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Bankruptcy Back Taxes

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Bankruptcy Back Taxes

Bankruptcy back taxes Publication 584 - Introductory Material Table of Contents What's New Introduction How To Use This Workbook What's New Future developments. Bankruptcy back taxes  The IRS has created a page on IRS. Bankruptcy back taxes gov for information about Publication 584, at www. Bankruptcy back taxes irs. Bankruptcy back taxes gov/pub584. Bankruptcy back taxes Information about any future developments affecting Publication 584 (such as legislation enacted after we release it) will be posted on that page. Bankruptcy back taxes Introduction This workbook is designed to help you figure your loss on personal-use property in the event of a disaster, casualty, or theft. Bankruptcy back taxes It contains schedules to help you figure the loss to your main home, its contents, and your motor vehicles. Bankruptcy back taxes However, these schedules are for your information only. Bankruptcy back taxes You must complete Form 4684, Casualties and Thefts, to report your loss. Bankruptcy back taxes How To Use This Workbook You can use this workbook by following these five steps. Bankruptcy back taxes Read Publication 547 to learn about the tax rules for casualties, disasters, and thefts. Bankruptcy back taxes Know the definitions of cost or other basis and fair market value, discussed later. Bankruptcy back taxes Fill out Schedules 1 through 20. Bankruptcy back taxes Read the instructions for Form 4684. Bankruptcy back taxes Fill out Form 4684 using the information you entered in Schedules 1 through 20. Bankruptcy back taxes Use the chart below to find out how to use Schedules 1 through 19 to fill out Form 4684. Bankruptcy back taxes Take what's in each row of. Bankruptcy back taxes . Bankruptcy back taxes . Bankruptcy back taxes And enter it on Form 4684. Bankruptcy back taxes . Bankruptcy back taxes . Bankruptcy back taxes Column 1 Line 1 Column 2 Line 2 Column 3 Line 3 Column 4 Line 4 Column 5 Line 5 Column 6 Line 6 Column 7 Line 7 Column 8 Line 8 Column 9 Line 9 Prev  Up  Next   Home   More Online Publications
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The Bankruptcy Back Taxes

Bankruptcy back taxes 7. Bankruptcy back taxes   Costs You Can Deduct or Capitalize Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Carrying Charges Research and Experimental CostsProduct. Bankruptcy back taxes Costs not included. Bankruptcy back taxes Intangible Drilling Costs Exploration CostsPartnerships and S corporations. Bankruptcy back taxes Development Costs Circulation Costs Business Start-Up and Organizational Costs Reforestation Costs Retired Asset Removal Costs Barrier Removal CostsOther barrier removals. Bankruptcy back taxes Film and Television Production Costs What's New Film and television productions costs. Bankruptcy back taxes  The election to expense film and television production costs does not apply to productions that begin after December 31, 2013. Bankruptcy back taxes See Film and Television Production Costs , later. Bankruptcy back taxes Introduction This chapter discusses costs you can elect to deduct or capitalize. Bankruptcy back taxes You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it. Bankruptcy back taxes If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. Bankruptcy back taxes When you capitalize a cost, you add it to the basis of property to which it relates. Bankruptcy back taxes A partnership, corporation, estate, or trust makes the election to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. Bankruptcy back taxes Each individual partner, shareholder, or beneficiary elects whether to deduct or capitalize exploration costs. Bankruptcy back taxes You may be subject to the alternative minimum tax (AMT) if you deduct research and experimental, intangible drilling, exploration, development, circulation, or business organizational costs. Bankruptcy back taxes For more information on the alternative minimum tax, see the instructions for the following forms. Bankruptcy back taxes Form 6251, Alternative Minimum Tax—Individuals. Bankruptcy back taxes Form 4626, Alternative Minimum Tax—Corporations. Bankruptcy back taxes Topics - This chapter discusses: Carrying charges Research and experimental costs Intangible drilling costs Exploration costs Development costs Circulation costs Qualified disaster expenses Business start-up and organizational costs Reforestation costs Retired asset removal costs Barrier removal costs Film and television production costs Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 3468 Investment Credit 8826 Disabled Access Credit See chapter 12 for information about getting publications and forms. Bankruptcy back taxes Carrying Charges Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. Bankruptcy back taxes Certain carrying