Publication 946 (2006), How To Depreciate Property

3. Claiming the Special Depreciation Allowance

This is archived information that pertains only to the 2006 Tax Year. If you
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Table of Contents

You can take a special depreciation allowance to recover part of the cost of qualified property (defined next), placed in service during the tax year. The allowance applies only for the first year you place the property in service. For qualified property placed in service in 2006, you can take an additional 50% (or 30%, if applicable) special allowance. The allowance is an additional deduction you can take after any section 179 deduction and before you figure regular depreciation under MACRS for the year you place the property in service.

This chapter explains what is qualified property. It also includes rules regarding how to figure an allowance, how to elect not to claim an allowance, and when you must recapture an allowance.

See chapter 6 for information about getting publications and forms.

What Is Qualified Property?

Business/investment use

Improvement

Nonresidential real property

Placed in service

Residential rental property

Structural components

Your property is qualified property if it is one of the following.

Qualified Liberty Zone property.
Qualified Gulf Opportunity Zone (GO Zone) property.
Certain property with a long production period or certain noncommercial aircraft either placed in service or manufactured in the GO Zone, Rita GO Zone, or Wilma GO Zone before January 1, 2007.
Qualified cellulosic biomass ethanol plant property acquired by purchase after December 20, 2006.

The following discussions provide information about the types of qualified property listed above for which you can take the special depreciation allowance.

Qualified Liberty Zone Property

You can take a special depreciation allowance for qualified Liberty Zone property. The property must meet the following requirements.

It is one of the following types of property.
1. Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. See Which Method Can You Use To Depreciate Your Property in chapter 1.
2. Water utility property which is either of the following.
  1. Property that is an integral part of the gathering, treatment, or commercial distribution of water, and that, without regard to this provision, would be 20-year property.
  2. Any municipal sewer.
3. Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS.
4. Certain nonresidential real property and residential rental property (defined next).
It is property that meets certain tests, explained later.
It is not excepted property, explained later.

Nonresidential real property and residential rental property. This property is qualified Liberty Zone property only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the events of September 11, 2001. Property is treated as replacing destroyed or condemned property if, as part of an integrated plan, such property replaces real property included in a continuous area that includes real property destroyed or condemned.

For these purposes, real property is considered destroyed (or condemned) only if an entire building or structure was destroyed (or condemned) as a result of the attacks. Otherwise, the property is considered damaged real property. For example, if certain structural components of a building (such as walls, floors, and plumbing fixtures) were damaged or destroyed as a result of the attacks, but the building is not destroyed (or condemned), then only costs related to replacing the damaged or destroyed structural components qualify for the special Liberty Zone depreciation allowance.

Other Tests To Be Met

To be qualified Liberty Zone property, the property must also meet all of the following tests.

Acquisition date test. You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2) after September 10, 2001, and there must not have been a binding written contract for the acquisition in effect before September 11, 2001.

Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001. Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into before the manufacture, construction, or production of the property, is considered to be manufactured, constructed, or produced by you.

Placed in service date test. The property must be placed in service for use in your trade or business or for the production of income before January 1, 2007 (January 1, 2010, in the case of qualifying nonresidential real property and residential rental property).

Sale-leaseback. If you sold qualified Liberty Zone property you placed in service after September 10, 2001, and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback.

The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before September 11, 2001.

Syndicated leasing transactions. If qualified Liberty Zone property is originally placed in service by a lessor after September 10, 2001, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale.

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 final unit is placed in service and the period between the times the first and last units are placed in service does not exceed 12 months.

For special rules explaining when property involved in certain other transactions is treated as originally placed in service, see section 1.168(k)-1(b)(5) of the Regulations.

Substantial use test. Substantially all (80 percent or more) of the use of the property must be in the Liberty Zone and in the active conduct of your trade or business in the Liberty Zone.

Original use test. The original use of the property in the Liberty Zone must have begun with you after
September 10, 2001.

Used property can be qualified Liberty Zone property if it has not previously been used within the Liberty Zone. Also, additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test if the original use of the property in the Liberty Zone began with you. However, the cost of reconditioned or rebuilt property you acquired does not meet this test. Property containing used parts will not be treated as reconditioned or rebuilt if the cost of the used parts is not more than 20 percent of the total cost of the property.

If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after you originally placed the property in service, the lessor is considered to be the original user of the property.

