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Amendment To 2010 Tax Return

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Amendment To 2010 Tax Return

Amendment to 2010 tax return 1. Amendment to 2010 tax return   Fuel Taxes Table of Contents Definitions Information Returns Registration RequirementsAdditional information. Amendment to 2010 tax return Gasoline and Aviation GasolineTaxable Events Gasoline Blendstocks Diesel Fuel and KeroseneTaxable Events Dyed Diesel Fuel and Dyed Kerosene Alaska and Feedstocks Back-up Tax Diesel-Water Fuel Emulsion Kerosene for Use in AviationTaxable Events Liability For Tax Surtax on any liquid used in a fractional ownership program aircraft as fuel Certificate for Commercial Aviation and Exempt UsesExempt use. Amendment to 2010 tax return Reseller statement. Amendment to 2010 tax return Other Fuels (Including Alternative Fuels)Taxable Events Compressed Natural Gas (CNG)Taxable Events Fuels Used on Inland WaterwaysFishing vessels. Amendment to 2010 tax return Deep-draft ocean-going vessels. Amendment to 2010 tax return Passenger vessels. Amendment to 2010 tax return Ocean-going barges. Amendment to 2010 tax return State or local governments. Amendment to 2010 tax return Cellulosic or Second Generation Biofuel Not Used as Fuel Biodiesel Sold as But Not Used as Fuel Definitions Excise taxes are imposed on all the following fuels. Amendment to 2010 tax return Gasoline, including aviation gasoline and gasoline blendstocks. Amendment to 2010 tax return Diesel fuel, including dyed diesel fuel. Amendment to 2010 tax return Diesel-water fuel emulsion. Amendment to 2010 tax return Kerosene, including dyed kerosene and kerosene used in aviation. Amendment to 2010 tax return Other Fuels (including alternative fuels). Amendment to 2010 tax return Compressed natural gas (CNG). Amendment to 2010 tax return Fuels used in commercial transportation on inland waterways. Amendment to 2010 tax return Any liquid used in a fractional ownership program aircraft as fuel. Amendment to 2010 tax return The following terms are used throughout the discussion of fuel taxes. Amendment to 2010 tax return Other terms are defined in the discussion of the specific fuels to which they pertain. Amendment to 2010 tax return Agri-biodiesel. Amendment to 2010 tax return   Agri-biodiesel means biodiesel derived solely from virgin oils, including esters derived from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, and from animal fats. Amendment to 2010 tax return Approved terminal or refinery. Amendment to 2010 tax return   This is a terminal operated by a registrant that is a terminal operator or a refinery operated by a registrant that is a refiner. Amendment to 2010 tax return Biodiesel. Amendment to 2010 tax return   Biodiesel means the monoalkyl esters of long chain fatty acids derived from plant or animal matter that meet the registration requirements for fuels and fuel additives established by the Environmental Protection Agency (EPA) under section 211 of the Clean Air Act, and the requirements of the American Society of Testing Materials (ASTM) D6751. Amendment to 2010 tax return Blended taxable fuel. Amendment to 2010 tax return   This means any taxable fuel produced outside the bulk transfer/terminal system by mixing taxable fuel on which excise tax has been imposed and any other liquid on which excise tax has not been imposed. Amendment to 2010 tax return This does not include a mixture removed or sold during the calendar quarter if all such mixtures removed or sold by the blender contain less than 400 gallons of a liquid on which the tax has not been imposed. Amendment to 2010 tax return Blender. Amendment to 2010 tax return   This is the person that produces blended taxable fuel. Amendment to 2010 tax return Bulk transfer. Amendment to 2010 tax return   This is the transfer of taxable fuel by pipeline or vessel. Amendment to 2010 tax return Bulk transfer/terminal system. Amendment to 2010 tax return   This is the taxable fuel distribution system consisting of refineries, pipelines, vessels, and terminals. Amendment to 2010 tax return Fuel in the supply tank of any engine, or in any tank car, railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer/terminal system. Amendment to 2010 tax return Cellulosic biofuel. Amendment to 2010 tax return   Cellulosic biofuel means any liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis that meets the registration requirements for fuels and fuel additives established by the EPA under section 211 of the Clean Air Act. Amendment to 2010 tax return Cellulosic biofuel does not include any alcohol with a proof of less than 150 (without regard to denaturants). Amendment to 2010 tax return For fuels sold or used after December 31, 2009, cellulosic biofuel does not include fuel of which more than 4% (determined by weight) is any combination of water and sediment, fuel of which the ash content is more than 1%, or