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Hrblock At Home

Hrblock at home 9. Hrblock at home   Worksheets Table of Contents When Should I Figure MAC?Checking the Previous Year's Contributions Available Worksheets Chapter 2 introduced you to the term maximum amount contributable (MAC). Hrblock at home Generally, your MAC is the lesser of your: Limit on annual additions (chapter 3), or Limit on elective deferrals (chapter 4). Hrblock at home The worksheets in this chapter can help you figure the cost of incidental life insurance, your includible compensation, your limit on annual additions, your limit on elective deferrals, your limit on catch-up contributions, and your MAC. Hrblock at home After completing the worksheets, you should maintain them with your 403(b) records for that year. Hrblock at home Do not attach them to your tax return. Hrblock at home At the end of the year or the beginning of the next year, you should compare your estimated compensation figures with your actual figures. Hrblock at home If your compensation is the same as, or more than, the projected amounts and the calculations are correct, then you should simply file these worksheets with your other tax records for the year. Hrblock at home If your compensation was lower than your estimated figures, you will need to check the amount contributed during the year to determine if contributions are more than your MAC. Hrblock at home When Should I Figure MAC? At the beginning of each year, you should figure your MAC using a conservative estimate of your compensation. Hrblock at home Should your income change during the year, you should refigure your MAC based on a revised conservative estimate. Hrblock at home By doing this, you will be able to determine if contributions to your 403(b) account should be increased or decreased for the year. Hrblock at home Checking the Previous Year's Contributions At the beginning of the following year, you should refigure your MAC based on your actual earned income. Hrblock at home At the end of the current year or the beginning of the next year, you should check your contributions to be sure you did not exceed your MAC. Hrblock at home This means refiguring your limit based on your actual compensation figures for the year. Hrblock at home This will allow you to determine if the amount contributed is more than the allowable amounts, and possibly avoid additional taxes. Hrblock at home Available Worksheets The following worksheets have been provided to help you figure your MAC. Hrblock at home Worksheet A. Hrblock at home Cost of Incidental Life Insurance. Hrblock at home Worksheet B. Hrblock at home Includible Compensation for Your Most Recent Year of Service Worksheet C. Hrblock at home Limit on Catch-Up Contributions. Hrblock at home ??? Worksheet 1. Hrblock at home Maximum Amount Contributable (MAC). Hrblock at home Worksheet A. Hrblock at home Cost of Incidental Life Insurance Note. Hrblock at home Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. Hrblock at home This amount will be used to figure includible compensation for your most recent year of service. Hrblock at home 1. Hrblock at home Enter the value of the contract (amount payable upon your death) 1. Hrblock at home   2. Hrblock at home Enter the cash value in the contract at the end of the year 2. Hrblock at home   3. Hrblock at home Subtract line 2 from line 1. Hrblock at home This is the value of your current life insurance protection 3. Hrblock at home   4. Hrblock at home Enter your age on your birthday nearest the beginning of the policy year 4. Hrblock at home   5. Hrblock at home Enter the 1-year term premium for $1,000 of life insurance based on your age. Hrblock at home (From Figure 3-1) 5. Hrblock at home   6. Hrblock at home Divide line 3 by $1,000 6. Hrblock at home   7. Hrblock at home Multiply line 6 by line 5. Hrblock at home This is the cost of your incidental life insurance 7. Hrblock at home   Worksheet B. Hrblock at home Includible Compensation for Your Most Recent Year of Service1 Note. Hrblock at home Use this worksheet to figure includible compensation for your most recent year of service. Hrblock at home 1. Hrblock at home Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service 1. Hrblock at home   2. Hrblock at home Enter elective deferrals excluded from your gross income for your most recent year of service2 2. Hrblock at home   3. Hrblock at home Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service 3. Hrblock at home   4. Hrblock at home Enter amounts contributed or deferred by your employer according to your election to your 457 account (a nonqualified plan of a state or local government or of a tax-exempt organization) for your most recent year of service 4. Hrblock at home   5. Hrblock at home Enter pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan for your most recent year of service 5. Hrblock at home   6. Hrblock at home Enter your foreign earned income exclusion for your most recent year of service 6. Hrblock at home   7. Hrblock at home Add lines 1, 2, 3, 4, 5, and 6 7. Hrblock at home   8. Hrblock at home Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service 8. Hrblock at home   9. Hrblock at home Enter compensation