002 and depreciated under the Alternative Depreciation System (ADS). Report on line 17 MACRS depreciation on assets placed in service in
prior years.
Under ADS, use the applicable depreciation method, the applicable recovery period, and the applicable convention to compute depreciation.
The following types of property must be depreciated under ADS.
- Tangible property used predominantly outside the United States.
- Tax-exempt use property.
- Tax-exempt bond financed property.
- Imported property covered by an executive order of the President of the United States.
- Property used predominantly in a farming business and placed in service during any tax year in which you made an election under section
263A(d)(3).
Instead of depreciating property under GDS (line 19), you may make an irrevocable election with respect to any classification of property for any
tax year to use ADS. For residential rental and nonresidential real property, you may make this election separately for each property.
Column (a).
Use the following rules to determine the classification of the property under ADS.
Class life.
Under ADS, the depreciation deduction for most property is based on the property's class life. See the Table of Class Lives and Recovery Periods in
Pub. 946. Use line 20a for all property depreciated under ADS, except property that does not have a class life, residential rental and nonresidential
real property, water utility property, and railroad gradings and tunnel bores.
See section 168(g)(3) for special rules for determining the class life for certain property. The class life for qualified Liberty Zone leasehold
improvement property under ADS is 9 years.
12-year property.
Use line 20b for property that does not have a class life.
40-year property.
Use line 20c for residential rental and nonresidential real property.
Water utility property and railroad gradings and tunnel bores.
These assets are 50-year property under ADS. There is no separate line to report 50-year property. Therefore, attach a statement showing the same
information required in columns (a) through (g). Include the deduction in the line 22 Total and write See attachment in the bottom
margin of the form.
Column (b).
For 40-year property, enter the month and year placed in service or converted to use in a trade or business or for the production of income.
Column (c).
See the instructions for line 19, column (c).
Column (d).
On line 20a, enter the property's class life.
Column (e).
Under ADS, the applicable conventions are the same as those used under GDS. See the instructions for line 19, column (e).
Column (g).
Figure the depreciation deduction in the same manner as under GDS, except use the straight line method over the ADS recovery period and use the
applicable convention.
Part IV - Summary
Line 22
A partnership (other than an electing large partnership) or S corporation does not include any section 179 expense deduction (line 12) on this
line. Instead, any section 179 expense deduction is passed through separately to the partners and shareholders on the appropriate line of their
Schedules K-1.
Line 23
If you are subject to the uniform capitalization rules of section 263A, enter the increase in basis from costs you must capitalize. For a detailed
discussion of who is subject to these rules, which costs must be capitalized, and allocation of costs among activities, see Regulations section
1.263A-1.
Part V - Listed Property
If you claim the standard mileage rate, actual vehicle expenses (including depreciation), or depreciation on other listed property, you must
provide the information requested in Part V, regardless of the tax year the property was placed in service. However, if you file Form 2106, 2106-EZ,
or Schedule C-EZ (Form 1040), report this information on that form and not in Part V. Also, if you file Schedule C (Form 1040) and are claiming the
standard mileage rate or actual vehicle expenses (except depreciation), and you are not required to file Form 4562 for any other reason, report
vehicle information in Part IV of Schedule C and not on Form 4562.
Section A Line 25
An additional 30% depreciation deduction is allowed for qualified property placed in service during the tax year. See the instructions for line 14
for the definition of qualified property and how to figure the deduction. This special depreciation allowance is included in the overall limit on
depreciation and section 179 expense deduction for passenger automobiles. However, the limit is increased for passenger automobiles (except for
qualified Liberty Zone property) for which the special depreciation allowance is claimed. See the instructions for lines 26 and 27 for details on the
limit. Enter on line 25 your total special depreciation allowance for all listed property.
Lines 26 and 27
Qualified business use.
To determine whether to use line 26 or line 27 to report your listed property, you must first determine the percentage of qualified business use
for each property. Generally, a qualified business use is any use in your trade or business. However, it does not include any of the following.
- Investment use.
- Leasing the property to a 5% owner or related person.
