us internal revenue service: i4562--2000

8/14/2019 US Internal Revenue Service: i4562--2000

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2000 Department of the TreasuryInternal Revenue ServiceInstructions for Form 4562Depreciation and Amortization(Including Information on Listed Property)Section references are to the Internal Revenue Code unless otherwise noted.

A Change To NoteFor tax years beginning in 2000, themaximum section 179 expense deductionhas been increased to $20,000 ($40,000

for enterprise zone businesses).

General Instructions

Purpose of FormUse Form 4562 to:q Claim your deduction for depreciationand amortization,q Make the election to expense certaintangible property (section 179), andq Provide information on thebusiness/investment use of automobilesand other listed property.

Who Must FileExcept as otherwise noted, complete andfile Form 4562 if you are claiming any ofthe following.q Depreciation for property placed inservice during the 2000 tax year.q A section 179 expense deduction(which may include a carryover from aprevious year).q Depreciation on any vehicle or otherlisted property (regardless of when it wasplaced in service).q A deduction for any vehicle reported ona form other than Schedule C (Form1040), Profit or Loss From Business, orSchedule C-EZ (Form 1040), Net Profit

From Business.q Any depreciation on a corporate incometax return (other than Form 1120S).q Amortization of costs that begins duringthe 2000 tax year.

However, do not file Form 4562 toreport depreciation and information on theuse of vehicles if you are an employee

entirety when computing your allowablesection 179 expense deduction. See theinstructions for line 12 on page 3.

Additional InformationFor more information about depreciationand amortization (including information onlisted property) see the following.q Pub. 463, Travel, Entertainment, Gift,and Car Expenses.q Pub. 534, Depreciating Property Placedin Service Before 1987.q Pub. 535, Business Expenses.q Pub. 551, Basis of Assets.q

Pub. 946, How To Depreciate Property.

Definitions

Depreciation

Depreciation is the annual deductionallowed to recover the cost or other basisof business or investment property havinga useful life substantially beyond the taxyear. However, land is not depreciable.

Depreciation starts when you first usethe property in your business or for theproduction of income. It ends when youtake the property out of service, deductall your depreciable cost or other basis,or no longer use the property in yourbusiness or for the production of income.

Amortization

Amortization is similar to the straight linemethod of depreciation in that an annualdeduction is allowed to recover certaincosts over a fixed time period. You canamortize such items as the costs ofstarting a business, goodwill and certainother intangibles, reforestation, andpollution control facilities. For moreinformation, see Pub. 535.

Listed Property

communication, and video recordingequipment).q Cellular telephones (or other similartelecommunications equipment).q

Computers or peripheral equipment.Exception. Listed property does notinclude:

1. Photographic, phonographic,communication, or video equipment usedexclusively in a taxpayer's trade orbusiness or at the taxpayer's regularbusiness establishment;

2. Any computer or peripheralequipment used exclusively at a regularbusiness establishment and owned or

leased by the person operating theestablishment; or

3. An ambulance, hearse, or vehicleused for transporting persons or propertyfor hire.

For purposes of the exceptions above,a portion of the taxpayer's home is treatedas a regular business establishment onlyif that portion meets the requirementsunder section 280A(c)(1) for deductingexpenses attributable to the business useof a home. However, for any propertylisted in 1 above, the regular businessestablishment of an employee is his or heremployer's regular businessestablishment.

Commuting

Generally, commuting is travel betweenyour home and a work location. However,travel that meets any of the followingconditions is not commuting.q You have at least one regular worklocation away from your home and thetravel is to a temporary work location inthe same trade or business, regardlessof the distance. Generally, a temporarywork location is one where youremployment is expected to last 1 year orless. See Pub. 463 for details.


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RecordkeepingExcept for Part V (relating to listedproperty), the IRS does not require you tosubmit detailed information with yourreturn on the depreciation of assetsplaced in service in previous tax years.

However, the information needed tocompute your depreciation deduction(basis, method, etc.) must be part of yourpermanent records.

Because Form 4562 does not providefor permanent recordkeeping, you mayuse the depreciation worksheet on page12 to assist you in maintainingdepreciation records. However, theworksheet is designed only for Federalincome tax purposes. You may need to

keep additional records for accountingand state income tax purposes.

Specific InstructionsIdentifying number. Individuals, enteryour social security number. All others,enter your employer identification number(EIN).

Part IElection To ExpenseCertain Tangible Property(Section 179)Note: An estate or trust cannot make thiselection.

You may elect to expense part of thecost of certain tangible personal propertyused in your trade or business and certainother property described in section1245(a)(3). To make the election, you

must have:1. Purchased the property and

2. Placed it in service during the 2000tax year.

Note: See section 179(d) for thedefinition of section 179 property andpurchase.

You must make the election with either:

1. The original return you file for thetax year the property was placed in

service (whether or not you file your returnon time) or

2. An amended return filed no laterthan the due date (including extensions)for your return for the tax year theproperty was placed in service.

Note: If you timely filed your returnwithout making the election, you can still

k th l ti b fili d d

deduction by the section 179 expensededuction.