that was both: Earned during your most recent year of service, and Earned while your employer was not qualified to maintain a 403(b) plan 9. Hrblock at home   10. Hrblock at home Add lines 8 and 9 10. Hrblock at home   11. Hrblock at home Subtract line 10 from line 7. Hrblock at home This is your includible compensation for your most recent year of service 11. Hrblock at home   1Use estimated amounts if figuring includible compensation before the end of the year. Hrblock at home  2Elective deferrals made to a designated Roth account are not excluded from your gross income and should not be included on this line. Hrblock at home Worksheet C. Hrblock at home Limit on Catch-Up Contributions Note. Hrblock at home If you will be age 50 or older by the end of the year, use this worksheet to figure your limit on catch-up contributions. Hrblock at home 1. Hrblock at home Maximum catch-up contributions 1. Hrblock at home $5,500 2. Hrblock at home Enter your includible compensation for your most recent year of service 2. Hrblock at home   3. Hrblock at home Enter your elective deferrals 3. Hrblock at home   4. Hrblock at home Subtract line 3 from line 2 4. Hrblock at home   5. Hrblock at home Enter the lesser of line 1 or line 4. Hrblock at home This is your limit on catch-up contributions 5. Hrblock at home   Worksheet 1. Hrblock at home Maximum Amount Contributable (MAC) Note. Hrblock at home Use this worksheet to figure your MAC. Hrblock at home Part I. Hrblock at home Limit on Annual Additions     1. Hrblock at home Enter your includible compensation for your most recent year of service 1. Hrblock at home   2. Hrblock at home Maximum1: For 2013, enter $51,000 For 2014, enter $52,000 2. Hrblock at home   3. Hrblock at home Enter the lesser of line 1 or line 2. Hrblock at home This is your limit on annual additions 3. Hrblock at home     Caution: If you had only nonelective contributions, skip Part II and enter the amount from line 3 on line 18. Hrblock at home     Part II. Hrblock at home Limit on Elective Deferrals     4. Hrblock at home Maximum contribution: For 2013, enter $17,500 For 2014, enter $17,500 4. Hrblock at home     Note. Hrblock at home If you have at least 15 years of service with a qualifying organization, complete lines 5 through 17. Hrblock at home If not, enter zero (-0-) on line 16 and go to line 17. Hrblock at home     5. Hrblock at home Amount per year of service 5. Hrblock at home $ 5,000 6. Hrblock at home Enter your years of service 6. Hrblock at home   7. Hrblock at home Multiply line 5 by line 6 7. Hrblock at home   8. Hrblock at home Enter the total of all elective deferrals made for you by the qualifying organization for prior years 8. Hrblock at home   9. Hrblock at home Subtract line 8 from line 7. Hrblock at home If zero or less, enter zero (-0-) 9. Hrblock at home   10. Hrblock at home Maximum increase in limit for long service 10. Hrblock at home $15,000 11. Hrblock at home Enter the total of additional pre-tax elective deferrals made in prior years under the 15-year rule 11. Hrblock at home   12. Hrblock at home Enter the aggregate amount of all designated Roth contributions permitted for prior years under the 15-year rule 12. Hrblock at home   13. Hrblock at home Add line 11 and line 12 13. Hrblock at home   14. Hrblock at home Subtract line 13 from line 10 14. Hrblock at home   15. Hrblock at home Maximum additional contributions 15. Hrblock at home $ 3,000 16. Hrblock at home Enter the least of lines 9, 14, or 15. Hrblock at home This is your increase in the limit for long service 16. Hrblock at home   17. Hrblock at home Add lines 4 and 16. Hrblock at home This is your limit on elective deferrals 17. Hrblock at home     Part III. Hrblock at home Maximum Amount Contributable     18. Hrblock at home If you had only nonelective contributions, enter the amount from line 3. Hrblock at home This is your MAC. Hrblock at home    If you had only elective deferrals, enter the lesser of lines 3 or 17. Hrblock at home This is your MAC. Hrblock at home    If you had both elective deferrals and nonelective contributions, enter the amount from line 3. Hrblock at home This is your MAC. Hrblock at home (Use the amount on line 17 to determine if you have excess elective deferrals as explained in chapter 7. Hrblock at home ) 18. Hrblock at home   1If you participate in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pension plans of all corporations, partnerships, and sole proprietorships in which you have more than 50% control. Hrblock at home You must also combine the contributions made to all 403(b) accounts on your behalf by your employer. Hrblock at home Prev  Up  Next   Home   More Online Publications
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The Hrblock At Home

