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2012 Tax Form 8863

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2012 Tax Form 8863

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The 2012 Tax Form 8863

2012 tax form 8863 7. 2012 tax form 8863   Costs You Can Deduct or Capitalize Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Carrying Charges Research and Experimental CostsProduct. 2012 tax form 8863 Costs not included. 2012 tax form 8863 Intangible Drilling Costs Exploration CostsPartnerships and S corporations. 2012 tax form 8863 Development Costs Circulation Costs Business Start-Up and Organizational Costs Reforestation Costs Retired Asset Removal Costs Barrier Removal CostsOther barrier removals. 2012 tax form 8863 Film and Television Production Costs What's New Film and television productions costs. 2012 tax form 8863  The election to expense film and television production costs does not apply to productions that begin after December 31, 2013. 2012 tax form 8863 See Film and Television Production Costs , later. 2012 tax form 8863 Introduction This chapter discusses costs you can elect to deduct or capitalize. 2012 tax form 8863 You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it. 2012 tax form 8863 If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. 2012 tax form 8863 When you capitalize a cost, you add it to the basis of property to which it relates. 2012 tax form 8863 A partnership, corporation, estate, or trust makes the election to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. 2012 tax form 8863 Each individual partner, shareholder, or beneficiary elects whether to deduct or capitalize exploration costs. 2012 tax form 8863 You may be subject to the alternative minimum tax (AMT) if you deduct research and experimental, intangible drilling, exploration, development, circulation, or business organizational costs. 2012 tax form 8863 For more information on the alternative minimum tax, see the instructions for the following forms. 2012 tax form 8863 Form 6251, Alternative Minimum Tax—Individuals. 2012 tax form 8863 Form 4626, Alternative Minimum Tax—Corporations. 2012 tax form 8863 Topics - This chapter discusses: Carrying charges Research and experimental costs Intangible drilling costs Exploration costs Development costs Circulation costs Qualified disaster expenses Business start-up and organizational costs Reforestation costs Retired asset removal costs Barrier removal costs Film and television production costs Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 3468 Investment Credit 8826 Disabled Access Credit See chapter 12 for information about getting publications and forms. 2012 tax form 8863 Carrying Charges Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. 2012 tax form 8863 Certain carrying charges must be capitalized under the uniform capitalization rules. 2012 tax form 8863 (For information on capitalization of interest, see chapter 4 . 2012 tax form 8863 ) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible. 2012 tax form 8863 You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. 2012 tax form 8863 For unimproved and unproductive real property, your election is good for only 1 year. 2012 tax form 8863 You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. 2012 tax form 8863 For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. 2012 tax form 8863 For personal property, your election is effective until the date you install or first use it, whichever is later. 2012 tax form 8863 How to make the election. 2012 tax form 8863   To make the election to capitalize a carrying charge, attach a statement to your original tax return for the year the election is to be effective indicating which charges you are electing to capitalize. 2012 tax form 8863 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2012 tax form 8863 Attach the statement to the amended return and write “Filed pursuant to section 301. 2012 tax form 8863 9100-2” on the statement. 2012 tax form 8863 File the amended return at the same address you filed the original return. 2012 tax form 8863 Research and Experimental Costs The costs of research and experimentation are generally capital expenses. 2012 tax form 8863 However, you can elect to deduct these costs as a current business expense. 2012 tax form 8863 Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change. 2012 tax form 8863 If you meet certain requirements, you may elect to defer and amortize research and experimental costs. 2012 tax form 8863 For information on electing to defer and amortize these costs, see Research and Experimental Costs in chapter 8. 2012 tax form 8863 Research and experimental costs defined. 2012 tax form 8863   Research and experimental costs are reasonable costs you incur in your trade or business for activities intended to provide information that would eliminate uncertainty about the development or improvement of a product. 2012 tax form 8863 Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. 2012 tax form 8863 Whether costs qualify as research and experimental costs depends on the nature of the activity to which the costs relate rather than on the nature of the product or improvement being developed or the level of technological advancement. 