Section 179 property does not include:q Property used 50% or less in your tradeor business.q Property held for investment (section212 property).q Property you lease to others as anoncorporate lessor unless:

1. You manufactured or produced theproperty or

2. The term of the lease is less than50% of the property's class life, and forthe first 12 months after the property istransferred to the lessee, the sum of thedeductions related to the property that areallowed to you solely under section 162

(except rents and reimbursed amounts) ismore than 15% of the rental income fromthe property.q Property used mainly outside the UnitedStates (except for property described insection 168(g)(4)).q Property used for lodging or forfurnishing the lodging (except as providedin section 50(b)(2)).q Property used by a tax-exemptorganization (other than a section 521

farmers' cooperative) unless the propertyis used mainly in a taxable unrelated tradeor business.q Property used by a governmental unitor foreign person or entity (except forproperty used under a lease with a termof less than 6 months).q Air conditioning or heating units.Limitations. The section 179 expensededuction is subject to the following twoseparate limitations, which are figured inPart I.

1. A dollar limitation and

2. A taxable income limitation.

For a partnership (other than anelecting large partnership, as defined insection 775) these limitations apply to thepartnership and each partner. For anelecting large partnership, the limitationsapply only to the partnership. For an Scorporation, these limitations apply to the

S corporation and each shareholder. Fora controlled group, all componentmembers are treated as one taxpayer.

For more details on the section 179expense deduction, see Pub. 946.

Line 1

For an enterprise zone business, the

larger amount. For the definitions ofenterprise zone business and qualifiedzone property, see sections 1397B and1397C.

Recapture Rule: If any qualified zoneproperty placed in service during thecurrent year ceases to be used in an

empowerment zone by an enterprise zonebusiness in a later year, the benefit of theincreased section 179 expense deductionmust be reported as other income onyour return.

Line 2

Enter the cost of all section 179 propertyplaced in service during the tax year.Include amounts from any listed propertyfrom Part V. Also include any section 179

property placed in service by your spouse,even if you are filing a separate return.

For an enterprise zone business,include on this line only 50% of the costof section 179 property that is alsoqualified zone property.

Line 5

If line 5 is zero, you cannot elect toexpense any property. Skip lines 6through 11, enter zero on line 12, and

enter the carryover of any disalloweddeduction from 1999 on line 13.

If you are married filing separately, youand your spouse must allocate the dollarlimitation for the tax year. To do so,multiply the total limitation that you wouldotherwise enter on line 5 by 50%, unlessyou both elect a different allocation. If youboth elect a different allocation, multiplythe total limitation by the percentageelected. The sum of the percentages you

and your spouse elect must equal 100%.Important: Do notenter on line 5 morethan your share of the total dollarlimitation.

Line 6

Important: Do notinclude any listedproperty on line 6.

Column (a). Enter a brief description ofthe property for which you are making theelection (e.g., truck, office furniture, etc.).Column (b). Enter the cost of theproperty. If you acquired the propertythrough a trade-in, do not include anyundepreciated basis of the assets youtraded in. See Pub. 551 for details.Column (c). Enter the amount you electto expense. You do not have to expensethe entire cost of the property You can


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Line 10

The carryover of disallowed deductionfrom 1999 is the amount of section 179property, if any, you elected to expensein previous years, but not allowed as adeduction due to the business incomelimitation. If you filed Form 4562 for 1999,

enter the amount from line 13 of your1999 Form 4562. For additional details,see Pub. 946.

Line 11

The section 179 expense deduction isfurther limited by the business incomelimitation under section 179(b)(3).

For purposes of the rules that follow:q If you have to apply another Code

section that has a limitation based ontaxable income, see Regulations section1.179-2(c)(5) for rules on how to apply thebusiness income limitation under section179 in such a case.q You are considered to activelyconduct a trade or business if youmeaningfully participate in itsmanagement or operations. A merepassive investor is not considered toactively conduct a trade or business.

Individuals. Enter the smaller of line 5or the aggregate taxable income from anytrade or business you actively conducted,computed without regard to any section179 expense deduction, the deduction forone-half of self-employment taxes undersection 164(f), or any net operating lossdeduction. Include in aggregate taxableincome the wages, salaries, tips, andother compensation you earned as anemployee (not reduced by unreimbursed

employee business expenses). If you aremarried filing a joint return, combine theaggregate taxable incomes for you andyour spouse.Partnerships. Enter the smaller of line5 or the aggregate of the partnership'sitems of income and expense describedin section 702(a) from any trade orbusiness the partnership activelyconducted (other than credits, tax-exemptincome, the section 179 expense

deduction, and guaranteed paymentsunder section 707(c)).S corporations. Enter the smaller of line5 or the aggregate of the corporation'sitems of income and expense describedin section 1366(a) from any trade orbusiness the corporation activelyconducted (other than credits, tax-exemptincome the section 179 expense

Line 12

The limitations on lines 5 and 11 apply tothe taxpayer, and not to each separatebusiness or activity. Therefore, if you havemore than one business or activity, youmay allocate your allowable section 179expense deduction among them.

To do so, write Summary at the topof Part I of the separate Form 4562 youare completing for the aggregate amountsfrom all businesses or activities. Do notcomplete the rest of that form. On line 12of the Form 4562 you prepare for eachseparate business or activity, enter theamount allocated to the business oractivity from the Summary. No otherentry is required in Part I of the separateForm 4562 prepared for each businessor activity.

Part IIMACRS Depreciationfor Assets Placed in ServiceOnly During Your 2000 TaxYearThe term Modified Accelerated CostRecovery System (MACRS) includes theGeneral Depreciation System and the

Alternative Depreciation System.Generally, MACRS is used to depreciateany tangible property placed in serviceafter 1986. However, MACRS does notapply to films, videotapes, and soundrecordings. See section 168(f) for otherexceptions.

For more details on MACRS, see Pub.946. For information on other methods ofdepreciation, see Pub. 534.

