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Depreciation and Other Information - Evidence

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Depreciation and Other Information - Evidence


Disallowed Deduction, Uniform Capitalization, Employer Provided Vehicles ,Depreciation and Other Information - Evidence, 168(i)(4)

Section 168(i)(4)

To simplify the computation of MACRS depreciation, you can elect to group assets into one or more general asset accounts under section 168(i)(4). The assets in each general asset account are depreciated under MACRS as a single asset.

Each account must include only assets that were placed in service during the same tax year with the same asset class (if any), depreciation method, recovery period, and convention. However, an asset cannot be included in a general asset account if the asset is used both for personal purposes and business/investment purposes.

When an asset in an account is disposed of, the amount realized generally must be recognized as ordinary income. The unadjusted depreciable basis and depreciation reserve of the general asset account are not affected as a result of a disposition.

Special rules apply to passenger automobiles, assets generating foreign source income, assets converted to personal use, and certain asset dispositions. For more details, see Regulations section 1.168(i)-1.

To make the election, check the box on line 18. You must make the election on your return filed no later than the due date (including extensions) for the tax year in which the assets included in the general asset account was placed in service. Once made, the election is irrevocable and applies to the tax year for which the election is made and all later tax years.

Carryover of Disallowed Deduction 

You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. This disallowed deduction amount is shown on line 13 of Form 4562. You use the amount you carry over to determine your section 179 deduction in the next year. Enter that amount on line 10 of your Form 4562 for the next year.

Uniform Capitalization 

If you are subject to the uniform capitalization rules of section 263A, enter the increase in basis from costs you must capitalize. For a detailed discussion of who is subject to these rules, which costs must be capitalized, and allocation of costs among activities, see Regulations section 1.263A-1.

Employer Provided Vehicle and Evidence

Employers providing vehicles to their employees satisfy the employer's substantiation requirements under section 274(d) by maintaining a written policy statement that:

  • Prohibits personal use including commuting or

  • Prohibits personal use except for commuting

An employee does not need to keep a separate set of records for any vehicle that satisfies these written policy statement rules.  For both written policy statements, there must be evidence that would enable the IRS to determine whether use of the vehicle meets the conditions stated below.

A policy statement that prohibits personal use (including commuting) must meet all of the following conditions.

  • The employer owns or leases the vehicle and provides it to one or more employees for use in the employer's trade or business

  • When the vehicle is not used in the employer's trade or business, it is kept on the employer's business premises, unless it is temporarily located elsewhere (e.g. for maintenance or because of a mechanical failure)

  • No employee using the vehicle lives at the employer's business premises

  • No employee may use the vehicle for personal purposes, other than de minimis personal use (e.g. a stop for lunch between two business deliveries)

  • Except for de minimis use, the employer reasonable believes that no employee uses the vehicle for any personal purpose.

A policy statement that prohibits personal use (except for commuting) is not available if the commuting employee is an officer, director, or 1% or more owner.  This policy must meet all of the following conditions

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Views: 1483 Created on: Jun 15, 2013
Date updated: Dec 04, 2020

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