Hrblock at home Depreciation Table of Contents Introduction Special Depreciation AllowanceQualified Property Election Not To Claim the Allowance Rules for Returns Filed Before June 1, 2002 Passenger Automobiles New York Liberty Zone BenefitsSpecial Liberty Zone Depreciation Allowance Increased Section 179 Deduction Liberty Zone Leasehold Improvement Property If you depreciate business property that you acquired and placed in service after September 10, 2001, new law contains provisions that may affect your depreciation deduction for that property. Hrblock at home Publication 946, How To Depreciate Property, contains information on depreciation. Hrblock at home However, Publication 946 does not contain the new provisions because it was printed before the law was enacted. Hrblock at home The new provisions are in the Supplement to Publication 946, which is reprinted below. Hrblock at home Supplement to Publication 946 How To Depreciate Property   Introduction After Publication 946 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. Hrblock at home The new law made several changes in the tax rules explained in the publication. Hrblock at home Some of the changes apply to property placed in service during 2001. Hrblock at home This supplemental publication describes those changes and explains what you should do if you are affected by them. Hrblock at home The situations and examples in Publication 946 do not reflect any of the changes made by the Job Creation and Worker Assistance Act of 2002. Hrblock at home The new law contains the following provisions. Hrblock at home 30% depreciation deductions (special depreciation allowance and special New York Liberty Zone (Liberty Zone) depreciation allowance) for the year qualified property is placed in service after September 10, 2001. Hrblock at home An increased dollar limit on the section 179 deduction for qualified Liberty Zone property purchased after September 10, 2001. Hrblock at home A shorter recovery period for qualified Liberty Zone leasehold improvement property placed in service after September 10, 2001. Hrblock at home An increase in the maximum depreciation deduction for 2001 for a qualified passenger automobile placed in service after September 10, 2001. Hrblock at home If you believe you qualify for an increased deduction under any of these new rules, you must file the revised 2001 Form 4562 (dated March 2002) for 2001 calendar or fiscal years and 2000 fiscal years ending after September 10, 2001. Hrblock at home If you have already filed a tax return, this supplemental publication explains how to claim these benefits and how to elect not to claim the special depreciation allowance or special Liberty Zone depreciation allowance. Hrblock at home See Table 2 at the end of the supplement for an overview of the rules that apply if you filed your return before June 1, 2002. Hrblock at home Special Depreciation Allowance You can take a special depreciation allowance for qualified property you place in service after September 10, 2001. Hrblock at home The allowance is an additional deduction of 30% of the property's depreciable basis. Hrblock at home To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. Hrblock at home See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. Hrblock at home The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. Hrblock at home There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Hrblock at home In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. Hrblock at home Example 1. Hrblock at home On November 1, 2001, you bought and placed in service in your business qualified property that cost $100,000. Hrblock at home You did not elect to claim a section 179 deduction. Hrblock at home You can deduct 30% of the cost ($30,000) as a special depreciation allowance for 2001. Hrblock at home You use the remaining $70,000 of cost to figure your regular depreciation deduction for 2001 and later years. Hrblock at home Example 2. Hrblock at home The facts are the same as in Example 1, except that you choose to deduct $24,000 of the property's cost as a section 179 deduction. Hrblock at home You use the remaining $76,000 of cost to figure your special depreciation allowance of $22,800 ($76,000 × 30%). Hrblock at home You use the remaining $53,200 of cost to figure your regular depreciation deduction for 2001 and later years. Hrblock at home Qualified Property To qualify for the special depreciation allowance, your property must meet the following requirements. Hrblock at home It is new property of one of the following types. Hrblock at home Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. Hrblock at home See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. Hrblock at home Water utility property. Hrblock at home See 25-year property on page 22 in Publication 946. Hrblock at home Computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. Hrblock at home (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Hrblock at home ) Qualified leasehold improvement property (defined later). Hrblock at home It meets the following tests (explained later under Tests To Be Met). Hrblock at home Acquisition date test. Hrblock at home Placed in service date test. Hrblock at home Original use test. Hrblock at home It is not excepted property (explained later under Excepted Property). Hrblock at home Qualified leasehold improvement property. Hrblock at home    Generally, this is any improvement to an interior part of a building that is nonresidential real property, provided all of the following requirements are met. Hrblock at home The improvement is made under or pursuant to a lease by the lessee (or any sublessee) or the lessor of