Depreciation and Other Information

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Depreciation and Other Information - Evidence
Article ID: 33850

Question

168(i)(4)

Answer

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

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

The carryover of disallowed deduction from 2010 is the amount of section 179 property, if any, you elected to expense in previous years that was not allowed as a deduction because of the business income limitation. If you filed Form 4562 for 2010, enter the amount on your 2010 Form 4562.

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: 1107	Created on: Jun 15, 2013 Date updated: Nov 07, 2014
Posted in: OLTPRO DESKTOP SOFTWARE USAGE

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Depreciation and Other Information - Evidence

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.

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.

Carryover of Disallowed Deduction

The carryover of disallowed deduction from 2010 is the amount of section 179 property, if any, you elected to expense in previous years that was not allowed as a deduction because of the business income limitation. If you filed Form 4562 for 2010, enter the amount on your 2010 Form 4562.

Uniform Capitalization

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</