Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has issued procedures for claiming the 50 percent Kansas additional first-year depreciation provided by the Food, Conservation, and Energy Act of 2008 (P.L. 110-246) for qualified Recovery Assistance property (RA property) placed in service by the taxpayer on or after May 5, 2007. The guidance also explains how a taxpayer may elect not to deduct the Kansas additional first-year depreciation for RA property.

Background

 
Code Sec. 1400N(d) provides an additional first-year depreciation deduction equal to 50 percent of the adjusted basis of certain depreciable property used in the areas affected by the Katrina, Wilma and Rita hurricanes. The Food, Conservation, and Energy Act of 2008 applies a modified version of Code Sec. 1400N(d) to the Kansas disaster area for "qualified Recovery Assistance property" and allows an additional first-year depreciation deduction equal to 50 percent of the adjusted basis of such property.

Claiming Kansas Bonus Depreciation for Tax Year That Includes May 5, 2007

  For a taxpayer that has yet to file a federal tax return for the tax year that includes May 5, 2007, the taxpayer may claim the depreciation on line 14 of Form 4562, Depreciation and Amortization, for the federal tax return for the tax year that includes May 5, 2007. If the RA property is listed property, such as passenger automobiles or computers, the taxpayer may claim the Kansas additional first-year depreciation on line 25 of Form 4562, Depreciation and Amortization, for the federal tax return for the tax year that includes May 5, 2007.

  If a taxpayer timely filed its federal tax return for the tax year that includes May 5, 2007, and did not claim the Kansas additional first-year depreciation for RA property, but wants to do so, the IRS has provided special procedures by which the taxpayer can claim the bonus depreciation (provided that the taxpayer did not elect not to deduct the bonus depreciation). These procedures allow certain taxpayers to claim the bonus depreciation on an amended return for the tax year that includes May 5, 2007, or on a return for the first or second succeeding year (along with filing a Form 3115, Application for Change in Accounting Method).

Electing Not to Deduct Kansas Bonus Depreciation

  An election not to deduct the Kansas additional first-year depreciation for any class of property that is RA property placed in service during the tax year must be made by the due date (including extensions) of the federal tax return for the tax year in which the RA property is placed in service by the taxpayer. The guidance provides different sets of procedures for returns for tax years that include May 5, 2007, filed before August 11, 2008, and for such returns filed on or after that date. A taxpayer that files its tax return for the tax year including May 5, 2007, that claims depreciation but not Kansas bonus depreciation, and does not follow the procedures for claiming Kansas bonus depreciation on a subsequent return, will be deemed to have elected not to take the bonus depreciation.

Notice 2008-67, 2008FED ¶46,525

Other References:

 
Code Sec. 179

  CCH Reference - 2008FED ¶12,126.54

 
Code Sec. 1400N

  CCH Reference - 2008FED ¶32,487.054

  Tax Research Consultant

  CCH Reference - TRC DEPR: 3,700