Depreciation may be an adjustment for

alternative minimum tax purposes. Fordetails, see Form 4626, AlternativeMinimum TaxCorporations; Form 6251,Alternative Minimum TaxIndividuals; orSchedule I of Form 1041, U.S. IncomeTax Return for Estates and Trusts.

Section AGeneral Asset AccountElection

Line 14

To simplify the computation of MACRSdepreciation, you may elect to groupassets into one or more general assetaccounts under section 168(i)(4). Theassets in each general asset account aredepreciated as a single asset.

Each account must include only assetsthat were placed in service during the

basis and depreciation reserve of thegeneral asset account are not affected asa result of a disposition.

Special rules apply to passengerautomobiles, assets generating foreignsource income, assets converted topersonal use, and certain asset

dispositions. For more details, seeRegulations section 1.168(i)-1.

To make the election, check the box online 14. You must make the election onyour return filed no later than the due date(including extensions) for the tax year inwhich the assets included in the generalasset account were placed in service.Once made, the election is irrevocableand applies to the tax year for which theelection is made and all later tax years.

Section BGeneral DepreciationSystem (GDS)

Lines 15a Through 15i

Use lines 15a through 15i only for assetsplaced in service during the tax yearbeginning in 2000 and depreciated underthe General Depreciation System (GDS),except for automobiles and other listedproperty (which are reported in Part V).

Column (a). Determine which propertyyou acquired and placed in service duringthe tax year beginning in 2000. Then, sortthat property according to its classification(3-year property, 5-year property, etc.) asshown in column (a) of lines 15a through15i. The classifications for some propertyare shown below. For property notshown, see Determining theclassification on page 4.

3-year property includes:q A race horse that is more than 2 yearsold at the time it is placed in service.q Any horse (other than a race horse) thatis more than 12 years old at the time it isplaced in service.q Any qualified rent-to-own property (asdefined in section 168(i)(14)).

5-year property includes:q Automobiles.q Light general purpose trucks.q Typewriters, calculators, copiers, andduplicating equipment.q Any semi-conductor manufacturingequipment.q Any computer or peripheral equipment.q Any section 1245 property used inconnection with research and

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10-year property includes:q Vessels, barges, tugs, and similar watertransportation equipment.q Any single purpose agricultural orhorticultural structure (see section168(i)(13)).q Any tree or vine bearing fruit or nuts.

15-year property includes:q Any municipal wastewater treatmentplant.q Any telephone distribution plant andcomparable equipment used for 2-wayexchange of voice and datacommunications.q Any section 1250 property that is aretail motor fuels outlet (whether or notfood or other convenience items are sold

there).20-year property includes:

q Farm buildings (other than singlepurpose agricultural or horticulturalstructures).q Municipal sewers not classified as25-year property.

25-year property is water utilityproperty, which is:q Property that is an integral part of the

gathering, treatment, or commercialdistribution of water, that, without regardto this classification, would be 20-yearproperty.q Municipal sewers. This classificationapplies to property placed in service afterJune 12, 1996, except for property placedin service under a binding contract ineffect at all times since June 9, 1996.

Residential rental property is abuilding in which 80% or more of the total

rent is from dwelling units.Nonresidential real property is any

real property that is neither residentialrental property nor property with a classlife of less than 27.5 years.

50-year property includes anyimprovements necessary to construct orimprove a roadbed or right-of-way forrailroad track that qualifies as a railroadgrading or tunnel bore under section168(e)(4).

There is no separate line to report50-year property. Therefore, attach astatement showing the same informationas required in columns (a) through (g).Include the deduction in the line 21Total and write See attachment in thebottom margin of the form.Determining the classification. If your

Column (b). For lines 15h and 15i, enterthe month and year you placed theproperty in service. If you convertedproperty held for personal use to use in atrade or business or for the production ofincome, treat the property as being placedin service on the conversion date.Column (c). To find the basis fordepreciation, multiply the cost or otherbasis of the property by the percentageof business/investment use. From thatresult, subtract any section 179 expensededuction, deduction for removal ofbarriers to the disabled and the elderly,disabled access credit, and enhanced oilrecovery credit. See section 50(c) todetermine the basis adjustment forinvestment credit property.Column (d). Determine the recovery

period from the table below, unless youacquired qualified Indian reservationproperty (as defined in section 168(j)(4)).Qualified Indian reservation property doesnot include property placed in service toconduct class I, II, or III gaming activities.See Pub. 946 for the table for qualifiedIndian reservation property.

Column (e). The applicable conventiondetermines the portion of the tax year forwhich depreciation is allowable during ayear property is either placed in serviceor disposed of. There are three types ofconventions. To select the correctconvention, you must know the type of

service (or disposed of) on the midpointof that tax year. Enter HY in column (e).

Mid-quarter convention. If theaggregate bases of property subject todepreciation under section 168 andplaced in service during the last 3 monthsof your tax year exceed 40% of the

aggregate bases of property subject todepreciation under section 168 andplaced in service during the entire taxyear, the mid-quarter, instead of thehalf-year, convention applies.

In determining whether the mid-quarterconvention applies, do not take intoaccount the following:q Property that is being depreciatedunder a method other than MACRS.q Any residential rental property,

nonresidential real property, or railroadgradings and tunnel bores.q Property that is placed in service anddisposed of within the same tax year.

The mid-quarter convention treats allproperty placed in service (or disposedof) during any quarter as placed in service(or disposed of) on the midpoint of thatquarter. However, no depreciation isallowed under this convention for propertythat is placed in service and disposed ofwithin the same tax year. Enter MQ incolumn (e).