charges must be capitalized under the uniform capitalization rules. Bankruptcy back taxes (For information on capitalization of interest, see chapter 4 . Bankruptcy back taxes ) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible. Bankruptcy back taxes You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. Bankruptcy back taxes For unimproved and unproductive real property, your election is good for only 1 year. Bankruptcy back taxes You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. Bankruptcy back taxes For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. Bankruptcy back taxes For personal property, your election is effective until the date you install or first use it, whichever is later. Bankruptcy back taxes How to make the election. Bankruptcy back taxes   To make the election to capitalize a carrying charge, attach a statement to your original tax return for the year the election is to be effective indicating which charges you are electing to capitalize. Bankruptcy back taxes 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 return (excluding extensions). Bankruptcy back taxes Attach the statement to the amended return and write “Filed pursuant to section 301. Bankruptcy back taxes 9100-2” on the statement. Bankruptcy back taxes File the amended return at the same address you filed the original return. Bankruptcy back taxes Research and Experimental Costs The costs of research and experimentation are generally capital expenses. Bankruptcy back taxes However, you can elect to deduct these costs as a current business expense. Bankruptcy back taxes Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change. Bankruptcy back taxes If you meet certain requirements, you may elect to defer and amortize research and experimental costs. Bankruptcy back taxes For information on electing to defer and amortize these costs, see Research and Experimental Costs in chapter 8. Bankruptcy back taxes Research and experimental costs defined. Bankruptcy back taxes   Research and experimental costs are reasonable costs you incur in your trade or business for activities intended to provide information that would eliminate uncertainty about the development or improvement of a product. Bankruptcy back taxes Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. Bankruptcy back taxes Whether costs qualify as research and experimental costs depends on the nature of the activity to which the costs relate rather than on the nature of the product or improvement being developed or the level of technological advancement. Bankruptcy back taxes      The costs of obtaining a patent, including attorneys' fees paid or incurred in making and perfecting a patent application, are research and experimental costs. Bankruptcy back taxes However, costs paid or incurred to obtain another's patent are not research and experimental costs. Bankruptcy back taxes Product. Bankruptcy back taxes   The term “product” includes any of the following items. Bankruptcy back taxes Formula. Bankruptcy back taxes Invention. Bankruptcy back taxes Patent. Bankruptcy back taxes Pilot model. Bankruptcy back taxes Process. Bankruptcy back taxes Technique. Bankruptcy back taxes Property similar to the items listed above. Bankruptcy back taxes It also includes products used by you in your trade or business or held for sale, lease, or license. Bankruptcy back taxes Costs not included. Bankruptcy back taxes   Research and experimental costs do not include expenses for any of the following activities. Bankruptcy back taxes Advertising or promotions. Bankruptcy back taxes Consumer surveys. Bankruptcy back taxes Efficiency surveys. Bankruptcy back taxes Management studies. Bankruptcy back taxes Quality control testing. Bankruptcy back taxes Research in connection with literary, historical, or similar projects. Bankruptcy back taxes The acquisition of another's patent, model, production, or process. Bankruptcy back taxes When and how to elect. Bankruptcy back taxes   You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. Bankruptcy back taxes If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS. Bankruptcy back taxes Deducting or Amortizing Research and Experimentation Costs IF you . Bankruptcy back taxes . Bankruptcy back taxes . Bankruptcy back taxes THEN . Bankruptcy back taxes . Bankruptcy back taxes . Bankruptcy back taxes Elect to deduct research and experimental costs as a current business expense Deduct all research and experimental costs in the first year you pay or incur the costs and all later years. Bankruptcy back taxes Do not deduct research and experimental costs as a current business expense If you meet the requirements, amortize them over at least 60 months, starting with the month you first receive an economic benefit from the research. Bankruptcy back taxes See Research and Experimental Costs in chapter 8. Bankruptcy back taxes Research credit. Bankruptcy