For special rules identifying the original user of property involved in certain other transactions and the original user of fractional interests in property, see section 1.168(k)-1(b)(3) of the regulations.

Excepted Property

Qualified Liberty Zone property does not include any of the following.

Property placed in service and disposed of in the same tax year.
Property converted from business use to personal use in the same tax year it is acquired. Property converted from personal use to business use in the same or later tax year may be qualified Liberty Zone property.
Property that also qualified for the special depreciation allowance.
Property required to be depreciated using the Alternative Depreciation System (ADS). This includes listed property used 50% or less in a qualified business use. For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies, in chapter 4.
Qualified Liberty Zone leasehold improvement property, defined in chapter 4.
Property for which you elected not to claim any special depreciation allowance (discussed later).

Qualified Gulf Opportunity Zone Property

You can take a special depreciation allowance for qualified Gulf Opportunity Zone (GO Zone) property. The property must meet the following requirements.

It is one of the following types of property.
1. Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. See Which Method Can You Use To Depreciate Your Property in
  chapter 1.
2. Water utility property, which is either of the following.
  1. Property that is an integral part of the gathering, treatment, or commercial distribution of water, and that, without regard to this provision, would be 20-year property.
  2. Any municipal sewer.
3. Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS.
4. Qualified leasehold improvement property, defined below.
5. Certain nonresidential real property and residential rental property.
It is property that meets certain tests, explained under Other Tests To Be Met on page 27.
It is not excepted property, explained under Excepted Property on page 28.

Qualified leasehold improvement property. Generally, this is any improvement to an interior part of a building that is nonresidential real property, if all the following requirements are met.

The improvement is made under or according to a lease by the lessee (or any sublessee) or the lessor of that part of the building.
That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part.
The improvement is placed in service more than 3 years after the date the building was first placed in service by any person.
The improvement is section 1250 property. See chapter 3 in Publication 544, Sales and Other Dispositions of Assets, for the definition of section 1250 property.

However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following.

The enlargement of the building.
Any elevator or escalator.
Any structural component benefiting a common area.
The internal structural framework of the building.

Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. However, a lease between related persons is not treated as a lease.

Related persons. For this purpose, the following are related persons.

Members of an affiliated group.
An individual and a member of his or her family, including only a spouse, child, parent, brother, sister, half-brother, half-sister, ancestor, and lineal descendant.
A corporation and an individual who directly or indirectly owns 80% or more of the value of the outstanding stock of that corporation.
Two corporations that are members of the same controlled group.
A trust fiduciary and a corporation if 80% or more of the value of the outstanding stock is directly or indirectly owned by or for the trust or grantor of the trust.
The grantor and fiduciary, and the fiduciary and beneficiary, of any trust.
The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts.
A tax-exempt educational or charitable organization and any person (or, if that person is an individual, a member of that person's family) who directly or indirectly controls the organization.
Two S corporations, and an S corporation and a regular corporation, if the same persons own 80% or more of the value of the outstanding stock of each corporation.
A corporation and a partnership if the same persons own both of the following.
1. 80% or more of the value of the outstanding stock of the corporation.
2. 80% or more of the capital or profits interest in the partnership.
The executor and beneficiary of any estate.

Other Tests To Be Met

To be qualified GO Zone property, the property must also meet all of the following tests.

Acquisition date test. You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2) after August 27, 2005, with no binding written contract for the acquisition in effect before August 28, 2005.

Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after August 27, 2005, and before January 1, 2008. Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into before the manufacture, construction, or production of the property, is considered to be manufactured, constructed, or produced by you.

Placed in service date test. The property must be placed in service for use in your trade or business or for the production of income before January 1, 2008 (January 1, 2009, in the case of qualifying nonresidential real property and residential rental property).

Extension of placed in service date. The December 31, 2008, deadline for meeting the placed-in-service date test for qualifying nonresidential real property and residential rental property located in specified portions of the GO Zone is extended to December 31, 2010. Specified portions of the GO Zone are those counties or parishes in the GO Zone that are identified by the IRS as having more than 60 percent of the occupied housing units damaged by the hurricanes occurring during 2005. The IRS will publish guidance in 2007 identifying these counties and parishes.

Sale-leaseback. If you sold qualified GO Zone property you placed in service after August 27, 2005, and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback.