2012 tax form 8863      The costs of obtaining a patent, including attorneys' fees paid or incurred in making and perfecting a patent application, are research and experimental costs. 2012 tax form 8863 However, costs paid or incurred to obtain another's patent are not research and experimental costs. 2012 tax form 8863 Product. 2012 tax form 8863   The term “product” includes any of the following items. 2012 tax form 8863 Formula. 2012 tax form 8863 Invention. 2012 tax form 8863 Patent. 2012 tax form 8863 Pilot model. 2012 tax form 8863 Process. 2012 tax form 8863 Technique. 2012 tax form 8863 Property similar to the items listed above. 2012 tax form 8863 It also includes products used by you in your trade or business or held for sale, lease, or license. 2012 tax form 8863 Costs not included. 2012 tax form 8863   Research and experimental costs do not include expenses for any of the following activities. 2012 tax form 8863 Advertising or promotions. 2012 tax form 8863 Consumer surveys. 2012 tax form 8863 Efficiency surveys. 2012 tax form 8863 Management studies. 2012 tax form 8863 Quality control testing. 2012 tax form 8863 Research in connection with literary, historical, or similar projects. 2012 tax form 8863 The acquisition of another's patent, model, production, or process. 2012 tax form 8863 When and how to elect. 2012 tax form 8863   You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. 2012 tax form 8863 If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS. 2012 tax form 8863 Deducting or Amortizing Research and Experimentation Costs IF you . 2012 tax form 8863 . 2012 tax form 8863 . 2012 tax form 8863 THEN . 2012 tax form 8863 . 2012 tax form 8863 . 2012 tax form 8863 Elect to deduct research and experimental costs as a current business expense Deduct all research and experimental costs in the first year you pay or incur the costs and all later years. 2012 tax form 8863 Do not deduct research and experimental costs as a current business expense If you meet the requirements, amortize them over at least 60 months, starting with the month you first receive an economic benefit from the research. 2012 tax form 8863 See Research and Experimental Costs in chapter 8. 2012 tax form 8863 Research credit. 2012 tax form 8863   If you pay or incur qualified research expenses, you may be able to take the research credit. 2012 tax form 8863 For more information see Form 6765, Credit for Increasing Research Activities and its instructions. 2012 tax form 8863 Intangible Drilling Costs The costs of developing oil, gas, or geothermal wells are ordinarily capital expenditures. 2012 tax form 8863 You can usually recover them through depreciation or depletion. 2012 tax form 8863 However, you can elect to deduct intangible drilling costs (IDCs) as a current business expense. 2012 tax form 8863 These are certain drilling and development costs for wells in the United States in which you hold an operating or working interest. 2012 tax form 8863 You can deduct only costs for drilling or preparing a well for the production of oil, gas, or geothermal steam or hot water. 2012 tax form 8863 You can elect to deduct only the costs of items with no salvage value. 2012 tax form 8863 These include wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production. 2012 tax form 8863 Your cost for any drilling or development work done by contractors under any form of contract is also an IDC. 2012 tax form 8863 However, see Amounts paid to contractor that must be capitalized , later. 2012 tax form 8863 You can also elect to deduct the cost of drilling exploratory bore holes to determine the location and delineation of offshore hydrocarbon deposits if the shaft is capable of conducting hydrocarbons to the surface on completion. 2012 tax form 8863 It does not matter whether there is any intent to produce hydrocarbons. 2012 tax form 8863 If you do not elect to deduct your IDCs as a current business expense, you can elect to deduct them over the 60-month period beginning with the month they were paid or incurred. 2012 tax form 8863 Amounts paid to contractor that must be capitalized. 2012 tax form 8863   Amounts paid to a contractor must be capitalized if they are either: Amounts properly allocable to the cost of depreciable property, or Amounts paid only out of production or proceeds from production if these amounts are depletable income to the recipient. 2012 tax form 8863 How to make the election. 2012 tax form 8863   You elect to deduct IDCs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. 2012 tax form 8863 No formal statement is required. 2012 tax form 8863 If you file Schedule C (Form 1040), enter these costs under “Other expenses. 2012 tax form 8863 ”   For oil and gas wells, your election is binding for the year it is made and for all later years. 2012 tax form 8863 For geothermal wells, your election can be revoked by the filing of an amended return on which you do not take the deduction. 2012 tax form 8863 You can file the amended return for the year up to the normal time of expiration for filing a claim for credit or refund, generally, within 3 years after the date you filed the original return or within 2 years after the date you paid the tax, whichever is later. 