that part of the building. Hrblock at home That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. Hrblock at home The improvement is placed in service more than 3 years after the date the building was first placed in service. Hrblock at home   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. Hrblock at home The enlargement of the building. Hrblock at home Any elevator or escalator. Hrblock at home Any structural component benefiting a common area. Hrblock at home The internal structural framework of the building. Hrblock at home   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. Hrblock at home However, a binding commitment between related persons is not treated as a lease. Hrblock at home Related persons. Hrblock at home   For this purpose, the following are related persons. Hrblock at home Members of an affiliated group. Hrblock at home The persons listed in items (1) through (9) under Related persons on page 8 of Publication 946 (except that “80% or more” should be substituted for “more than 10%” each place it appears). Hrblock at home An executor and a beneficiary of the same estate. Hrblock at home Tests To Be Met To qualify for the special depreciation allowance, the property must meet all of the following tests. Hrblock at home Acquisition date test. Hrblock at home    Generally, you must have acquired the property either: After September 10, 2001, and before September 11, 2004, but only if no written binding contract for the acquisition was in effect before September 11, 2001, or Pursuant to a written binding contract entered into after September 10, 2001, and before September 11, 2004. Hrblock at home   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, and before September 11, 2004. Hrblock at home Placed in service date test. Hrblock at home   Generally, the property must be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. Hrblock at home   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. Hrblock at home Original use test. Hrblock at home   The original use of the property must have begun with you after September 10, 2001. Hrblock at home “Original use” means the first use to which the property is put, whether or not by you. Hrblock at home Additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test. Hrblock at home Excepted Property The following property does not qualify for the special depreciation allowance. Hrblock at home Property used by any person before September 11, 2001. Hrblock at home Property required to be depreciated using ADS. Hrblock at home This includes listed property used 50% or less in a qualified business use. Hrblock at home Qualified New York Liberty Zone leasehold improvement property (defined next). Hrblock at home Qualified New York Liberty Zone leasehold improvement property. Hrblock at home   This is any qualified leasehold improvement property (as defined earlier) if all of the following requirements are met. Hrblock at home The improvement is to a building located in the New York Liberty Zone (defined later under New York Liberty Zone Benefits). Hrblock at home The improvement is placed in service after September 10, 2001, and before January 1, 2007. Hrblock at home No written binding contract for the improvement was in effect before September 11, 2001. Hrblock at home Election Not To Claim the Allowance You can elect not to claim the special depreciation allowance for qualified property. Hrblock at home If you make this election for any property, it applies to all property in the same property class placed in service during the year. Hrblock at home To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. Hrblock at home When to make election. Hrblock at home   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. Hrblock at home   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). Hrblock at home Attach the election statement to the amended return. Hrblock at home At the top of the election statement, write “Filed pursuant to section 301. Hrblock at home 9100–2. Hrblock at home ” Revoking an election. Hrblock at home   Once you elect not to deduct the special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Hrblock at home A request to revoke the election is subject to a user fee. Hrblock at home Rules for Returns Filed Before June 1, 2002 The following rules apply if you placed qualified property in service after September 10, 2001, and filed your return before June 1, 2002. Hrblock at home The rules apply to returns for the following years. Hrblock at home 2000 fiscal years that end after September 10, 2001. Hrblock at home 2001 calendar and fiscal years. Hrblock at home Claiming the allowance. Hrblock at home   If you did not claim the allowance on your return and did not make the election not to claim the allowance, you can do either of the following to claim the allowance. Hrblock at home File an amended return by the due date (not including extensions) of your return for the year following the year the property was placed in service. Hrblock at home Write “Filed Pursuant to Rev. Hrblock at home Proc. Hrblock at home 2002–33” at the top of the amended return. Hrblock at home File Form 3115, Application for Change in Accounting Method, with your return for the year