back taxes   If you pay or incur qualified research expenses, you may be able to take the research credit. Bankruptcy back taxes For more information see Form 6765, Credit for Increasing Research Activities and its instructions. Bankruptcy back taxes Intangible Drilling Costs The costs of developing oil, gas, or geothermal wells are ordinarily capital expenditures. Bankruptcy back taxes You can usually recover them through depreciation or depletion. Bankruptcy back taxes However, you can elect to deduct intangible drilling costs (IDCs) as a current business expense. Bankruptcy back taxes These are certain drilling and development costs for wells in the United States in which you hold an operating or working interest. Bankruptcy back taxes You can deduct only costs for drilling or preparing a well for the production of oil, gas, or geothermal steam or hot water. Bankruptcy back taxes You can elect to deduct only the costs of items with no salvage value. Bankruptcy back taxes These include wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production. Bankruptcy back taxes Your cost for any drilling or development work done by contractors under any form of contract is also an IDC. Bankruptcy back taxes However, see Amounts paid to contractor that must be capitalized , later. Bankruptcy back taxes You can also elect to deduct the cost of drilling exploratory bore holes to determine the location and delineation of offshore hydrocarbon deposits if the shaft is capable of conducting hydrocarbons to the surface on completion. Bankruptcy back taxes It does not matter whether there is any intent to produce hydrocarbons. Bankruptcy back taxes If you do not elect to deduct your IDCs as a current business expense, you can elect to deduct them over the 60-month period beginning with the month they were paid or incurred. Bankruptcy back taxes Amounts paid to contractor that must be capitalized. Bankruptcy back taxes   Amounts paid to a contractor must be capitalized if they are either: Amounts properly allocable to the cost of depreciable property, or Amounts paid only out of production or proceeds from production if these amounts are depletable income to the recipient. Bankruptcy back taxes How to make the election. Bankruptcy back taxes   You elect to deduct IDCs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. Bankruptcy back taxes No formal statement is required. Bankruptcy back taxes If you file Schedule C (Form 1040), enter these costs under “Other expenses. Bankruptcy back taxes ”   For oil and gas wells, your election is binding for the year it is made and for all later years. Bankruptcy back taxes For geothermal wells, your election can be revoked by the filing of an amended return on which you do not take the deduction. Bankruptcy back taxes You can file the amended return for the year up to the normal time of expiration for filing a claim for credit or refund, generally, within 3 years after the date you filed the original return or within 2 years after the date you paid the tax, whichever is later. Bankruptcy back taxes Energy credit for costs of geothermal wells. Bankruptcy back taxes   If you capitalize the drilling and development costs of geothermal wells that you place in service during the tax year, you may be able to claim a business energy credit. Bankruptcy back taxes See the Instructions for Form 3468 for more information. Bankruptcy back taxes Nonproductive well. Bankruptcy back taxes   If you capitalize your IDCs, you have another option if the well is nonproductive. Bankruptcy back taxes You can deduct the IDCs of the nonproductive well as an ordinary loss. Bankruptcy back taxes You must indicate and clearly state your election on your tax return for the year the well is completed. Bankruptcy back taxes Once made, the election for oil and gas wells is binding for all later years. Bankruptcy back taxes You can revoke your election for a geothermal well by filing an amended return that does not claim the loss. Bankruptcy back taxes Costs incurred outside the United States. Bankruptcy back taxes   You cannot deduct as a current business expense all the IDCs paid or incurred for an oil, gas, or geothermal well located outside the United States. Bankruptcy back taxes However, you can elect to include the costs in the adjusted basis of the well to figure depletion or depreciation. Bankruptcy back taxes If you do not make this election, you can deduct the costs over the 10-year period beginning with the tax year in which you paid or incurred them. Bankruptcy back taxes These rules do not apply to a nonproductive well. Bankruptcy back taxes Exploration Costs The costs of determining the existence, location, extent, or quality of any mineral deposit are ordinarily capital expenditures if the costs lead to the development of a mine. Bankruptcy back taxes You recover these costs through depletion as the mineral is removed