fuel that has an acid number greater than 25. Amendment to 2010 tax return Also see Second generation biofuel below. Amendment to 2010 tax return Diesel-water fuel emulsion. Amendment to 2010 tax return   A diesel-water fuel emulsion means an emulsion at least 14% of which is water. Amendment to 2010 tax return The emulsion additive used to produce the fuel must be registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. Amendment to 2010 tax return Dry lease aircraft exchange. Amendment to 2010 tax return   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. Amendment to 2010 tax return Enterer. Amendment to 2010 tax return   This is the importer of record (under customs law) for the taxable fuel. Amendment to 2010 tax return However, if the importer of record is acting as an agent, such as a customs broker, the person for whom the agent is acting is the enterer. Amendment to 2010 tax return If there is no importer of record, the owner at the time of entry into the United States is the enterer. Amendment to 2010 tax return Entry. Amendment to 2010 tax return   Taxable fuel is entered into the United States when it is brought into the United States and applicable customs law requires that it be entered for consumption, use, or warehousing. Amendment to 2010 tax return This does not apply to fuel brought into Puerto Rico (which is part of the U. Amendment to 2010 tax return S. Amendment to 2010 tax return customs territory), but does apply to fuel brought into the United States from Puerto Rico. Amendment to 2010 tax return Fractional ownership aircraft program and fractional program aircraft. Amendment to 2010 tax return   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. Amendment to 2010 tax return Measurement of taxable fuel. Amendment to 2010 tax return   Volumes of taxable fuel can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit. Amendment to 2010 tax return Other fuels. Amendment to 2010 tax return   See Other Fuels (Including Alternative Fuels), later, and Alternative Fuel Credit and Alternative Fuel Mixture Credit in chapter 2. Amendment to 2010 tax return Pipeline operator. Amendment to 2010 tax return   This is the person that operates a pipeline within the bulk transfer/terminal system. Amendment to 2010 tax return Position holder. Amendment to 2010 tax return   This is the person that holds the inventory position in the taxable fuel in the terminal, as reflected in the records of the terminal operator. Amendment to 2010 tax return You hold the inventory position when you have a contractual agreement with the terminal operator for the use of the storage facilities and terminaling services for the taxable fuel. Amendment to 2010 tax return A terminal operator that owns taxable fuel in its terminal is a position holder. Amendment to 2010 tax return Rack. Amendment to 2010 tax return   This is a mechanism capable of delivering fuel into a means of transport other than a pipeline or vessel. Amendment to 2010 tax return Refiner. Amendment to 2010 tax return   This is any person that owns, operates, or otherwise controls a refinery. Amendment to 2010 tax return Refinery. Amendment to 2010 tax return   This is a facility used to produce taxable fuel and from which taxable fuel may be removed by pipeline, by vessel, or at a rack. Amendment to 2010 tax return However, this term does not include a facility where only blended fuel, and no other type of fuel, is produced. Amendment to 2010 tax return For this purpose, blended fuel is any mixture that would be blended taxable fuel if produced outside the bulk transfer/terminal system. Amendment to 2010 tax return Registrant. Amendment to 2010 tax return   This is a taxable fuel registrant (see Registration Requirements, later). Amendment to 2010 tax return Removal. Amendment to 2010 tax return   This is any physical transfer of taxable fuel. Amendment to 2010 tax return It also means any use of taxable fuel other than as a material in the production of taxable fuel or Other Fuels. Amendment to 2010 tax return However, taxable fuel is not removed when it evaporates or is otherwise lost or destroyed. Amendment to 2010 tax return Renewable diesel. Amendment to 2010 tax return   See Renewable Diesel Credits in chapter 2. Amendment to 2010 tax return Sale. Amendment to 2010 tax return   For taxable fuel not in a terminal, this is the transfer of title to, or substantial incidents of ownership in, taxable fuel to the buyer for money, services, or other property. Amendment to 2010 tax return For taxable fuel in a terminal, this is the transfer of the inventory position if the transferee becomes the position holder for that taxable fuel. Amendment to 2010 tax return Second generation biofuel. Amendment to 2010 tax return   This is any liquid fuel derived by, or from, qualified feedstocks, and meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U. Amendment to 2010 tax return S. Amendment to 2010 tax return