2012 tax form 8863 Energy credit for costs of geothermal wells. 2012 tax form 8863   If you capitalize the drilling and development costs of geothermal wells that you place in service during the tax year, you may be able to claim a business energy credit. 2012 tax form 8863 See the Instructions for Form 3468 for more information. 2012 tax form 8863 Nonproductive well. 2012 tax form 8863   If you capitalize your IDCs, you have another option if the well is nonproductive. 2012 tax form 8863 You can deduct the IDCs of the nonproductive well as an ordinary loss. 2012 tax form 8863 You must indicate and clearly state your election on your tax return for the year the well is completed. 2012 tax form 8863 Once made, the election for oil and gas wells is binding for all later years. 2012 tax form 8863 You can revoke your election for a geothermal well by filing an amended return that does not claim the loss. 2012 tax form 8863 Costs incurred outside the United States. 2012 tax form 8863   You cannot deduct as a current business expense all the IDCs paid or incurred for an oil, gas, or geothermal well located outside the United States. 2012 tax form 8863 However, you can elect to include the costs in the adjusted basis of the well to figure depletion or depreciation. 2012 tax form 8863 If you do not make this election, you can deduct the costs over the 10-year period beginning with the tax year in which you paid or incurred them. 2012 tax form 8863 These rules do not apply to a nonproductive well. 2012 tax form 8863 Exploration Costs The costs of determining the existence, location, extent, or quality of any mineral deposit are ordinarily capital expenditures if the costs lead to the development of a mine. 2012 tax form 8863 You recover these costs through depletion as the mineral is removed from the ground. 2012 tax form 8863 However, you can elect to deduct domestic exploration costs paid or incurred before the beginning of the development stage of the mine (except those for oil and gas wells). 2012 tax form 8863 How to make the election. 2012 tax form 8863   You elect to deduct exploration costs by taking the deduction on your income tax return, or on an amended income tax return, for the first tax year for which you wish to deduct the costs paid or incurred during the tax year. 2012 tax form 8863 Your return must adequately describe and identify each property or mine, and clearly state how much is being deducted for each one. 2012 tax form 8863 The election applies to the tax year you make this election and all later tax years. 2012 tax form 8863 Partnerships and S corporations. 2012 tax form 8863   Each partner, not the partnership, elects whether to capitalize or to deduct that partner's share of exploration costs. 2012 tax form 8863 Each shareholder, not the S corporation, elects whether to capitalize or to deduct that shareholder's share of exploration costs. 2012 tax form 8863 Reduced corporate deductions for exploration costs. 2012 tax form 8863   A corporation (other than an S corporation) can deduct only 70% of its domestic exploration costs. 2012 tax form 8863 It must capitalize the remaining 30% of costs and amortize them over the 60-month period starting with the month the exploration costs are paid or incurred. 2012 tax form 8863 A corporation may also elect to capitalize and amortize mining exploration costs over a 10-year period. 2012 tax form 8863 For more information on this method of amortization, see Internal Revenue Code section 59(e). 2012 tax form 8863   The 30% the corporation capitalizes cannot be added to its basis in the property to figure cost depletion. 2012 tax form 8863 However, the amount amortized is treated as additional depreciation and is subject to recapture as ordinary income on a disposition of the property. 2012 tax form 8863 See Section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. 2012 tax form 8863   These rules also apply to the deduction of development costs by corporations. 2012 tax form 8863 See Development Costs , later. 2012 tax form 8863 Recapture of exploration expenses. 2012 tax form 8863   When your mine reaches the producing stage, you must recapture any exploration costs you elected to deduct. 2012 tax form 8863 Use either of the following methods. 2012 tax form 8863 Method 1—Include the deducted costs in gross income for the tax year the mine reaches the producing stage. 2012 tax form 8863 Your election must be clearly indicated on the return. 2012 tax form 8863 Increase your adjusted basis in the mine by the amount included in income. 2012 tax form 8863 Generally, you must elect this recapture method by the due date (including extensions) of your return. 2012 tax form 8863 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2012 tax form 8863 Make the election on your amended return and write “Filed pursuant to section 301. 2012 tax form 8863 9100-2” on the form where you are including the income. 2012 tax form 8863 File the amended return at the same address you filed the original return. 2012 tax form 8863 Method 2—Do not claim any depletion deduction for the tax year the mine reaches the producing stage and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. 