from the ground. Bankruptcy back taxes However, you can elect to deduct domestic exploration costs paid or incurred before the beginning of the development stage of the mine (except those for oil and gas wells). Bankruptcy back taxes How to make the election. Bankruptcy back taxes   You elect to deduct exploration costs by taking the deduction on your income tax return, or on an amended income tax return, for the first tax year for which you wish to deduct the costs paid or incurred during the tax year. Bankruptcy back taxes Your return must adequately describe and identify each property or mine, and clearly state how much is being deducted for each one. Bankruptcy back taxes The election applies to the tax year you make this election and all later tax years. Bankruptcy back taxes Partnerships and S corporations. Bankruptcy back taxes   Each partner, not the partnership, elects whether to capitalize or to deduct that partner's share of exploration costs. Bankruptcy back taxes Each shareholder, not the S corporation, elects whether to capitalize or to deduct that shareholder's share of exploration costs. Bankruptcy back taxes Reduced corporate deductions for exploration costs. Bankruptcy back taxes   A corporation (other than an S corporation) can deduct only 70% of its domestic exploration costs. Bankruptcy back taxes It must capitalize the remaining 30% of costs and amortize them over the 60-month period starting with the month the exploration costs are paid or incurred. Bankruptcy back taxes A corporation may also elect to capitalize and amortize mining exploration costs over a 10-year period. Bankruptcy back taxes For more information on this method of amortization, see Internal Revenue Code section 59(e). Bankruptcy back taxes   The 30% the corporation capitalizes cannot be added to its basis in the property to figure cost depletion. Bankruptcy back taxes However, the amount amortized is treated as additional depreciation and is subject to recapture as ordinary income on a disposition of the property. Bankruptcy back taxes See Section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. Bankruptcy back taxes   These rules also apply to the deduction of development costs by corporations. Bankruptcy back taxes See Development Costs , later. Bankruptcy back taxes Recapture of exploration expenses. Bankruptcy back taxes   When your mine reaches the producing stage, you must recapture any exploration costs you elected to deduct. Bankruptcy back taxes Use either of the following methods. Bankruptcy back taxes Method 1—Include the deducted costs in gross income for the tax year the mine reaches the producing stage. Bankruptcy back taxes Your election must be clearly indicated on the return. Bankruptcy back taxes Increase your adjusted basis in the mine by the amount included in income. Bankruptcy back taxes Generally, you must elect this recapture method by the due date (including extensions) of your return. Bankruptcy back taxes 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 return (excluding extensions). Bankruptcy back taxes Make the election on your amended return and write “Filed pursuant to section 301. Bankruptcy back taxes 9100-2” on the form where you are including the income. Bankruptcy back taxes File the amended return at the same address you filed the original return. Bankruptcy back taxes Method 2—Do not claim any depletion deduction for the tax year the mine reaches the producing stage and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. Bankruptcy back taxes   You also must recapture deducted exploration costs if you receive a bonus or royalty from mine property before it reaches the producing stage. Bankruptcy back taxes Do not claim any depletion deduction for the tax year you receive the bonus or royalty and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. Bankruptcy back taxes   Generally, if you dispose of the mine before you have fully recaptured the exploration costs you deducted, recapture the balance by treating all or part of your gain as ordinary income. Bankruptcy back taxes Under these circumstances, you generally treat as ordinary income all of your gain if it is less than your adjusted exploration costs with respect to the mine. Bankruptcy back taxes If your gain is more than your adjusted exploration costs, treat as ordinary income only a part of your gain, up to the amount of your adjusted exploration costs. Bankruptcy back taxes Foreign exploration costs. Bankruptcy back taxes   If you pay or incur exploration costs for a mine or other natural deposit located outside the United States, you cannot deduct all the costs in the current year. Bankruptcy back taxes You can elect to include the costs (other than for an oil, gas, or geothermal well) in the adjusted basis of the mineral property to figure cost depletion. Bankruptcy back taxes (Cost depletion is discussed in chapter 9 . Bankruptcy