- The use of the property as compensation for services performed by a 5% owner or related person.
- The use of the property as compensation for services performed by any person (who is not a 5% owner or related person), unless an amount is
included in that person's income for the use of the property and, if required, income tax was withheld on that amount.
Exception.
If at least 25% of the total use of any aircraft during the tax year is for a qualified business use, the leasing or compensatory use of the
aircraft by a 5% owner or related person is treated as a qualified business use.
Determine your percentage of qualified business use similar to the method used to figure the business/investment use percentage in column (c). Your
percentage of qualified business use may be smaller than the business/investment use percentage.
For more information, see Pub. 946.
Column (a).
List on a property-by-property basis all your listed property in the following order.
- Automobiles and other vehicles.
- Other listed property (computers and peripheral equipment, etc.).
See Listed Property on page 1 for items to include.
In column (a), list the make and model of automobiles, and give a general description of other listed property.
If you have more than five vehicles used 100% for business/investment purposes, you may group them by tax year. Otherwise, list each vehicle
separately.
Column (b).
Enter the date the property was placed in service. If property held for personal use is converted to business/investment use, treat the property as
placed in service on the date of conversion.
Column (c).
Enter the percentage of business/investment use. For automobiles and other vehicles, determine this percentage by dividing the number of miles the
vehicle is driven for trade or business purposes or for the production of income during the year (not to include any commuting mileage) by the total
number of miles the vehicle is driven for all purposes. Treat vehicles used by employees as being used 100% for business/investment purposes if the
value of personal use is included in the employees' gross income, or the employees reimburse the employer for the personal use.
Employers who report the amount of personal use of the vehicle in the employee's gross income, and withhold the appropriate taxes, should enter
100% for the percentage of business/investment use. For more information, see Pub. 463.
For other listed property (such as computers or video equipment), allocate the use based on the most appropriate unit of time the property is
actually used. See Temporary Regulations section 1.280F-6T(e).
If during the tax year you convert property used solely for personal purposes to business/investment use, figure the percentage of
business/investment use only for the number of months you use the property in your business or for the production of income. Multiply that percentage
by the number of months you use the property in your business or for the production of income, and divide the result by 12.
Column (d).
Enter the property's actual cost (including sales tax) or other basis (unadjusted for prior years' depreciation). If you traded in old property,
your basis is the adjusted basis of the old property (figured as if 100% of the property's use had been for business/investment purposes) plus any
additional amount you paid for the new property.
Note:
If you acquired the property through a trade-in, see Notice 2000-4, 2000-1 C.B. 313. You can find Notice 2000-4 on page 313 of Internal Revenue
Bulletin 2000-3 at www.irs.gov/pub/irs-irbs/irb00-03.pdf.
For a vehicle, reduce your basis by any qualified electric vehicle credit or deduction for clean-fuel vehicles you claimed.
If you converted the property from personal use to business/investment use, your basis for depreciation is the smaller of the property's
adjusted basis or its fair market value on the date of conversion.
Column (e).
Multiply column (d) by the percentage in column (c). From that result, subtract any section 179 expense deduction, any special depreciation
allowance, any credit for employer-provided childcare facilities and services, and half of any investment credit taken before 1986 (unless you took
the reduced credit). For automobiles and other listed property placed in service after 1985 (i.e., transition property), reduce the depreciable basis
by the entire investment credit.
Column (f).
Enter the recovery period. For property placed in service after 1986 and used more than 50% in a qualified business use, use the table in the line
19, column (d), instructions on page 5. For property placed in service after 1986 and used 50% or less in a qualified business use, depreciate the
property using the straight line method over its ADS recovery period. The ADS recovery period is 5 years for automobiles and computers.
Column (g).
Enter the method and convention used to figure your depreciation deduction. See the instructions for line 19, columns (e) and (f), on page 5. Write
200 DB, 150 DB, or S/L, for the depreciation method, and HY, MM, or MQ, for half-year, mid-month, or
mid-quarter conventions, respectively. For property placed in service before 1987, write PRE if you used the prescribed percentages under ACRS.