Mid-month convention. Thisconvention applies only to residentialrental property, nonresidential realproperty (lines 15h or 15i), and railroadgradings and tunnel bores. It treats allproperty placed in service (or disposedof) during any month as placed in service(or disposed of) on the midpoint of thatmonth. Enter MM in column (e).Column (f). Applicable depreciationmethods are prescribed for eachclassification of property as follows:q 3-, 5-, 7-, and 10-year property.Except as otherwise stated below, theapplicable method is the 200% decliningbalance method, switching to the straightline method in the first tax year that thestraight line rate exceeds the decliningbalance rate. For 3-, 5-, 7-, or 10-year

property (excluding any tree or vinebearing fruit or nuts), you may make anirrevocable election to use the 150%declining balance method, switching tothe straight line method in the first taxyear that the straight line rate exceeds thedeclining balance rate. The electionapplies to all property within theclassification for which it is made and that

(a) (b)Class life (in years) Classification

(See Pub. 946)

4 or less................................. 3-year propertyMore than 4 but less than 10. 5-year property10 or more but less than 16 .. 7-year property16 or more but less than 20.. 10-year property

20 or more but less than 25.. 15-year property25 or more ............................. 20-year property

Recovery Period for Most Property

In the case of: The recoveryperiod is:3-year property............................ 3 yrs.5-year property............................ 5 yrs.7-year property............................ 7 yrs.10-year property.......................... 10 yrs.15-year property.......................... 15 yrs.20-year property.......................... 20 yrs.25-year property.......................... 25 yrs.Residential rental property .......... 27.5 yrs.Nonresidential real property........ 39 yrs.Railroad gradings and tunnelbores............................................ 50 yrs.


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q Water utility property, residentialrental property, nonresidential realproperty, any railroad grading ortunnel bore, or any tree or vine bearingfruit or nuts. The only applicable methodis the straight line method.

You may also make an irrevocable

election to use the straight line method forall property within a classification that isplaced in service during the tax year.

Enter 200 DB for 200% decliningbalance, 150 DB for 150% decliningbalance, or S/L for straight line.Column (g). To figure the depreciationdeduction you may use optional Tables Athrough E, starting on page 10. Multiplythe applicable rate from the appropriatetable by the property's unadjusted basis

(column (c)). See Pub. 946 for completetables. If you disposed of the propertyduring the current tax year, multiply theresult by the applicable decimal amountfrom the tables in Step 3 on the nextpage. Or you may compute the deductionyourself by completing the followingsteps:

Step 1. Determine the depreciationrate as follows.q If you are using the 200% or 150%

declining balance method in column (f),divide the declining balance rate (use 2.00for 200 DB or 1.50 for 150 DB) by thenumber of years in the recovery period incolumn (d). For example, for propertydepreciated using the 200 DB methodover a recovery period of 5 years, divide2.00 by 5 for a rate of 40%. You mustswitch to the straight line rate in the firstyear that the straight line rate exceeds thedeclining balance rate.q If you are using the straight linemethod, divide 1.00 by the remainingnumber of years in the recovery periodas of the beginning of the tax year (butnot less than one). For example, if thereare 61/2 years remaining in the recoveryperiod as of the beginning of the year,divide 1.00 by 6.5 for a rate of 15.38%.

Step 2. Multiply the percentage ratedetermined in Step 1 by the property'sunrecovered basis (basis for depreciation(as defined in column (c)) reduced by allprior years' depreciation).

Step 3. For property placed in serviceor disposed of during the current tax year,multiply the result from Step 2 by theapplicable decimal amount from thetables below (based on the conventionshown in column (e))

Short tax years. See Pub. 946 forrules on how to compute the depreciation

deduction for property placed in service ina short tax year.

Section CAlternativeDepreciation System (ADS)

Lines 16a Through 16c

Complete lines 16a through 16c forassets, other than automobiles and otherlisted property, placed in service onlyduring the tax year beginning in 2000 and

depreciated under the AlternativeDepreciation System (ADS). Report online 17 depreciation on assets placed inservice in prior years.

Under ADS, use the applicabledepreciation method, the applicablerecovery period, and the applicableconvention to compute depreciation.

The following types of property mustbe depreciated under ADS:q

Tangible property used predominantlyoutside the United States.q Tax-exempt use property.q Tax-exempt bond financed property.q Imported property covered by anexecutive order of the President of theUnited States.q Property used predominantly in afarming business and placed in serviceduring any tax year in which you madean election under section 263A(d)(3).

Instead of depreciating property underGDS (line 15), you may make anirrevocable election with respect to anyclassification of property for any tax yearto use ADS. For residential rental andnonresidential real property, you maymake this election separately for eachproperty.

See section 168(g)(3) for special rulesfor determining the class life for certainproperty.

12-year property. Use line 16b forproperty that does not have a class life.

40-year property. Use line 16c forresidential rental and nonresidential real

property.Water utility property and railroad

gradings and tunnel bores. Theseassets are 50-year property under ADS.There is no separate line to report 50-yearproperty. Therefore, attach a statementshowing the same information required incolumns (a) through (g). Include thededuction in the line 21 Total and writeSee attachment in the bottom margin ofthe form.

Column (b). For 40-year property, enterthe month and year placed in service orconverted to use in a trade or businessor for the production of income.Column (c). See the instructions for line15, column (c).Column (d). On line 16a, enter theproperty's class life.Column (e). Under ADS, the applicableconventions are the same as those usedunder GDS. See the instructions for line15, column (e).Column (g). Figure the depreciationdeduction in the same manner as underGDS, except use the straight line methodover the ADS recovery period and use theapplicable convention.