back taxes ) If you do not make this election, you must deduct the costs over the 10-year period beginning with the tax year in which you pay or incur them. Bankruptcy back taxes These rules also apply to foreign development costs. Bankruptcy back taxes Development Costs You can deduct costs paid or incurred during the tax year for developing a mine or any other natural deposit (other than an oil or gas well) located in the United States. Bankruptcy back taxes These costs must be paid or incurred after the discovery of ores or minerals in commercially marketable quantities. Bankruptcy back taxes Development costs also include depreciation on improvements used in the development of ores or minerals and costs incurred for you by a contractor. Bankruptcy back taxes Development costs do not include the costs for the acquisition or improvement of depreciable property. Bankruptcy back taxes Instead of deducting development costs in the year paid or incurred, you can elect to treat the cost as deferred expenses and deduct them ratably as the units of produced ores or minerals benefited by the expenses are sold. Bankruptcy back taxes This election applies each tax year to expenses paid or incurred in that year. Bankruptcy back taxes Once made, the election is binding for the year and cannot be revoked for any reason. Bankruptcy back taxes How to make the election. Bankruptcy back taxes   The election to deduct development costs ratably as the ores or minerals are sold must be made for each mine or other natural deposit by a clear indication on your return or by a statement filed with the IRS office where you file your return. Bankruptcy back taxes Generally, you must make the election by the due date of the return (including extensions). Bankruptcy back taxes 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 return (excluding extensions). Bankruptcy back taxes Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Bankruptcy back taxes 9100-2. Bankruptcy back taxes ” File the amended return at the same address you filed the original return. Bankruptcy back taxes Foreign development costs. Bankruptcy back taxes   The rules discussed earlier for foreign exploration costs apply to foreign development costs. Bankruptcy back taxes Reduced corporate deductions for development costs. Bankruptcy back taxes   The rules discussed earlier for reduced corporate deductions for exploration costs also apply to corporate deductions for development costs. Bankruptcy back taxes Circulation Costs A publisher can deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical. Bankruptcy back taxes For example, a publisher can deduct the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. Bankruptcy back taxes Circulation costs are deductible even if they normally would be capitalized. Bankruptcy back taxes This rule does not apply to the following costs that must be capitalized. Bankruptcy back taxes The purchase of land or depreciable property. Bankruptcy back taxes The acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical, including the purchase of another publisher's list of subscribers. Bankruptcy back taxes Other treatment of circulation costs. Bankruptcy back taxes   If you do not want to deduct circulation costs as a current business expense, you can elect one of the following ways to recover these costs. Bankruptcy back taxes Capitalize all circulation costs that are properly chargeable to a capital account (see chapter 1 ). Bankruptcy back taxes Amortize circulation costs over the 3-year period beginning with the tax year they were paid or incurred. Bankruptcy back taxes How to make the election. Bankruptcy back taxes   You elect to capitalize circulation costs by attaching a statement to your return for the first tax year the election applies. Bankruptcy back taxes Your election is binding for the year it is made and for all later years, unless you get IRS approval to revoke it. Bankruptcy back taxes Business Start-Up and Organizational Costs Business start-up and organizational costs are generally capital expenditures. Bankruptcy back taxes However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. Bankruptcy back taxes The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Bankruptcy back taxes Any remaining costs must be amortized. Bankruptcy back taxes For information about amortizing start-up and organizational costs, see chapter 8 . Bankruptcy back taxes Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. Bankruptcy back taxes Organizational costs include the costs of creating a corporation. Bankruptcy back taxes For more information on start-up and organizational costs, see chapter 8 . Bankruptcy back taxes How to make the election. Bankruptcy back taxes   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. Bankruptcy back taxes 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 return (excluding extensions). Bankruptcy back