following the year the property was placed in service. Hrblock at home Your return must be filed by the due date (including extensions). Hrblock at home Write “Automatic Change Filed Under Rev. Hrblock at home Proc. Hrblock at home 2002–33” on the appropriate line of Form 3115. Hrblock at home You must also file a copy (with signature) of the completed Form 3115 with the IRS National Office no later than when you file the original with your return. Hrblock at home For more information about filing Form 3115, including the address to send it to, see Revenue Procedure 2002–9, Revenue Procedure 2002–19, and Revenue Procedure 2002–33. Hrblock at home Example 1. Hrblock at home You are an individual and you use the calendar year. Hrblock at home You placed qualified property in service for your business in December 2001. Hrblock at home You filed your 2001 income tax return before April 15, 2002. Hrblock at home You did not claim the special depreciation allowance for the property and did not make the election not to claim the allowance. Hrblock at home You can claim the special allowance by filing an amended 2001 return by April 15, 2003, with “Filed Pursuant to Rev. Hrblock at home Proc. Hrblock at home 2002–33” at the top of the amended return. Hrblock at home You must file an amended return by April 15, 2003, even if you get an extension of time to file your 2002 tax return. Hrblock at home Example 2. Hrblock at home The facts concerning your 2001 return are the same as in Example 1. Hrblock at home In addition, you got an automatic 4-month extension of time (to August 15, 2003) to file your 2002 return. Hrblock at home You can claim the special allowance by filing a Form 3115 (with “Filed Pursuant to Rev. Hrblock at home Proc. Hrblock at home 2002–33” on the appropriate line) with your 2002 return by August 15, 2003. Hrblock at home You must also file a copy of this Form 3115 with the IRS National Office no later than when you file your 2002 return. Hrblock at home Electing not to claim the allowance. Hrblock at home   Generally, you have elected not to claim the special depreciation allowance for a class of property if you: Filed your return timely (including extensions) for the year you placed qualified property in service and indicated on a statement with the return that you are not claiming the allowance, or Filed your return timely and filed an amended return within 6 months of the due date of the original return (not including extensions) and indicated on a statement with the amended return that you are not claiming the allowance. Hrblock at home The statement must indicate that you are not deducting the special depreciation allowance and the class of property to which the election applies. Hrblock at home The statement can be either attached to or written on the return. Hrblock at home You can, for example, write “not deducting 30%” on Form 4562. Hrblock at home Deemed election. Hrblock at home   If you have not followed either of the procedures described above to elect not to claim the allowance, you may still be treated as making the election. Hrblock at home You will be treated as making the election if you meet both of the following conditions. Hrblock at home You filed your return for the year you placed the property in service and claimed depreciation, but not the special allowance, for any class of property. Hrblock at home You do not file an amended return or a Form 3115 within the time prescribed for claiming the special allowance. Hrblock at home See Claiming the allowance, earlier. Hrblock at home Passenger Automobiles The limit on your depreciation deduction (including any section 179 deduction) for any passenger automobile that is qualified property (defined earlier) placed in service after September 10, 2001, and for which you claim the special depreciation allowance is increased. Hrblock at home Generally, the limit is increased from $3,060 to $7,660. Hrblock at home However, if the automobile is a qualified electric car, the limit is increased from $9,280 to $23,080 ($22,980 if placed in service in 2002). Hrblock at home Table 1 shows the maximum deduction amounts for 2001. Hrblock at home Table 1. Hrblock at home Maximum Deduction for 2001 Qualified Vehicle Placed in Service Before Sept. Hrblock at home 11 Placed in Service After Sept. Hrblock at home 10 Passenger automobile $3,060 $7,660 Electric car 9,280 23,080 1 1$22,980 if you place an electric car in service in 2002. Hrblock at home Election not to claim the allowance. Hrblock at home   The increased maximum depreciation deduction does not apply if you elected not to claim the special depreciation allowance as explained earlier under Election Not To Claim the Allowance and Rules for Returns Filed Before June 1, 2002. Hrblock at home New York Liberty Zone Benefits Several benefits are available for property you place in service in the New York Liberty Zone (Liberty Zone). Hrblock at home They include a special depreciation allowance for the year you place the property in service, an increased section 179 deduction, and the classification of certain leasehold improvement property as 5-year property. Hrblock at home Area defined. Hrblock at home   The New York Liberty Zone