If you elected an alternate percentage, enter S/L.
Column (h).
See Limits for passenger automobiles on page 8 before entering an amount in column (h).
For property used more than 50% in a qualified business use (line 26) and placed in service after 1986, figure column (h) by following the
instructions for line 19, column (g), on page 6. If placed in service before 1987, multiply column (e) by the applicable percentage given in Pub. 534
for ACRS property. If the recovery period for an automobile ended before your tax year beginning in 2002, enter your unrecovered basis, if any, in
column (h).
For property used 50% or less in a qualified business use (line 27) and placed in service after 1986, figure column (h) by dividing column (e) by
column (f) and using the same conventions as discussed in the instructions for line 19, column (e), on page 5. The amount in column (h) cannot exceed
the property's unrecovered basis. If the recovery period for an automobile ended before your tax year beginning in 2002, enter your unrecovered basis,
if any, in column (h).
For property placed in service before 1987 that was disposed of during the year, enter zero.
Limits for passenger automobiles.
The depreciation deduction, including any special depreciation allowance, plus section 179 expense deduction for passenger automobiles is limited
for any tax year.
Definitions.
Passenger automobiles are 4-wheeled vehicles manufactured primarily for use on public roads that are rated at 6,000 pounds unloaded gross
vehicle weight or less. For a truck or van, gross vehicle weight is substituted for unloaded gross vehicle weight. Electric passenger
automobiles are vehicles produced by an original equipment manufacturer and designed to run primarily on electricity.
Exception.
The following vehicles are not considered passenger automobiles.
- An ambulance, hearse, or combination ambulance-hearse used in your trade or business.
- A vehicle used in your trade or business of transporting persons or property for compensation or hire.
For any passenger automobile (including an electric passenger automobile) you list on line 26 or line 27, the total of columns (h) and (i) on line
26 or 27 and column (h) on line 25 for that automobile cannot exceed the applicable limit shown in Table 1, 2, or 3 below. If
the business/investment use percentage in column (c) for the automobile is less than 100%, you must reduce the applicable limit to an amount equal to
the limit multiplied by that percentage. For example, for an automobile (other than an electric automobile) placed in service in January 2002 (by a
calendar year taxpayer, for which you elect not to claim the special depreciation allowance) that is used 60% for business/investment, the limit is
$1,836 ($3,060 x 60%).
Table 1 - Limits for Passenger Automobiles Placed in Service
Before 2000 (excluding electric passenger automobiles placed
in service after August 5, 1997)
| IF you placed your automobile in service:
|
THEN the limit on your depreciation
and section 179 expense deduction is: |
| June 19 - Dec. 31. 1984 |
$6,000 |
| Jan. 1 - Apr. 2, 1985 |
$6,200 |
| Apr. 3, 1985 - Dec. 31, 1986 |
$4,800 |
| Jan. 1, 1987 - Dec. 31, 1990 |
$1,475 |
| Jan. 1, 1991 - Dec. 31, 1992 |
$1,575 |
| Jan. 1, 1993 - Dec. 31, 1994 |
$1,675 |
| Jan. 1, 1995 - Dec. 31, 1999 |
$1,775* |
| *For vehicles placed in service
after August 5, 1997, this limit does not apply to the
cost of any qualified clean-fuel vehicle property (such
as retrofit parts and components) installed on a vehicle
for the purpose of permitting that vehicle to run on a
clean-burning fuel. See section 179A for definitions.
|
Table 2 - Limits for Passenger Automobiles Placed in Service After 1999 (excluding electric passenger automobiles)
| IF you placed your automobile in service:
|
AND the number of tax years in which this automobile has been in service is:
|
THEN the limit on your depreciation and section 179 expense deduction is*:
|
| Jan. 1 - Dec. 31, 2000
|
3
|
$2,950
|
| 4
|
$1,775
|
| Jan. 1 - Dec. 31, 2001
|
2
|
$4,900
|
| 3
|
$2,950
|
| Jan. 1 - Dec. 31, 2002
|
1
|
$7,660**
|
| 2
|
$4,900
|
| After Dec. 31, 2002
|
1
|
***
|
| *For vehicles placed in service after August 5, 1997, this limit does not apply to the cost of any qualified clean-fuel vehicle property (such as retrofit parts and components) installed on a vehicle for the purpose of permitting that vehicle to run on a clean-burning fuel. See section 179A for definitions.