2012 tax form 8863   You also must recapture deducted exploration costs if you receive a bonus or royalty from mine property before it reaches the producing stage. 2012 tax form 8863 Do not claim any depletion deduction for the tax year you receive the bonus or royalty and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. 2012 tax form 8863   Generally, if you dispose of the mine before you have fully recaptured the exploration costs you deducted, recapture the balance by treating all or part of your gain as ordinary income. 2012 tax form 8863 Under these circumstances, you generally treat as ordinary income all of your gain if it is less than your adjusted exploration costs with respect to the mine. 2012 tax form 8863 If your gain is more than your adjusted exploration costs, treat as ordinary income only a part of your gain, up to the amount of your adjusted exploration costs. 2012 tax form 8863 Foreign exploration costs. 2012 tax form 8863   If you pay or incur exploration costs for a mine or other natural deposit located outside the United States, you cannot deduct all the costs in the current year. 2012 tax form 8863 You can elect to include the costs (other than for an oil, gas, or geothermal well) in the adjusted basis of the mineral property to figure cost depletion. 2012 tax form 8863 (Cost depletion is discussed in chapter 9 . 2012 tax form 8863 ) If you do not make this election, you must deduct the costs over the 10-year period beginning with the tax year in which you pay or incur them. 2012 tax form 8863 These rules also apply to foreign development costs. 2012 tax form 8863 Development Costs You can deduct costs paid or incurred during the tax year for developing a mine or any other natural deposit (other than an oil or gas well) located in the United States. 2012 tax form 8863 These costs must be paid or incurred after the discovery of ores or minerals in commercially marketable quantities. 2012 tax form 8863 Development costs also include depreciation on improvements used in the development of ores or minerals and costs incurred for you by a contractor. 2012 tax form 8863 Development costs do not include the costs for the acquisition or improvement of depreciable property. 2012 tax form 8863 Instead of deducting development costs in the year paid or incurred, you can elect to treat the cost as deferred expenses and deduct them ratably as the units of produced ores or minerals benefited by the expenses are sold. 2012 tax form 8863 This election applies each tax year to expenses paid or incurred in that year. 2012 tax form 8863 Once made, the election is binding for the year and cannot be revoked for any reason. 2012 tax form 8863 How to make the election. 2012 tax form 8863   The election to deduct development costs ratably as the ores or minerals are sold must be made for each mine or other natural deposit by a clear indication on your return or by a statement filed with the IRS office where you file your return. 2012 tax form 8863 Generally, you must make the election by the due date of the return (including extensions). 2012 tax form 8863 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2012 tax form 8863 Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 2012 tax form 8863 9100-2. 2012 tax form 8863 ” File the amended return at the same address you filed the original return. 2012 tax form 8863 Foreign development costs. 2012 tax form 8863   The rules discussed earlier for foreign exploration costs apply to foreign development costs. 2012 tax form 8863 Reduced corporate deductions for development costs. 2012 tax form 8863   The rules discussed earlier for reduced corporate deductions for exploration costs also apply to corporate deductions for development costs. 2012 tax form 8863 Circulation Costs A publisher can deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical. 2012 tax form 8863 For example, a publisher can deduct the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. 2012 tax form 8863 Circulation costs are deductible even if they normally would be capitalized. 2012 tax form 8863 This rule does not apply to the following costs that must be capitalized. 2012 tax form 8863 The purchase of land or depreciable property. 2012 tax form 8863 The acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical, including the purchase of another publisher's list of subscribers. 2012 tax form 8863 Other treatment of circulation costs. 2012 tax form 8863   If you do not want to deduct circulation costs as a current business expense, you can elect one of the following ways to recover these costs. 2012 tax form 8863 Capitalize all circulation costs that are properly chargeable to a capital account (see chapter 1 ). 2012 tax form 8863 Amortize circulation costs over the 3-year period beginning with the tax year they were paid or incurred. 2012 tax form 8863 How to make the election. 2012 tax form 8863   You elect to capitalize circulation costs by attaching a statement to your return for the first tax year the election applies. 