Syndicated leasing transactions. If qualified GO Zone property is originally placed in service by a lessor after August 27, 2005, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale.

Substantial use test. Substantially all (80 percent or more during each tax year) of the use of the property must be in the GO Zone and in the active conduct of your trade or business in the GO Zone.

Original use test. The original use of the property in the GO Zone must have begun with you after August 27, 2005.

Used property can be qualified GO Zone property if it has not previously been used within the GO Zone. Also, additional capital expenditures you incurred after August 27, 2005, to recondition or rebuild your property meet the original use test if the original use of the property in the GO Zone began with you.

If you sold property you placed in service after August 27, 2005, and you leased it back within 3 months after you originally placed the property in service, the lessor is considered to be the original user of the property.

If you acquire new property for personal use and then use the property in your trade or business or for the production of income, you are considered to be the original user.

For special rules identifying the original user of property involved in certain other transactions and the original user of fractional interests in property, see Regulations section 1.168(k)-1(b)(3).

Excepted Property

Qualified GO Zone property does not include any of the following.

Property required to be depreciated using the Alternative Depreciation System (ADS). This includes listed property used 50% or less in a qualified business use. For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies, in chapter 4.
Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103 of the Internal Revenue Code.
Any qualified revitalization building (described below) for which you have elected to claim a commercial revitalization deduction for qualified revitalization expenditures.
Any property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store, the principal business of which is the sale of alcoholic beverages for consumption off premises.
Any gambling or animal racing property (defined below).
Property for which you elected not to claim any special depreciation allowance (discussed later).

Qualified revitalization building. This is a commercial building and its structural components that you placed in service in a renewal community. If the building is new, the original use of the building must begin with you. If the building is not new, you must substantially rehabilitate the building and then place it in service. For more information, including definitions of substantially rehabilitated building and qualified revitalization expenditure, see Publication 954, Tax Incentives for Distressed Communities.

Gambling or animal racing property. Gambling or animal racing property includes the following personal and real property.

Any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing.
Any real property determined by square footage (other than any portion that is less than 100 square feet) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing.

Long Production Period Property and Noncommercial Aircraft

Long Production Period Property

To be qualified property, long production period property must meet the following requirements.

It is property of one of the following types.
1. Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less.
2. Water utility property (25-year property described under Which Property Class Applies under GDS in chapter 4).
3. Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified.
4. Qualified leasehold improvement property (defined earlier).
The property has a recovery period of at least 10 years or is transportation property. Transportation property is tangible personal property used in the trade or business of transporting persons or property.
The property is subject to section 263A.
The property has an estimated production period exceeding 2 years or has an estimated production period exceeding 1 year and an estimated production cost exceeding $1,000,000.

Noncommercial Aircraft

To be qualified property, noncommercial aircraft must meet the following requirements.

The aircraft must not be tangible personal property used in the trade or business of transporting persons or property (except for agricultural or firefighting purposes).
The aircraft must be purchased (as discussed under Property Acquired by Purchase in chapter 2) by a purchaser who at the time of the contract for purchase, makes a nonrefundable deposit of the lesser of 10% of the cost or $100,000.
The aircraft must have an estimated production period exceeding four months and a cost exceeding $200,000.

Other Tests To Be Met

Qualified long production period property and noncommercial aircraft must also meet all of the following tests.

Acquisition date test. To qualify for the 50% special allowance, you must have acquired the property after May 5, 2003, and before January 1, 2005. If a written binding contract to acquire the property existed before May 6, 2003, the property does not qualify.

To qualify for the 30% special allowance, you must have acquired the property after September 10, 2001, and before January 1, 2005. If a written binding contract to acquire the property existed before September 11, 2001, the property does not qualify.

Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after May 5, 2003 (after September 10, 2001, for the 30% special allowance, if applicable), and before January 1, 2005. Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into before the manufacture, construction, or production of the property, is considered to be manufactured, constructed, or produced by you.

Placed in service date test. The IRS has extended the original December 31, 2005, deadline for meeting the placed in service date test to December 31, 2006, for qualified long production period property and noncommercial aircraft placed in service or manufactured in the GO Zone, the Rita GO Zone, or the Wilma GO Zone. This extension applies only to taxpayers that were unable to meet the original December 31, 2005, deadline as a result of Hurricane Katrina, Rita, and/or Wilma. For information about the GO Zone, Rita GO Zone, and Wilma GO Zone, see Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma. Also see the Instructions for Form 4562 and Announcement 2006-29 on page 879 of Internal Revenue Bulletin 2006-19, available at www.irs.gov/pub/irs-irbs/irb06-19.pdf.