|
| **If you elected not to claim the special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the limit is $3,060. ***The limit for automobiles placed in service after December 31, 2002, will be published in the Internal Revenue Bulletin. This amount was not available at the time these instructions were printed.
|
Table 3 - Limits for Electric Passenger Automobiles Placed in Service After August 5, 1997
| IF you placed your electric automobile in service:
|
AND the number of tax years in which this automobile has been in service is:
|
THEN the limit on your depreciation and section 179 expense deduction is:
|
| Aug. 6, 1997 - Dec. 31, 1998
|
4 or more
|
$5,425
|
| Jan. 1 - Dec. 31, 1999
|
4 or more
|
$5,325
|
| Jan. 1 - Dec. 31, 2000
|
3
|
$8,850
|
| 4 or more
|
$5,325
|
| Jan. 1 - Dec. 31, 2001
|
2
|
$14,800
|
| 3
|
$8,850
|
| Jan. 1 - Dec. 31, 2002
|
1
|
$22,980*
|
| 2
|
$14,700
|
| After Dec. 31, 2002
|
1
|
**
|
| *If you elected not to claim the special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the limit is $9,180.
|
| **The limit for electric passenger automobiles placed in service after December 31, 2002, will be published in the Internal Revenue Bulletin. This amount was not available at the time these instructions were printed.
|
Column (i).
Enter the amount you elect to expense for section 179 property used more than 50% in a qualified business use (subject to the limits for passenger
automobiles noted above). Refer to the Part I instructions to determine if the property qualifies under section 179.
Recapture of depreciation and section 179 expense deduction.
For listed property used more than 50% in a qualified business use in the year placed in service and used 50% or less in a later year, you may have
to recapture in the later year part of the depreciation and section 179 expense deduction. Use Form 4797, Sales of Business Property, to
figure the recapture amount.
Section B
Except as noted below, you must complete lines 30 through 36 for each vehicle identified in Section A. Employees must provide their employers with
the information requested on lines 30 through 36 for each automobile or vehicle provided for their use.
Exception.
Employers are not required to complete lines 30 through 36 for vehicles used by employees who are not more than 5% owners or related persons and
for which the question on line 37, 38, 39, 40, or 41 is answered Yes.
Section C
Employers providing vehicles to their employees satisfy the employer's substantiation requirements under section 274(d) by maintaining a written
policy statement that:
- Prohibits personal use including commuting or
- Prohibits personal use except for commuting.
An employee does not need to keep a separate set of records for any vehicle that satisfies these written policy statement rules.
For both written policy statements, there must be evidence that would enable the IRS to determine whether use of the vehicle meets the conditions
stated below.
Line 37
A policy statement that prohibits personal use (including commuting) must meet all of the following conditions.
- The employer owns or leases the vehicle and provides it to one or more employees for use in the employer's trade or business.
- When the vehicle is not used in the employer's trade or business, it is kept on the employer's business premises, unless it is temporarily
located elsewhere (e.g., for maintenance or because of a mechanical failure).
- No employee using the vehicle lives at the employer's business premises.
- No employee may use the vehicle for personal purposes, other than de minimis personal use (e.g., a stop for lunch between two business
deliveries).
- Except for de minimis use, the employer reasonably believes that no employee uses the vehicle for any personal purpose.
Line 38
A policy statement that prohibits personal use (except for commuting) is not available if the commuting employee is an officer,
director, or 1% or more owner. This policy must meet all of the following conditions.
- The employer owns or leases the vehicle and provides it to one or more employees for use in the employer's trade or business, and it is used
in the employer's trade or business.