taxes Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Bankruptcy back taxes 9100-2. Bankruptcy back taxes ” File the amended return at the same address you filed the original return. Bankruptcy back taxes The election applies when computing taxable income for the current tax year and all subsequent years. Bankruptcy back taxes Reforestation Costs Reforestation costs are generally capital expenditures. Bankruptcy back taxes However, you can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. Bankruptcy back taxes The remaining costs can be amortized over an 84-month period. Bankruptcy back taxes For information about amortizing reforestation costs, see chapter 8 . Bankruptcy back taxes Qualifying reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Bankruptcy back taxes Qualified timber property is property that contains trees in significant commercial quantities. Bankruptcy back taxes See chapter 8 for more information on qualifying reforestation costs and qualified timber property. Bankruptcy back taxes If you elect to deduct qualified reforestation costs, create and maintain separate timber accounts for each qualified timber property and include all reforestation costs and the dates each was applied. Bankruptcy back taxes Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. Bankruptcy back taxes How to make the election. Bankruptcy back taxes   You elect to deduct qualifying reforestation costs by claiming the deduction on your timely filed income tax return (including extensions) for the tax year the expenses were paid or incurred. Bankruptcy back taxes If Form T (Timber), Forest Activities Schedule, is required, complete Part IV of Form T. Bankruptcy back taxes If Form T is not required, attach a statement containing the following information for each qualified timber property for which an election is being made. Bankruptcy back taxes The unique stand identification numbers. Bankruptcy back taxes The total number of acres reforested during the tax year. Bankruptcy back taxes The nature of the reforestation treatments. Bankruptcy back taxes The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. Bankruptcy back taxes   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 return (excluding extensions). Bankruptcy back taxes Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Bankruptcy back taxes 9100-2. Bankruptcy back taxes ” File the amended return at the same address you filed the original return. Bankruptcy back taxes The election applies when computing taxable income for the current tax year and all subsequent years. Bankruptcy back taxes   For additional information on reforestation costs, see chapter 8 . Bankruptcy back taxes Recapture. Bankruptcy back taxes   This deduction may have to be recaptured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the expenditure. Bankruptcy back taxes For more information on recapturing the deduction, see Depreciation Recapture in Publication 544. Bankruptcy back taxes Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. Bankruptcy back taxes However, if you replace a component (part) of a depreciable asset, capitalize the removal costs if the replacement is an improvement and deduct the costs if the replacement is a repair. Bankruptcy back taxes Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. Bankruptcy back taxes However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. Bankruptcy back taxes You must own or lease the facility or vehicle for use in connection with your trade or business. Bankruptcy back taxes A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. Bankruptcy back taxes A public transportation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your customers, even if you are not in the business of providing transportation services). Bankruptcy back taxes You cannot deduct any costs that you paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property in the normal course of business. Bankruptcy back taxes Deduction limit. Bankruptcy back taxes   The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. Bankruptcy back taxes However, you can add any costs over this limit to the basis of the property and depreciate these excess costs. Bankruptcy back taxes Partners and partnerships. Bankruptcy back taxes   The $15,000 limit applies to a partnership and also to each partner in the partnership. Bankruptcy back taxes A partner can allocate the $15,000 limit in any manner among the partner's individually incurred costs and the partner's distributive share of partnership costs. Bankruptcy back taxes If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. Bankruptcy back taxes   A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). Bankruptcy back taxes If the partnership cannot show this, it is presumed that the partner was able to deduct the distributive share of the partnership's costs in full. Bankruptcy back taxes Example. Bankruptcy back