Part IIIOther DepreciationDo not use Part III for automobiles andother listed property. Instead, report this

property in Part V on page 2 of Form4562.

Line 17

For tangible property placed in service intax years beginning before 2000 anddepreciated under MACRS, enter theGDS and ADS deductions for the currentyear. To figure the deductions, see theinstructions for column (g), line 15, above.

Line 18Report property that you elect, undersection 168(f)(1), to depreciate under theunit-of-production method or any othermethod not based on a term of years(other than the retirement-replacement-betterment method).

Attach a separate sheet showing:

Mid-month (MM) convention

Placed in service(or disposed of) duringthe:

Placedin service

Disposedof

1st month.................... 0.9583 0.04172nd m onth . ................. 0.8750 0.1250

3rd month . .................. 0.7917 0.20834th month ................... 0.7083 0.29175th month ................... 0.6250 0.37506th month ................... 0.5417 0.45837th month ................... 0.4583 0.54178th month ................... 0.3750 0.62509th month ................... 0.2917 0.708310th m onth . ................ 0.2083 0.791711th m onth . ................ 0.1250 0.875012th m onth . ................ 0.0417 0.9583


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See section 50(c) to determine thebasis adjustment for investment creditproperty.

Line 19

Enter the total depreciation you areclaiming for the following types of property

(except listed property and propertysubject to a section 168(f)(1) election):q Accelerated cost recovery system(ACRS) property (pre-1987 rules). SeePub. 534.q Property placed in service before 1981.q Certain public utility property, whichdoes not meet certain normalizationrequirements.q Certain property acquired from relatedpersons.q Property acquired in certainnonrecognition transactions.q Certain sound recordings, movies, andvideotapes.q Property depreciated under the incomeforecast method. The use of the incomeforecast method is limited to motionpicture films, videotapes, soundrecordings, copyrights, books, andpatents. You cannot use this method to

depreciate any amortizable section 197intangible. See the instructions for line 40begnning on page 8 for more details onsection 197 intangibles.

Note: If you use the income forecastmethod for any property placed in serviceafter September 13, 1995, you may oweinterest or be entitled to a refund for the3rd and 10th tax years beginning after thetax year the property was placed inservice. For details, seeForm 8866,

Interest Computation Under theLook-Back Method for PropertyDepreciated Under the Income ForecastMethod.q Intangible property, other than section197 intangibles, including:

1. Computer software. Use thestraight line method over 36 months.

2. Any right to receive tangibleproperty or services under a contract orgranted by a governmental unit (not

acquired as part of a business).3. Any interest in a patent or copyright

not acquired as part of a business.

4. Residential mortgage servicingrights. Use the straight line method over108 months.

See section 167(f) for more details.

P i ' d i ti l t

include any section 179 expensededuction (line 12) on this line. Instead,any section 179 expense deduction ispassed through separately to the partnersand shareholders on the appropriate lineof their Schedules K-1.

Line 22

If you are subject to the uniformcapitalization rules of section 263A, enterthe increase in basis from costs you mustcapitalize. For a detailed discussion ofwho is subject to these rules, which costsmust be capitalized, and allocation ofcosts among activities, see Regulationssection 1.263A-1.

Part VListed Property

If you claim the standard mileage rate,actual vehicle expenses (includingdepreciation), or depreciation on otherlisted property, you must provide theinformation requested in Part V,regardless of the tax year the propertywas placed in service. However, if you fileForm 2106, 2106-EZ, or Schedule C-EZ(Form 1040), report this information onthat form and not in Part V. Also, if you fileSchedule C (Form 1040) and are claiming

the standard mileage rate or actualvehicle expenses (except depreciation),and you are not required to file Form 4562for any other reason, report vehicleinformation in Part IV of Schedule C andnot on Form 4562.

Section ADepreciation and OtherInformation

Lines 24 and 25

Qualified business use. To determinewhether to use line 24 or line 25 to reportyour listed property, you must firstdetermine the percentage of qualifiedbusiness use for each property.Generally, a qualified business use is anyuse in your trade or business. However,it does not include any of the following.q Investment use.q Leasing the property to a 5% owner orrelated person.q The use of the property ascompensation for services performed bya 5% owner or related person.q The use of the property ascompensation for services performed byany person (who is not a 5% owner orrelated person), unless an amount isincluded in that person's income for the

percentage of qualified business use maybe smaller than the business/investmentuse percentage.

For more information, see Pub. 946.Column (a). List on aproperty-by-property basis all your listedproperty in the following order.

1. Automobiles and other vehicles.2. Other listed property (computers

and peripheral equipment, etc.).

See Listed Property on page 1 foritems to include.

In column (a), list the make and modelof automobiles, and give a generaldescription of other listed property.

If you have more than five vehiclesused 100% for business/investment

purposes, you may group them by taxyear. Otherwise, list each vehicleseparately.Column (b). Enter the date the propertywas placed in service. If property held forpersonal use is converted tobusiness/investment use, treat theproperty as placed in service on the dateof conversion.Column (c). Enter the percentage ofbusiness/investment use. For automobiles

and other vehicles, determine thispercentage by dividing the number ofmiles the vehicle is driven for trade orbusiness purposes or for the productionof income during the year (not to includeany commuting mileage) by the totalnumber of miles the vehicle is driven forall purposes. Treat vehicles used byemployees as being used 100% forbusiness/investment purposes if the valueof personal use is included in the

employees' gross income, or theemployees reimburse the employer forthe personal use.