is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway) in the Borough of Manhattan in the City of New York, New York. Hrblock at home Special Liberty Zone Depreciation Allowance You can take a special depreciation allowance for qualified Liberty Zone property you place in service after September 10, 2001. Hrblock at home The allowance is an additional deduction of 30% of the property's depreciable basis. Hrblock at home To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. Hrblock at home See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. Hrblock at home The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. Hrblock at home There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Hrblock at home In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. Hrblock at home You cannot claim the special Liberty Zone depreciation allowance for property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. Hrblock at home Qualified property is eligible for only one special depreciation allowance. Hrblock at home Example 1. Hrblock at home On November 1, 2001, you bought and placed in service in your business, which is in the Liberty Zone, qualified Liberty Zone property that cost $200,000. Hrblock at home You did not elect to claim a section 179 deduction. Hrblock at home You can deduct 30% of the cost ($60,000) as a special Liberty Zone depreciation allowance for 2001. Hrblock at home You use the remaining $140,000 of cost to figure your regular depreciation deduction for 2001 and later years. Hrblock at home Example 2. Hrblock at home The facts are the same as in Example 1, except that you choose to deduct $59,000 of the property's cost as a section 179 deduction. Hrblock at home (See Increased Section 179 Deduction, later, for information concerning how this section 179 deduction amount is figured). Hrblock at home You use the remaining $141,000 of cost to figure your special Liberty Zone depreciation allowance of $42,300 ($141,000 × 30%). Hrblock at home You use the remaining $98,700 of cost to figure your regular depreciation deduction for 2001 and later years. Hrblock at home Qualified Liberty Zone Property For a 2001 calendar or fiscal year and a 2000 fiscal year that ends after September 10, 2001, property qualifies for the special Liberty Zone depreciation allowance if it meets the following requirements. Hrblock at home It is one of the following types of property. Hrblock at home Used property depreciated under MACRS with a recovery period of 20 years or less. Hrblock at home See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. Hrblock at home Used water utility property. Hrblock at home See 25-year property on page 22 in Publication 946. Hrblock at home Used computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. Hrblock at home (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Hrblock at home ) Certain nonresidential real property and residential rental property (defined later). Hrblock at home It meets the following tests (explained later under Tests to be met). Hrblock at home Acquisition date test. Hrblock at home Placed in service date test. Hrblock at home Substantial use test. Hrblock at home Original use test. Hrblock at home It is not excepted property (explained later under Excepted property). Hrblock at home Nonresidential real property and residential rental property. Hrblock at home   This property is qualifying property only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the terrorist attack of September 11, 2001. Hrblock at home 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. Hrblock at home   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 terrorist attack. Hrblock at home Otherwise, the property is considered damaged real property. Hrblock at home For example, if certain structural components of a building (such as walls, floors, or plumbing fixtures) are damaged or destroyed as a result of the terrorist attack, 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. Hrblock at home Tests to be met. Hrblock at home   To qualify for the special Liberty Zone depreciation allowance, your property must meet all of the following tests. Hrblock at home Acquisition date test. Hrblock at home   You must have acquired the property by purchase after September 10, 2001, and there must not have been a binding written contract for the acquisition in effect before September 11, 2001. Hrblock at home   For information on the acquisition of property by purchase, see Property Acquired by Purchase on page 15 of Publication 946. Hrblock at home   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. Hrblock at home Placed in service date test. Hrblock at home   Generally, 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). Hrblock at home   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. Hrblock at home Substantial use test. Hrblock at home   Substantially all use of the property must be in the Liberty Zone and in the active conduct of your trade or business in the Liberty Zone. Hrblock at home Original use test. Hrblock at home   The original use of the property in the Liberty Zone must have begun with you after September 10, 2001. Hrblock at home   Used property can be qualified Liberty Zone