C. Amendment to 2010 tax return 7545). Amendment to 2010 tax return It also includes certain liquid fuel which is derived by, or from, any cultivated algae, cyanobacteria, or lemna. Amendment to 2010 tax return It is not alcohol of less than 150 proof (disregard any added denaturants). Amendment to 2010 tax return See Form 6478 for more information. Amendment to 2010 tax return State. Amendment to 2010 tax return   This includes any state, any of its political subdivisions, the District of Columbia, and the American Red Cross. Amendment to 2010 tax return An Indian tribal government is treated as a state only if transactions involve the exercise of an essential tribal government function. Amendment to 2010 tax return Taxable fuel. Amendment to 2010 tax return   This means gasoline, diesel fuel, and kerosene. Amendment to 2010 tax return Terminal. Amendment to 2010 tax return   This is a storage and distribution facility supplied by pipeline or vessel, and from which taxable fuel may be removed at a rack. Amendment to 2010 tax return It does not include a facility at which gasoline blendstocks are used in the manufacture of products other than finished gasoline if no gasoline is removed from the facility. Amendment to 2010 tax return A terminal does not include any facility where finished gasoline, diesel fuel, or kerosene is stored if the facility is operated by a registrant and all such taxable fuel stored at the facility has been previously taxed upon removal from a refinery or terminal. Amendment to 2010 tax return Terminal operator. Amendment to 2010 tax return   This is any person that owns, operates, or otherwise controls a terminal. Amendment to 2010 tax return Throughputter. Amendment to 2010 tax return   This is any person that is a position holder or that owns taxable fuel within the bulk transfer/terminal system (other than in a terminal). Amendment to 2010 tax return Vessel operator. Amendment to 2010 tax return   This is the person that operates a vessel within the bulk transfer/terminal system. Amendment to 2010 tax return However, vessel does not include a deep draft ocean-going vessel. Amendment to 2010 tax return Information Returns Form 720-TO and Form 720-CS are information returns used to report monthly receipts and disbursements of liquid products. Amendment to 2010 tax return A liquid product is any liquid transported into storage at a terminal or delivered out of a terminal. Amendment to 2010 tax return For a list of products, see the product code table in the Instructions for Forms 720-TO and 720-CS. Amendment to 2010 tax return The returns are due the last day of the month following the month in which the transaction occurs. Amendment to 2010 tax return Generally, these returns can be filed on paper or electronically. Amendment to 2010 tax return For information on filing electronically, see Publication 3536, Motor Fuel Excise Tax EDI Guide. Amendment to 2010 tax return Publication 3536 is only available on the IRS website. Amendment to 2010 tax return Form 720-TO. Amendment to 2010 tax return   This information return is used by terminal operators to report receipts and disbursements of all liquid products to and from all approved terminals. Amendment to 2010 tax return Each terminal operator must file a separate form for each approved terminal. Amendment to 2010 tax return Form 720-CS. Amendment to 2010 tax return   This information return must be filed by bulk transport carriers (barges, vessels, and pipelines) who receive liquid product from an approved terminal or deliver liquid product to an approved terminal. Amendment to 2010 tax return Registration Requirements The following discussion applies to excise tax registration requirements for activities relating to fuels only. Amendment to 2010 tax return See Form 637 for other persons who must register and for more information about registration. Amendment to 2010 tax return Persons that are required to be registered. Amendment to 2010 tax return   You are required to be registered if you are a: Blender; Enterer; Pipeline operator; Position holder; Refiner; Terminal operator; Vessel operator; Producer or importer of alcohol, biodiesel, agri-biodiesel, and renewable diesel; or Producer of cellulosic or second generation biofuel. Amendment to 2010 tax return Persons that may register. Amendment to 2010 tax return   You may, but are not required to, register if you are a: Feedstock user, Industrial user, Throughputter that is not a position holder, Ultimate vendor, Diesel-water fuel emulsion producer, Credit card issuer, or Alternative fuel claimant. Amendment to 2010 tax return Ultimate vendors, credit card issuers, and alternative fuel claimants do not need to be registered to buy or sell fuel. Amendment to 2010 tax return However, they must be registered to file claims for certain sales and uses of fuel. Amendment to 2010 tax return See Form 637 for more information. Amendment to 2010 tax return Taxable