Employers who report the amount ofpersonal use of the vehicle in theemployee's gross income, and withholdthe appropriate taxes, should enter100% for the percentage ofbusiness/investment use. For moreinformation, see Pub. 463.

For listed property (such as computers

or video equipment), allocate the usebased on the most appropriate unit of timethe property is actually used. SeeTemporary Regulations section1.280F-6T.

If during the tax year you convertproperty used solely for personalpurposes to business/investment use,


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(figured as if 100% of the property's usehad been for business/investmentpurposes) plus any additional amount youpaid for the new property.

For a vehicle, reduce your basis by anydiesel-powered highway vehicle credit,qualified electric vehicle credit, or

deduction for clean-fuel vehicles youclaimed.

If you converted the property frompersonal use to business/investment use,your basis for depreciation is the smallerof the property's adjusted basis or its fairmarket value on the date of conversion.Column (e). Multiply column (d) by thepercentage in column (c). From thatresult, subtract any section 179 expensededuction and half of any investment

credit taken before 1986 (unless you tookthe reduced credit). For automobiles andother listed property placed in serviceafter 1985 (i.e., transition property),reduce the depreciable basis by the entireinvestment credit.Column (f). Enter the recovery period.For property placed in service after 1986and used more than 50% in a qualifiedbusiness use, use the table in the line 15,column (d) instructions on page 4. For

property placed in service after 1986 andused 50% or less in a qualified businessuse, depreciate the property using thestraight line method over its ADS recoveryperiod. The ADS recovery period is 5years for automobiles and computers.Column (g). Enter the method andconvention used to figure yourdepreciation deduction. See theinstructions for line 15, columns (e) and(f) on page 4. Write 200 DB, 150 DB,

or S/L, for the depreciation method, andHY, MM, or MQ, for half-year,mid-month, or mid-quarter conventions,respectively. For property placed inservice before 1987, write PRE if youused the prescribed percentages underACRS. If you elected an alternatepercentage, enter S/L.Column (h). See Limits for passengerautomobiles below before entering anamount in column (h).

For property used more than 50% in aqualified business use (line 24) andplaced in service after 1986, figurecolumn (h) by following the instructions forline 15, column (g) on page 5. If placed inservice before 1987, multiply column (e)by the applicable percentage given inPub. 534 for ACRS property. If the

instructions for line 15, column (e) onpage 4. The amount in column (h) cannotexceed the property's unrecovered basis.If the recovery period for an automobileended before your tax year beginning in2000, enter your unrecovered basis, ifany, in column (h).

For property placed in service before1987 that was disposed of during theyear, enter zero.Limits for passenger automobiles. Thedepreciation deduction plus section 179expense deduction for passengerautomobiles is limited for any tax year.

Definitions. Passenger automobilesare 4-wheeled vehicles manufacturedprimarily for use on public roads that arerated at 6,000 pounds unloaded gross

vehicle weight or less. For a truck or van,gross vehicle weight is substituted forunloaded gross vehicle weight. Electricpassenger automobiles are vehiclesproduced by an original equipmentmanufacturer and designed to runprimarily on electricity.

Exception. The following vehicles arenot considered passenger automobiles.q An ambulance, hearse, or combinationambulance-hearse used in your trade or

business.q A vehicle used in your trade or businessof transporting persons or property forcompensation or hire.

For any passenger automobile(including an electric passengerautomobile) you list on line 24 or line 25,the total of columns (h) and (i) for thatautomobile cannot exceed the applicablelimit shown in Table 1, 2, or 3 on thispage. If the business/investment usepercentage in column (c) for theautomobile is less than 100%, you mustreduce the applicable limit to an amountequal to the limit multiplied by thatpercentage. For example, for anautomobile (other than an electricautomobile) placed in service in 2000 (bya calendar year taxpayer) that is used60% for business/investment, the limit is$1,836 ($3,060 x 60%).

Table 1Limits for Passenger AutomobilesPlaced in Service Before 1998 (excludingelectric passenger automobiles placed inservice after August 5, 1997)

IF you placed yourautomobile in service:

THEN thelimit on yourdepreciationand section179 expensededuction is:

Table 2Limits for Passenger AutomobilesPlaced in Service After 1997 (excludingelectric passenger automobiles)

IF you placedyour automobile

in service:

THEN thelimit on yourdepreciationand section179 expense

deductionis*:

AND thenumber of

tax years inwhich thisautomobile

has been inservice is:

After Dec. 31,2000

2

3

1

$5,000

$2,950

**

*For vehicles placed in service after August 5, 1997,this limit does not apply to the cost of any qualifiedclean-fuel vehicle property (such as retrofit partsand components) installed on a vehicle for thepurpose of permitting that vehicle to run on aclean-burning fuel. See section 179A for definitions.

**The limit for automobiles placed in service afterDec. 31, 2000, will be published in the InternalRevenue Bulletin. This amount was not available atthe time these instructions were printed.

4

3 $2,950

$1,775

Jan. 1 Dec. 31,1998

Jan. 1 Dec. 31,1999

2

1 $3,060

$4,900

Jan. 1 Dec. 31,2000

Table 3Limits for Electric PassengerAutomobiles Placed in Service AfterAugust 5, 1997

IF you placedyour electricautomobile in

service:

THEN thelimit on yourdepreciationand section179 expensededuction is:

AND thenumber of

tax years inwhich thisautomobilehas been inservice is:

Aug. 6, 1997Dec. 31, 1997

After Dec. 31,2000

2

3

1

$14,900

$8,950

***

***The limit for electric passenger automobiles

placed in service after Dec. 31, 2000, will bepublished in the Internal Revenue Bulletin. Thisamount was not available at the time theseinstructions were printed.

