Basis Adjustment on Recapture
For property subject to investment credit recapture, increase the property basis as follows:
- For qualified rehabilitation expenditures, increase the basis by 100% of the recapture tax (or adjustment to carry-backs and carry-overs).
- For energy property or qualified timber property, increase the basis by 50% of the recapture tax (or adjustment to carry-backs and carry-overs).
If you are a partner or S corporation shareholder, the adjusted basis of your interest in the partnership or stock in the S corporation is adjusted to take into account the adjustment made to the basis of property held by the partnership or S corporation.
For more information see IRS Form 4255 General Instructions.