2012 tax form 8863 Your election is binding for the year it is made and for all later years, unless you get IRS approval to revoke it. 2012 tax form 8863 Business Start-Up and Organizational Costs Business start-up and organizational costs are generally capital expenditures. 2012 tax form 8863 However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. 2012 tax form 8863 The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. 2012 tax form 8863 Any remaining costs must be amortized. 2012 tax form 8863 For information about amortizing start-up and organizational costs, see chapter 8 . 2012 tax form 8863 Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. 2012 tax form 8863 Organizational costs include the costs of creating a corporation. 2012 tax form 8863 For more information on start-up and organizational costs, see chapter 8 . 2012 tax form 8863 How to make the election. 2012 tax form 8863   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. 2012 tax form 8863 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2012 tax form 8863 Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 2012 tax form 8863 9100-2. 2012 tax form 8863 ” File the amended return at the same address you filed the original return. 2012 tax form 8863 The election applies when computing taxable income for the current tax year and all subsequent years. 2012 tax form 8863 Reforestation Costs Reforestation costs are generally capital expenditures. 2012 tax form 8863 However, you can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. 2012 tax form 8863 The remaining costs can be amortized over an 84-month period. 2012 tax form 8863 For information about amortizing reforestation costs, see chapter 8 . 2012 tax form 8863 Qualifying reforestation costs are the direct costs of planting or seeding for forestation or reforestation. 2012 tax form 8863 Qualified timber property is property that contains trees in significant commercial quantities. 2012 tax form 8863 See chapter 8 for more information on qualifying reforestation costs and qualified timber property. 2012 tax form 8863 If you elect to deduct qualified reforestation costs, create and maintain separate timber accounts for each qualified timber property and include all reforestation costs and the dates each was applied. 2012 tax form 8863 Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. 2012 tax form 8863 How to make the election. 2012 tax form 8863   You elect to deduct qualifying reforestation costs by claiming the deduction on your timely filed income tax return (including extensions) for the tax year the expenses were paid or incurred. 2012 tax form 8863 If Form T (Timber), Forest Activities Schedule, is required, complete Part IV of Form T. 2012 tax form 8863 If Form T is not required, attach a statement containing the following information for each qualified timber property for which an election is being made. 2012 tax form 8863 The unique stand identification numbers. 2012 tax form 8863 The total number of acres reforested during the tax year. 2012 tax form 8863 The nature of the reforestation treatments. 2012 tax form 8863 The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. 2012 tax form 8863   If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2012 tax form 8863 Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 2012 tax form 8863 9100-2. 2012 tax form 8863 ” File the amended return at the same address you filed the original return. 2012 tax form 8863 The election applies when computing taxable income for the current tax year and all subsequent years. 2012 tax form 8863   For additional information on reforestation costs, see chapter 8 . 2012 tax form 8863 Recapture. 2012 tax form 8863   This deduction may have to be recaptured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the expenditure. 2012 tax form 8863 For more information on recapturing the deduction, see Depreciation Recapture in Publication 544. 2012 tax form 8863 Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. 2012 tax form 8863 However, if you replace a component (part) of a depreciable asset, capitalize the removal costs if the replacement is an improvement and deduct the costs if the replacement is a repair. 2012 tax form 8863 Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. 2012 tax form 8863 However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. 2012 tax form 8863 You must own or lease the facility or vehicle for use in connection with your trade or business. 2012 tax form 8863 A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. 2012 tax form 8863 A public transportation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your customers, even if you are not in the business of providing transportation services). 2012 tax form 8863 You cannot deduct any costs that you paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property in the normal course of business. 2012 tax form 8863 Deduction limit. 2012 tax form 8863   The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. 2012 tax form 8863 However, you can add any costs over this limit to the basis of the property and depreciate these excess costs. 2012 tax form 8863 Partners and partnerships. 2012 tax form 8863   The $15,000 limit applies to a partnership and also to each partner in the partnership. 