4

3 $8,950

$5,425

Jan. 1 Dec. 31,1998

Jan. 1 Dec. 31,1999

4 or more $5,425

1

2

$9,280

$14,800

Jan. 1 Dec. 31,2000

Column (i). Enter the amount youchoose to expense for section 179property used more than 50% in aqualified business use (subject to thelimits for passenger automobiles noted


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later year part of the depreciation andsection 179 expense deduction. UseForm 4797, Sales of Business Property,to figure the recapture amount.

Section BInformation on Use ofVehicles

Except as noted below, you mustcomplete items 28 through 34 for eachvehicle identified in Section A. Employeesmust provide their employers with theinformation requested in items 28 through34 for each automobile or vehicleprovided for their use.Exception. Employers are not requiredto complete items 28 through 34 forvehicles used by employees who are notmore than 5% owners or related persons

and for which question 35, 36, 37, 38, or39 is answered Yes.

Section CQuestions forEmployers Who Provide Vehiclesfor Use by Their Employees

For employers providing vehicles to theiremployees, two types of written policystatements will satisfy the employer'ssubstantiation requirements under section274(d):q A policy statement that prohibitspersonal use including commuting andq A policy statement that prohibitspersonal use except for commuting.

An employee does not need to keep aseparate set of records for any vehiclethat satisfies these written policystatement rules.

Line 35

A policy statement that prohibits personaluse (including commuting) must meet allof the following conditions:q The employer owns or leases thevehicle and provides it to one or moreemployees for use in the employer's tradeor business.q When the vehicle is not used in theemployer's trade or business, it is kept onthe employer's business premises, unlessit is temporarily located elsewhere (e.g.,

for maintenance or because of amechanical failure).q No employee using the vehicle lives atthe employer's business premises.q No employee may use the vehicle forpersonal purposes, other than de minimispersonal use (e.g., a stop for lunchbetween two business deliveries).

q The employer owns or leases thevehicle and provides it to one or moreemployees for use in the employer's tradeor business, and it is used in theemployer's trade or business.q For bona fide noncompensatorybusiness reasons, the employer requires

the employee to commute to and/or fromwork in the vehicle.q The employer establishes a writtenpolicy under which the employee may notuse the vehicle for personal purposes,other than commuting or de minimispersonal use (e.g., a stop for a personalerrand between a business delivery andthe employee's home).q Except for de minimis use, theemployer reasonably believes that the

employee does not use the vehicle for anypersonal purpose other than commuting.q The employer accounts for thecommuting use by including anappropriate amount in the employee'sgross income.

For both written policy statements,there must be evidence that would enablethe IRS to determine whether use of thevehicle meets the conditions statedabove.

Line 38

An employer that provides more than fivevehicles to its employees who are not 5%owners or related persons need notcomplete Section B for such vehicles.Instead, the employer must obtain theinformation from its employees and retainthe information received.

Line 39

An automobile meets the requirements forqualified demonstration use if theemployer maintains a written policystatement that:q Prohibits its use by individuals otherthan full-time automobile salespersons.q Prohibits its use for personal vacationtrips.q Prohibits storage of personalpossessions in the automobile.q

Limits the total mileage outside thesalesperson's normal working hours.

Part VIAmortizationEach year you may elect to deduct partof certain capital costs over a fixed period.If you amortize property, the part youamortize does not qualify for the election

expense and is subject to the investmentinterest limitations. Use Form 4952,Investment Interest Expense Deduction,to compute the allowable deduction.

For taxable bonds acquired after 1987,the amortization offsets the interestincome. See Pub. 550, Investment

Income and Expenses.Line 40

Complete line 40 only for those costs forwhich the amortization period beginsduring your tax year beginning in 2000.Column (a). Describe the costs you areamortizing. You may amortize:q Pollution control facilities (section 169,limited by section 291 for corporations).q Certain bond premiums (section 171).q Research and experimentalexpenditures (section 174).q The cost of acquiring a lease (section178).q Qualified forestation and reforestationcosts (section 194). See the instructionsfor line 42 on page 9 and see Pub. 535for limitations.q Business start-up expenditures (section195). To elect to amortize start-up

expenditures, attach a statement to yourincome tax return containing the followinginformation.

1. A detailed description of the tradeor business.

2. The month in which the active tradeor business began (or was acquired).

3. The number of months in theamortization period you are selecting(cannot be less than 60).

4. A description of each start-upexpenditure incurred (whether or notpaid).

The statement must be filed by the duedate, including extensions, of your returnfor the year in which the active trade orbusiness begins. If you timely filed thatreturn without making the election, youcan still make the election on an amendedreturn filed within 6 months of the duedate, excluding extensions, of that return.Write Filed pursuant to section301.9100-2 on the amended return andfile it at the same place you filed theoriginal return. See Regulations section1.195-1 for more details.q Organizational expenditures for acorporation (section 248) or partnership(section 709).

O ti l it ff f t i t


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5. Any patent, copyright, formula,process, design, pattern, knowhow,format, or similar item.

6. Any customer-based intangible(e.g., composition of market or marketshare).

7. Any supplier-based intangible.

8. Any license, permit, or other rightgranted by a governmental unit.

9. Any covenant not to competeentered into in connection with theacquisition of a business.

10. Any franchise (other than a sportsfranchise), trademark, or trade name.

Section 197 intangibles must beamortized over 15 years starting with themonth the intangibles were acquired.