fuel registrant. Amendment to 2010 tax return   This is an enterer, an industrial user, a refiner, a terminal operator, or a throughputter who received a Letter of Registration under the excise tax registration provisions and whose registration has not been revoked or suspended. Amendment to 2010 tax return The term registrant as used in the discussions of these fuels means a taxable fuel registrant. Amendment to 2010 tax return Additional information. Amendment to 2010 tax return   See the Form 637 instructions for the information you must submit when you apply for registration. Amendment to 2010 tax return Failure to register. Amendment to 2010 tax return   The penalty for failure to register if you must register, unless due to reasonable cause, is $10,000 for the initial failure, and then $1,000 each day thereafter you fail to register. Amendment to 2010 tax return Gasoline and Aviation Gasoline Gasoline. Amendment to 2010 tax return   Gasoline means all products commonly or commercially known or sold as gasoline with an octane rating of 75 or more that are suitable for use as a motor fuel. Amendment to 2010 tax return Gasoline includes any gasoline blend other than: Qualified ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from coal, including peat), Partially exempt ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from natural gas), or Denatured alcohol. Amendment to 2010 tax return Gasoline also includes gasoline blendstocks, discussed later. Amendment to 2010 tax return Aviation gasoline. Amendment to 2010 tax return   This means all special grades of gasoline suitable for use in aviation reciprocating engines and covered by ASTM specification D910 or military specification MIL-G-5572. Amendment to 2010 tax return Taxable Events The tax on gasoline is $. Amendment to 2010 tax return 184 per gallon. Amendment to 2010 tax return The tax on aviation gasoline is $. Amendment to 2010 tax return 194 per gallon. Amendment to 2010 tax return When used in a fractional ownership program aircraft, gasoline also is subject to a surtax of $. Amendment to 2010 tax return 141 per gallon. Amendment to 2010 tax return See Surtax on any liquid used in a fractional ownership program aircraft as fuel, later. Amendment to 2010 tax return Tax is imposed on the removal, entry, or sale of gasoline. Amendment to 2010 tax return Each of these events is discussed later. Amendment to 2010 tax return Also, see the special rules that apply to gasoline blendstocks, later. Amendment to 2010 tax return If the tax is paid on the gasoline in more than one event, a refund may be allowed for the “second” tax paid. Amendment to 2010 tax return See Refunds of Second Tax in chapter 2. Amendment to 2010 tax return Removal from terminal. Amendment to 2010 tax return   All removals of gasoline at a terminal rack are taxable. Amendment to 2010 tax return The position holder for that gasoline is liable for the tax. Amendment to 2010 tax return Two-party exchanges. Amendment to 2010 tax return   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. Amendment to 2010 tax return A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. Amendment to 2010 tax return The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. Amendment to 2010 tax return The exchange transaction occurs before or at the same time as removal across the rack by the receiving person. Amendment to 2010 tax return The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. Amendment to 2010 tax return The transaction is subject to a written contract. Amendment to 2010 tax return Terminal operator's liability. Amendment to 2010 tax return   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. Amendment to 2010 tax return   However, a terminal operator meeting all the following conditions at the time of the removal will not be liable for the tax. Amendment to 2010 tax return The terminal operator is a registrant. Amendment to 2010 tax return The terminal operator has an unexpired notification certificate (discussed later) from the position holder. Amendment to 2010 tax return The terminal operator has no reason to believe any information on the certificate is false. Amendment to 2010 tax return Removal from refinery. Amendment to 2010 tax return   The removal of gasoline from a refinery is taxable if the removal meets either of the following conditions. Amendment to 2010 tax return It is made by bulk transfer and the refiner, the owner of the gasoline immediately before the removal, or the operator of the pipeline or vessel is not a registrant. Amendment to 2010 tax return It is made at the refinery rack. Amendment to 2010 tax return The refiner is liable for the tax. Amendment to 2010 tax return Exception. Amendment to 2010 tax return   The tax does not apply to a removal of gasoline at the refinery rack if all the following requirements are met. Amendment to 2010 tax return The gasoline is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. Amendment