For special rules explaining when certain property is treated as originally placed in service, see section 1.168(k)-1(b)(5) of the Regulations.

Original use test. The original use of the property must have begun with you after May 5, 2003, for the 50% special allowance (after September 10, 2001, for the 30% special allowance, if applicable). Original use means the first use to which the property is put, whether or not by you. Therefore, property used by any person before May 6, 2003 (before September 11, 2001, if applicable), does not meet the original use test.

Additional capital expenditures you incurred to recondition or rebuild your property meet the original use test. However, the cost of reconditioned or rebuilt property you acquired does not meet this test. Property containing used parts will not be treated as reconditioned or rebuilt if the cost of the used parts is not more than 20 percent of the total cost of the property.

If you sold new property you placed in service after May 5, 2003 (after September 10, 2001, if applicable), and you leased it back within 3 months after you originally placed the property in service, the lessor is considered to be the original user of the property.

If you acquire new property for personal use and then use the property in your trade or business or for the production of income, you are considered to be the original user.

Excepted Property

Qualified long production period property and noncommercial aircraft do not include any of the following.

Property placed in service and disposed of in the same tax year.
Property converted from business use to personal use in the same tax year it is acquired. (Property converted from personal use to business use in the same or later tax year may be qualified property.)
Property required to be depreciated using the Alternative Depreciation System (ADS). This includes listed property used 50% or less in a qualified business use. For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies, in chapter 4.
Property for which you elected not to claim any special depreciation allowance (discussed later).

Qualified Cellulosic Biomass Ethanol Plant Property

You can take a special depreciation allowance for qualified cellulosic biomass ethanol plant property. Cellulosic biomass ethanol means ethanol produced by enzymatic hydrolysis of any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis. The property must meet the following requirements.

The property is used in the United States solely to produce cellulosic biomass ethanol.
The original use of the property must begin with you after December 20, 2006.
You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2) after December 20, 2006, with no binding written contract for the acquisition in effect before December 21, 2006.
The property must be placed in service for use in your trade or business or for the production of income before January 1, 2013.

Special Rules

Self-constructed property. Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after December 20, 2006. Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into before the manufacture, construction, or production of the property, is considered to be manufactured, constructed, or produced by you.

Sale-leaseback. If you sold qualified cellulosic biomass ethanol plant property you placed in service after December 20, 2006, and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback.

Syndicated leasing transactions. If qualified cellulosic biomass ethanol plant property is originally placed in service by a lessor after December 20, 2006, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale.

Excepted Property

Qualified cellulosic biomass ethanol plant property does not include any of the following.

Property placed in service and disposed of in the same tax year.
Property converted from business use to personal use in the same tax year it is acquired. Property converted from personal use to business use in the same or later tax year may be qualified cellulosic biomass ethanol plant property.
Property required to be depreciated using the Alternative Depreciation System (ADS). For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies, in chapter 4.
Property financed with the proceeds of any obligation the interest on which is exempt from tax under section 103 of the Internal Revenue Code.
Property for which you elected not to claim any special depreciation allowance (discussed later).
Property for which a deduction was taken under section 179C for certain qualified refinery property.

How Much Can You Deduct?

Adjusted basis

Basis

Placed in service

Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50% (or 30% if applicable). For qualified Liberty Zone property, multiply the depreciable basis by 30%. For qualified GO Zone property and qualified cellulosic biomass ethanol plant property, multiply the depreciable basis by 50%. For qualified long production period property and noncommercial aircraft, multiply the depreciable basis by 50% (or 30% if applicable).

For qualified property other than listed property, enter the special allowance on line 14 in Part II of Form 4562. For qualified property that is listed property, enter the special allowance on line 25 in Part V of Form 4562.

If you place qualified property in service in a short tax year, you can take the full amount of a special depreciation allowance.

Depreciable basis. This is the property's cost or other basis multiplied by the percentage of business/investment use, reduced by the total amount of any credits and deductions allocable to the property.

The following are examples of some credits and deductions that reduce depreciable basis.