property if it has not previously been used within the Liberty Zone. Hrblock at home 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. Hrblock at home Excepted property. Hrblock at home   The following property does not qualify for the special Liberty Zone depreciation allowance. Hrblock at home Property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. Hrblock at home Property required to be depreciated using ADS. Hrblock at home This includes listed property used 50% or less in a qualified business use. Hrblock at home Qualified New York Liberty Zone leasehold improvement property (defined earlier in Excepted Property under Special Depreciation Allowance). Hrblock at home Example. Hrblock at home In December 2001, you bought and placed in service in your business in the Liberty Zone the following property. Hrblock at home New office furniture with a MACRS recovery period of 7 years. Hrblock at home A used computer with a MACRS recovery period of 5 years. Hrblock at home The computer had not previously been used within the Liberty Zone. Hrblock at home Because the office furniture is new property, it qualifies for the special depreciation allowance, but not the special Liberty Zone depreciation allowance. Hrblock at home Because the computer is used property that had not previously been used in the Liberty Zone, it qualifies for the special Liberty Zone depreciation allowance, but not the special depreciation allowance. Hrblock at home Election Not To Claim the Liberty Zone Allowance You can elect not to claim the special Liberty Zone depreciation allowance for qualified property. Hrblock at home If you make this election for any property, it applies to all property in the same property class placed in service during the year. Hrblock at home To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. Hrblock at home When to make the election. Hrblock at home   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. Hrblock at home   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). Hrblock at home Attach the election statement to the amended return. Hrblock at home At the top of the election statement, write “Filed pursuant to section 301. Hrblock at home 9100–2. Hrblock at home ” Revoking an election. Hrblock at home   Once you elect not to deduct the special Liberty Zone depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Hrblock at home A request to revoke the election is subject to a user fee. Hrblock at home Returns filed before June 1, 2002. Hrblock at home   The rules that apply to the special depreciation allowance discussed earlier in Rules for Returns Filed Before June 1, 2002 under Special Depreciation Allowance also apply to the special Liberty Zone depreciation allowance. Hrblock at home Increased Section 179 Deduction Under section 179 of the Internal Revenue Code, you can choose to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Hrblock at home For tax years beginning in 2000, that limit was $20,000. Hrblock at home For tax years beginning in 2001 and 2002, that limit is generally $24,000. Hrblock at home If the cost of qualifying section 179 property placed in service in a year is over $200,000, you must reduce the dollar limit (but not below zero) by the amount of the cost over $200,000. Hrblock at home Increased Dollar Limit The dollar limit on the section 179 deduction is increased for certain property placed in service in the Liberty Zone. Hrblock at home The increase is the smaller of the following amounts. Hrblock at home $35,000. Hrblock at home The cost of section 179 property that is qualified Liberty Zone property placed in service during the year. Hrblock at home If you use the revised 2001 Form 4562 (dated March 2002) for a tax year beginning in 2000, you must reduce the section 179 dollar limit to $20,000 before adding the additional amount for qualified property. Hrblock at home Qualified property. Hrblock at home   To qualify for the increased section 179 deduction, your property must be section 179 property that is either: Qualified Liberty Zone property, or Property that would be qualified Liberty Zone property except that it is eligible for the special depreciation allowance. Hrblock at home Qualified Liberty Zone property is explained earlier in Qualified Liberty Zone Property under Special Liberty Zone Depreciation Allowance. Hrblock at home Property eligible for the special depreciation allowance is explained earlier in Qualified Property under Special Depreciation Allowance. Hrblock at home For information on the requirements that must be met for property to qualify for the section 179 deduction, see What Property Qualifies? on page 14 of Publication 946. Hrblock at home Example 1. Hrblock at home In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $25,000. Hrblock at home Because this cost is less than $35,000, the dollar limit on the section 179 deduction is increased by $25,000 to $49,000 ($24,000 + $25,000). Hrblock at home Example 2. Hrblock at home In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $75,000. Hrblock at home Because $35,000 is less than the cost of the property you place in service, the dollar limit on the section 179 deduction you can claim is increased by $35,000 to $59,000 ($24,000 + $35,000). Hrblock at home Reduced Dollar Limit Generally, you must reduce the dollar limit for a year by the cost of qualifying section 179 property placed in service in the year that is more than $200,000. Hrblock at home However, if the cost of your Liberty Zone property exceeds $200,000, you take into account only 50% (instead of 100%) of the cost of qualified property placed in service in a year. Hrblock at home Example. Hrblock at home In 2002, you place in service in your business, which is in the Liberty Zone, qualified property costing $460,000. Hrblock at home Your increased dollar limit is $59,000 ($35,000 + $24,000). Hrblock at home Because 50% of the cost of the property you place in service ($230,000) is $30,000 more than $200,000, you must reduce your $59,000 dollar limit to $29,000 ($59,000 - $30,000). Hrblock at home Recapture Rules Rules similar to those explained on page 20 of Publication 946 under When Must You Recapture the Deduction? apply with respect to any qualified property you stop using in the Liberty Zone. Hrblock at home Returns Filed Before June 1, 2002 If you filed a return before June 1, 2002, and did not deduct the increased section 179 amount for qualified property placed in service after September 10, 2001, you can deduct the increased amount by filing an amended return by the due date (not including extensions) of the return for the year after the year the property was placed in service. Hrblock at home This rule applies to returns for the following years. Hrblock at home 2000 fiscal years that end after September 10, 2001. Hrblock at home 2001 calendar and fiscal years. Hrblock at home On the amended return, write “Filed Pursuant to Rev. Hrblock at home Proc. Hrblock at home 2002–33. Hrblock at home ” Liberty Zone Leasehold Improvement Property Qualified Liberty Zone leasehold improvement property (described earlier in Qualified Property under Special Depreciation Allowance) is 5-year property. Hrblock at home This means that it is depreciated over a recovery period of 5 years. Hrblock at home For information about recovery periods, see Which Recovery Period Applies? on page 23 of Publication 946. Hrblock at home The straight-line method must be used with respect to qualified Liberty Zone leasehold improvement property. Hrblock at home Under ADS, the recovery period for qualified Liberty Zone leasehold improvement property is 9 years. Hrblock at home Returns Filed Before June 1, 2002 If you filed either of the following returns before June 1, 2002, and did not depreciate qualified Liberty Zone leasehold improvement property placed in service during the tax year as 5-year property using the straight line method, you should file an amended return before you file your return for the year after the year the property was placed in service. Hrblock at home Your 2000 fiscal year return (for a 2000 fiscal year that ends after September 10, 2001). Hrblock at home Your 2001 calendar or fiscal year return. Hrblock at home On the amended return, write “Filed Pursuant to Rev. Hrblock at home Proc. Hrblock at home 2002–33. Hrblock at home ” Table 2. Hrblock at home Rules for Returns Filed Before June 1, 2002 Note:This chart highlights the rules for returns affected by the Job Creation and Worker Assistance Act of 2002 that were filed before June 1, 2002, without accounting for any of the new benefits under the law. Hrblock at home See the text for definitions and examples. Hrblock at home Do not rely on this chart alone. Hrblock at home IF you want to. Hrblock at home . Hrblock at home . Hrblock at home THEN you. Hrblock at home . Hrblock at home . Hrblock at home BY. Hrblock at home . Hrblock at home . Hrblock at home claim the special depreciation allowance or special Liberty Zone depreciation allowance • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service, or • must file Form 3115, Application for Change in Accounting Method, with your return for the year after the year the property was placed in service • the due date (including extensions) of your return for the year after the year the property was placed in service, and • must file a copy of your completed Form 3115 with the IRS National Office • the date you file the original Form 3115 with your return for the year after the year the property was placed in service. Hrblock at home elect not to claim the special depreciation allowance or the special Liberty Zone depreciation allowance 1 • must have filed your return timely for the year the property was placed in service, and   • must file an amended return stating you are not claiming the allowance • the date that is 6 months after the due date of the original return (not including extensions). Hrblock at home deduct the increased section 179 amount • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service. Hrblock at home use a 5-year recovery period for depreciating qualified Liberty Zone leasehold improvement property • should file an amended return • the date you file your return for the year after the year the property was placed in service. Hrblock at home 1See also Deemed election under Rules for Returns Filed Before June 1, 2002, earlier. 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