taxes Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. Bankruptcy back taxes Emilio had $12,000 of similar expenses in his sole proprietorship. Bankruptcy back taxes He elected to deduct $7,000 of them. Bankruptcy back taxes Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. Bankruptcy back taxes Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. Bankruptcy back taxes Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partnership's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. Bankruptcy back taxes Qualification standards. Bankruptcy back taxes   You can deduct your costs as a current expense only if the barrier removal meets the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. Bankruptcy back taxes You can view the Americans with Disabilities Act at www. Bankruptcy back taxes ada. Bankruptcy back taxes gov/pubs/ada. Bankruptcy back taxes htm. Bankruptcy back taxes   The following is a list of some architectural barrier removal costs that can be deducted. Bankruptcy back taxes Ground and floor surfaces. Bankruptcy back taxes Walks. Bankruptcy back taxes Parking lots. Bankruptcy back taxes Ramps. Bankruptcy back taxes Entrances. Bankruptcy back taxes Doors and doorways. Bankruptcy back taxes Stairs. Bankruptcy back taxes Floors. Bankruptcy back taxes Toilet rooms. Bankruptcy back taxes Water fountains. Bankruptcy back taxes Public telephones. Bankruptcy back taxes Elevators. Bankruptcy back taxes Controls. Bankruptcy back taxes Signage. Bankruptcy back taxes Alarms. Bankruptcy back taxes Protruding objects. Bankruptcy back taxes Symbols of accessibility. Bankruptcy back taxes You can find the ADA guidelines and requirements for architectural barrier removal at www. Bankruptcy back taxes usdoj. Bankruptcy back taxes gov/crt/ada/reg3a. Bankruptcy back taxes html. Bankruptcy back taxes   The costs for removal of transportation barriers from rail facilities, buses, and rapid and light rail vehicles are deductible. Bankruptcy back taxes You can find the guidelines and requirements for transportation barrier removal at www. Bankruptcy back taxes fta. Bankruptcy back taxes dot. Bankruptcy back taxes gov. Bankruptcy back taxes   Also, you can access the ADA website at www. Bankruptcy back taxes ada. Bankruptcy back taxes gov for additional information. Bankruptcy back taxes Other barrier removals. Bankruptcy back taxes   To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. Bankruptcy back taxes The removed barrier must be a substantial barrier to access or use of a facility or public transportation vehicle by persons who have a disability or are elderly. Bankruptcy back taxes The removed barrier must have been a barrier for at least one major group of persons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). Bankruptcy back taxes The barrier must be removed without creating any new barrier that significantly impairs access to or use of the facility or vehicle by a major group of persons who have a disability or are elderly. Bankruptcy back taxes How to make the election. Bankruptcy back taxes   If you elect to deduct your costs for removing barriers to the disabled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. Bankruptcy back taxes Identify the deduction as a separate item. Bankruptcy back taxes The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. Bankruptcy back taxes If you make this election, you must maintain adequate records to support your deduction. Bankruptcy back taxes   For your election to be valid, you generally must file your return by its due date, including extensions. Bankruptcy back taxes 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 return (excluding extensions). Bankruptcy back taxes Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Bankruptcy back taxes 9100-2. Bankruptcy back taxes ” File the amended return at the same address you filed the original return. Bankruptcy back taxes Your election is irrevocable after the due date, including extensions, of your return. Bankruptcy back taxes Disabled access credit. Bankruptcy back taxes   If you make your business accessible to persons with disabilities and your business is an eligible small business, you may be able to claim the disabled access credit. Bankruptcy back taxes If you choose to claim the credit, you must reduce the amount you deduct or capitalize by the amount of the credit. Bankruptcy back taxes   For more information, see Form 8826, Disabled Access Credit. Bankruptcy back taxes Film and Television Production Costs Film and television production costs are generally capital expenses. Bankruptcy back taxes However, you can elect to deduct costs paid or incurred for certain productions commencing before January 1, 2014. Bankruptcy back taxes For more information, see section 181 of the Internal Revenue Code and the related Treasury Regulations. Bankruptcy back taxes Prev  Up  Next   Home   More Online Publications