Column (b). Enter the date theamortization period begins under theapplicable Code section.Column (c). Enter the total amount youare amortizing. See the applicable Codesection for limits on the amortizableamount.Column (d). Enter the Code sectionunder which you amortize the costs.Column (f). Compute the amortizationdeduction by:

1. Dividing column (c) by the numberof months over which the costs are to be

amortized, and multiplying the result bythe number of months in the amortizationperiod included in your tax year beginningin 2000 or

2. Multiplying column (c) by thepercentage in column (e).

Attach any other information the Code

and regulations may require to make avalid election. See Pub. 535 for moreinformation.

Line 42

Report the total amortization, includingthe allowable portion of forestation orreforestation amortization, on theapplicable Other Deductions or OtherExpenses line of your return. For moredetails, including limitations that apply,

see Pub. 535. Partnerships (other thanelecting large partnerships) and Scorporations, report the amortizable basisof any forestation or reforestationexpenses for which amortization iselected and the year in which theamortization begins as a separatelystated item on Schedules K and K-1(Form 1065 or 1120S). See theinstructions for Schedule K (Form 1065or 1120S) for more details on how to

report.

Paperwork Reduction Act Notice. Weask for the information on this form tocarry out the Internal Revenue laws of theUnited States. You are required to giveus the information. We need it to ensurethat you are complying with these lawsand to allow us to figure and collect theright amount of tax.

You are not required to provide theinformation requested on a form that issubject to the Paperwork Reduction Actunless the form displays a valid OMBcontrol number. Books or records relatingto a form or its instructions must beretained as long as their contents maybecome material in the administration ofany Internal Revenue law. Generally, taxreturns and return information areconfidential, as required by section 6103.

The time needed to complete and filethis form will vary depending on individualcircumstances. The estimated averagetime is:

If you have comments concerning theaccuracy of these time estimates orsuggestions for making this form simpler,we would be happy to hear from you. Seethe instructions for the tax return withwhich this form is filed.

Recordkeeping ........................ 37 hr., 19 min.

Learning about thelaw or the form........................ 5 hr., 10 min.

Preparing and sendingthe form to the IRS ................ . 5 hr., 59 min.


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Table AGeneral Depreciation System

If the recovery period is:

Year 3 years 5 years 7 years 10 years

1 33.33% 20.00% 14.29% 10.00%

2 44.45% 32.00% 24.49% 18.00%

3 14.81% 19.20% 17.49% 14.40%

4 7.41% 11.52% 12.49% 11.52%

5 11.52% 8.93% 9.22%

6

7 6.55%

7.37%8.92%

8.93%

5.76%

4.46% 6.55%8

6.56%9

Method: 200% declining balance switching to straight line

Convention: Half-year

6.55%10

3.28%11

Table BGeneral and Alternative Depreciation System

If the recovery period is:

Year 5 years 7 years 10 years 12 years 15 years 20 years

1 15.00% 10.71% 7.50% 6.25% 5.00% 3.750%

2 25.50% 19.13% 13.88% 11.72% 9.50% 7.219%

3 17.85% 15.03% 11.79% 10.25% 8.55% 6.677%

4 16.66% 12.25% 10.02% 8.97% 7.70% 6.177%

5 16.66% 12.25% 8.74% 7.85% 6.93% 5.713%

6

7

8.33% 12.25%

12.25%

8.74%

8.74%

7.33%

7.33%

6.23%

5.90%

5.285%

4.888%

8 6.13% 8.74% 7.33% 5.90% 4.522%

9 8.74% 7.33% 5.91% 4.462%

Convention: Half-year

Method: 150% declining balance switching to straight line

10 8.74% 7.33% 5.90% 4.461%

11 4.37% 7.32% 5.91% 4.462%

12 7.33% 5.90% 4.461%

13 3.66% 5.91% 4.462%

14 5.90% 4.461%

15 5.91% 4.462%


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Table CGeneral Depreciation System

The month in the 1st recovery year the property is placed in service:

Year 1 2 3 4 5 6 7 8 9 10 11 12

1 3.485% 3.182% 2.879% 2.576% 2.273% 1.970% 1.667% 1.364% 1.061% 0.758% 0.455% 0.152%

29 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636%

Recovery period: 27.5 years

Convention: Mid-month

Method: Straight line

10, 12, 14 3.637% 3.637% 3.637% 3.637% 3.637% 3.637% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636%

11, 13, 15 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.637% 3.637% 3.637% 3.637% 3.637% 3.637%

Table DGeneral Depreciation System


Year 1 2 3 4 5 6 7 8 9 10 11 12

9, 11, 13, 15 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175%

8 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.175% 3.175% 3.175% 3.175% 3.175%

Recovery period: 31.5 years



3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175%

10, 12, 14 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174%

Table EGeneral Depreciation System


Year 1 2 3 4 5 6 7 8 9 10 11 12

1 2.461% 2.247% 2.033% 1.819% 1.605% 1.391% 1.177% 0.963% 0.749% 0.535% 0.321% 0.107%

239 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564%

Recovery period: 39 years




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Depreciation Worksheet

Description of PropertyDate

Placed in

Service

Cost orOther

Basis

Business/Investment

Use %

Section179

Deduction

Depreciation PriorYears

Basis forDepreciation

Method/Convention

RecoveryPeriod

Rate orTable

%

DepreciationDeduction

Page

12

us internal revenue service: i4562--2000

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