- For bona fide noncompensatory business reasons, the employer requires the employee to commute to and/or from work in the
vehicle.
- The employer establishes a written policy under which the employee may not use the vehicle for personal purposes, other than commuting or de
minimis personal use (e.g., a stop for a personal errand between a business delivery and the employee's home).
- Except for de minimis use, the employer reasonably believes that the employee does not use the vehicle for any personal purpose other than
commuting.
- The employer accounts for the commuting use by including an appropriate amount in the employee's gross income.
Line 40
An employer that provides more than five vehicles to its employees who are not 5% owners or related persons need not complete Section B for such
vehicles. Instead, the employer must obtain the information from its employees and retain the information received.
Line 41
An automobile meets the requirements for qualified demonstration use if the employer maintains a written policy statement that:
- Prohibits its use by individuals other than full-time automobile salespersons,
- Prohibits its use for personal vacation trips,
- Prohibits storage of personal possessions in the automobile, and
- Limits the total mileage outside the salesperson's normal working hours.
Part VI-Amortization
Each year you may elect to deduct part of certain capital costs over a fixed period. If you amortize property, the part you amortize does not
qualify for the section 179 expense deduction or for depreciation.
Attach any information the Code and regulations may require to make a valid election. See Pub. 535 for more information.
Amortization of bond premiums.
For individuals reporting amortization of bond premium for bonds acquired before October 23, 1986, do not report the deduction here. See
the instructions for Schedule A (Form 1040), line 27.
For taxpayers (other than corporations) claiming a deduction for amortization of bond premium for bonds acquired after October 22, 1986, but before
January 1, 1988, the deduction is treated as interest expense and is subject to the investment interest limitations. Use Form 4952,
Investment Interest Expense Deduction, to compute the allowable deduction.
For taxable bonds acquired after 1987, the amortization offsets the interest income. See Pub. 550, Investment Income and Expenses.
Line 42
Complete line 42 only for those costs for which the amortization period begins during your tax year beginning in 2002.
Column (a).
Describe the costs you are amortizing. You may amortize the following.
The statement must be filed by the due date, including extensions, of your return for the year in which the active trade or business begins. If
you timely filed that return without making the election, you can still make the election on an amended return filed within 6 months of the due date,
excluding extensions, of that return. Write Filed pursuant to section 301.9100-2 on the amended return. See Regulations section 1.195-1 for
more details
Column (b).
Enter the date the amortization period begins under the applicable Code section.
Column (c).
Enter the total amount you are amortizing. See the applicable Code section for limits on the amortizable amount.
Column (d).
Enter the Code section under which you amortize the costs.
Column (f).
Compute the amortization deduction by:
- Dividing column (c) by the number of months over which the costs are to be amortized and multiplying the result by the number of months in
the amortization period included in your tax year beginning in 2002 or
- Multiplying column (c) by the percentage in column (e).
Line 43
If you are reporting the amortization of costs that began before your 2002 tax year and you are not required to file Form 4562 for any other
reason, do not file Form 4562. Report the amortization directly on the Other Deductions or Other Expenses line of your return. See Pub.
535.
Line 44
Report the total amortization, including the allowable portion of forestation or reforestation amortization, on the applicable Other
Deductions or Other Expenses line of your return. For more details, including limitations that apply, see Pub. 535. Partnerships (other
than electing large partnerships) and S corporations, report the amortizable basis of any forestation or reforestation expenses for which amortization
is elected and the year in which the amortization begins as a separately stated item on Schedules K and K-1 (Form 1065 or 1120S). See the instructions
for Schedule K (Form 1065 or 1120S) for more details on how to report.
Paperwork Reduction Act Notice.
We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information.
We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid
OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the
administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is:
| Recordkeeping
|
38 hr., 14 min.
|
| Learning about the law or the form
|
5 hr., 57 min.
|
| Preparing and sending the form to the IRS
|
6 hr., 50 min.
|
If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from
you. See the instructions for the tax return with which this form is filed.
Tables A and B
Tables C, D, E
Blank Depreciation Worksheet (Turned sideways)
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