Any section 179 deduction.
Any deduction for removal of barriers to the disabled and the elderly.
Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services.
Basis adjustment to investment credit property under section 50(c) of the Internal Revenue Code.

For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code.

For long production period property, only the part of the depreciable basis attributable to manufacture, construction, or production before January 1, 2005, is eligible for the special depreciation allowance.

For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1. For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1.

Depreciating the remaining cost. After you figure your special depreciation allowance for your qualified property, you can use the remaining cost to figure your regular MACRS depreciation deduction (discussed in chapter 4). Therefore, you must reduce the depreciable basis of the property by the allowance before figuring your regular MACRS depreciation deduction.

Example 1.

On November 1, 2006, Tom Brown bought and placed in service in his business qualified GO Zone property that cost $305,000. He did not elect to claim a section 179 deduction. He deducts 50% of the cost ($152,500) as a special depreciation allowance for 2006. He uses the remaining $152,500 of cost to figure his regular MACRS depreciation deduction for 2006 and later years.

Example 2.

The facts are the same as in Example 1, except that Tom elects to deduct $208,000 ($108,000 + the increased dollar limit of $100,000 for qualified GO Zone property) of the property's cost as a section 179 deduction. He uses the remaining $97,000 of cost to figure his special depreciation allowance of $48,500 ($97,000 × 50%). He uses the remaining $48,500 of cost to figure his regular MACRS depreciation deduction for 2006 and later years.

Like-kind exchanges and involuntary conversions. If you acquire qualified property in a like-kind exchange or involuntary conversion, the carryover basis of the acquired property is eligible for a special depreciation allowance. After you figure your special allowance, you can use the remaining carryover basis to figure your regular MACRS depreciation deduction. In the year you claim the allowance (the year you place in service the property received in the exchange or dispose of involuntarily converted property), you must reduce the carryover basis of the property by the allowance before figuring your regular MACRS depreciation deduction. See Figuring the Deduction for Property Acquired in a Nontaxable Exchange, in chapter 4, under How Is the Depreciation Deduction Figured. The excess basis (the part of the acquired property's basis that exceeds its carryover basis) is also eligible for a special depreciation allowance.

How Can You Elect Not To Claim an Allowance?

You can elect, for any class of property, either:

To deduct the 30% special allowance, instead of the 50% allowance (unless the allowance is for qualified GO Zone property or for qualified cellulosic biomass ethanol plant property), for all property in such class placed in service during the tax year, or
Not to deduct any special allowances for all property in such class placed in service during the tax year.

For qualified long production period property and noncommercial aircraft acquired before May 6, 2003, and for qualified Liberty Zone property, you can elect, for any class of property, not to deduct the 30% special allowance for all property in such class placed in service during the year. For qualified GO Zone property and qualified cellulosic biomass ethanol plant property, you can elect, for any class of property, not to deduct the 50% special allowance.

To make an election, attach a statement to your return indicating what election you are making and the class of property for which you are making the election.

When to make election. Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service.

However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Attach the election statement to the amended return. On the amended return, write “Filed pursuant to section 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. See Changing Your Accounting Method in chapter 1.

If you elect not to have any special allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation.

When Must You Recapture an Allowance?

When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. See When Do You Recapture MACRS Depreciation in chapter 4 for more information.

Recapture of allowance deducted for qualified GO Zone property. If, in any year after the year you claim the special depreciation allowance for qualified GO Zone property, the property ceases to be used in the GO Zone, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance.

Qualified cellulosic biomass ethanol plant property. If, in any year after the year you claim the special depreciation allowance for any qualified cellulosic biomass ethanol plant property, the property ceases to be qualified cellulosic biomass ethanol plant property, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance.

3. Claiming the Special Depreciation Allowance

Introduction

What Is Qualified Property?

Terms you may need to know (see Glossary):

Qualified Liberty Zone Property

Other Tests To Be Met

Excepted Property

Qualified Gulf Opportunity Zone Property

Other Tests To Be Met

Excepted Property

Long Production Period Property and Noncommercial Aircraft

Long Production Period Property

Noncommercial Aircraft

Other Tests To Be Met

Excepted Property

Qualified Cellulosic Biomass Ethanol Plant Property

Special Rules

Excepted Property

How Much Can You Deduct?

Terms you may need to know (see Glossary):

How Can You Elect Not To Claim an Allowance?

When Must You Recapture an Allowance?