2012 tax form 8863 A partner can allocate the $15,000 limit in any manner among the partner's individually incurred costs and the partner's distributive share of partnership costs. 2012 tax form 8863 If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. 2012 tax form 8863   A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). 2012 tax form 8863 If the partnership cannot show this, it is presumed that the partner was able to deduct the distributive share of the partnership's costs in full. 2012 tax form 8863 Example. 2012 tax form 8863 Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. 2012 tax form 8863 Emilio had $12,000 of similar expenses in his sole proprietorship. 2012 tax form 8863 He elected to deduct $7,000 of them. 2012 tax form 8863 Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. 2012 tax form 8863 Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. 2012 tax form 8863 Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partnership's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. 2012 tax form 8863 Qualification standards. 2012 tax form 8863   You can deduct your costs as a current expense only if the barrier removal meets the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. 2012 tax form 8863 You can view the Americans with Disabilities Act at www. 2012 tax form 8863 ada. 2012 tax form 8863 gov/pubs/ada. 2012 tax form 8863 htm. 2012 tax form 8863   The following is a list of some architectural barrier removal costs that can be deducted. 2012 tax form 8863 Ground and floor surfaces. 2012 tax form 8863 Walks. 2012 tax form 8863 Parking lots. 2012 tax form 8863 Ramps. 2012 tax form 8863 Entrances. 2012 tax form 8863 Doors and doorways. 2012 tax form 8863 Stairs. 2012 tax form 8863 Floors. 2012 tax form 8863 Toilet rooms. 2012 tax form 8863 Water fountains. 2012 tax form 8863 Public telephones. 2012 tax form 8863 Elevators. 2012 tax form 8863 Controls. 2012 tax form 8863 Signage. 2012 tax form 8863 Alarms. 2012 tax form 8863 Protruding objects. 2012 tax form 8863 Symbols of accessibility. 2012 tax form 8863 You can find the ADA guidelines and requirements for architectural barrier removal at www. 2012 tax form 8863 usdoj. 2012 tax form 8863 gov/crt/ada/reg3a. 2012 tax form 8863 html. 2012 tax form 8863   The costs for removal of transportation barriers from rail facilities, buses, and rapid and light rail vehicles are deductible. 2012 tax form 8863 You can find the guidelines and requirements for transportation barrier removal at www. 2012 tax form 8863 fta. 2012 tax form 8863 dot. 2012 tax form 8863 gov. 2012 tax form 8863   Also, you can access the ADA website at www. 2012 tax form 8863 ada. 2012 tax form 8863 gov for additional information. 2012 tax form 8863 Other barrier removals. 2012 tax form 8863   To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. 2012 tax form 8863 The removed barrier must be a substantial barrier to access or use of a facility or public transportation vehicle by persons who have a disability or are elderly. 2012 tax form 8863 The removed barrier must have been a barrier for at least one major group of persons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). 2012 tax form 8863 The barrier must be removed without creating any new barrier that significantly impairs access to or use of the facility or vehicle by a major group of persons who have a disability or are elderly. 2012 tax form 8863 How to make the election. 2012 tax form 8863   If you elect to deduct your costs for removing barriers to the disabled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. 2012 tax form 8863 Identify the deduction as a separate item. 2012 tax form 8863 The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. 2012 tax form 8863 If you make this election, you must maintain adequate records to support your deduction. 2012 tax form 8863   For your election to be valid, you generally must file your return by its due date, including extensions. 2012 tax form 8863 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2012 tax form 8863 Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 2012 tax form 8863 9100-2. 2012 tax form 8863 ” File the amended return at the same address you filed the original return. 2012 tax form 8863 Your election is irrevocable after the due date, including extensions, of your return. 2012 tax form 8863 Disabled access credit. 2012 tax form 8863   If you make your business accessible to persons with disabilities and your business is an eligible small business, you may be able to claim the disabled access credit. 2012 tax form 8863 If you choose to claim the credit, you must reduce the amount you deduct or capitalize by the amount of the credit. 2012 tax form 8863   For more information, see Form 8826, Disabled Access Credit. 2012 tax form 8863 Film and Television Production Costs Film and television production costs are generally capital expenses. 2012 tax form 8863 However, you can elect to deduct costs paid or incurred for certain productions commencing before January 1, 2014. 2012 tax form 8863 For more information, see section 181 of the Internal Revenue Code and the related 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