to 2010 tax return The gasoline is received at a facility operated by a registrant and located within the bulk transfer/terminal system. Amendment to 2010 tax return The removal from the refinery is by railcar. Amendment to 2010 tax return The same person operates the refinery and the facility at which the gasoline is received. Amendment to 2010 tax return Entry into the United States. Amendment to 2010 tax return   The entry of gasoline into the United States is taxable if the entry meets either of the following conditions. Amendment to 2010 tax return It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. Amendment to 2010 tax return It is not made by bulk transfer. Amendment to 2010 tax return The enterer is liable for the tax. Amendment to 2010 tax return Importer of record's liability. Amendment to 2010 tax return   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. Amendment to 2010 tax return   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. Amendment to 2010 tax return The importer of record has an unexpired notification certificate (discussed later) from the enterer. Amendment to 2010 tax return The importer of record has no reason to believe any information in the certificate is false. Amendment to 2010 tax return Customs bond. Amendment to 2010 tax return   The customs bond will not be charged for the tax imposed on the entry of the gasoline if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. Amendment to 2010 tax return Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. Amendment to 2010 tax return   The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline or the operator of the pipeline or vessel is not a registrant. Amendment to 2010 tax return The position holder is liable for the tax. Amendment to 2010 tax return The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. Amendment to 2010 tax return However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. Amendment to 2010 tax return Bulk transfers not received at approved terminal or refinery. Amendment to 2010 tax return   The removal by bulk transfer of gasoline from a terminal or refinery, or the entry of gasoline by bulk transfer into the United States, is taxable if the following conditions apply. Amendment to 2010 tax return No tax was previously imposed (as discussed earlier) on any of the following events. Amendment to 2010 tax return The removal from the refinery. Amendment to 2010 tax return The entry into the United States. Amendment to 2010 tax return The removal from a terminal by an unregistered position holder. Amendment to 2010 tax return Upon removal from the pipeline or vessel, the gasoline is not received at an approved terminal or refinery (or at another pipeline or vessel). Amendment to 2010 tax return   The owner of the gasoline when it is removed from the pipeline or vessel is liable for the tax. Amendment to 2010 tax return However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. Amendment to 2010 tax return The owner is a registrant. Amendment to 2010 tax return The owner has an unexpired notification certificate (discussed later) from the operator of the terminal or refinery where the gasoline is received. Amendment to 2010 tax return The owner has no reason to believe any information on the certificate is false. Amendment to 2010 tax return The operator of the facility where the gasoline is received is liable for the tax if the owner meets these conditions. Amendment to 2010 tax return The operator is jointly and severally liable if the owner does not meet these conditions. Amendment to 2010 tax return Sales to unregistered person. Amendment to 2010 tax return   The sale of gasoline located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. Amendment to 2010 tax return   The seller is liable for the tax. Amendment to 2010 tax return However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. Amendment to 2010 tax return   The seller is a registrant. Amendment to 2010 tax return The seller has an unexpired notification certificate (discussed later) from the buyer. Amendment to 2010 tax return The seller has no reason to believe any information on the certificate is false. Amendment to 2010 tax return The buyer of the gasoline is liable for the tax if the seller meets these conditions. Amendment to 2010 tax return The buyer is jointly and severally liable if the seller does not meet these conditions. Amendment to 2010 tax return Exception. Amendment to 2010 tax return   The tax does not apply to a sale if all of the following apply. Amendment to 2010 tax return The buyer's principal place of business is not in the United States. Amendment to 2010 tax return The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. Amendment to 2010 tax return The seller is a registrant and the exporter of record. Amendment to 2010 tax return The fuel was exported. Amendment to 2010 tax return Removal or sale of blended gasoline. Amendment to 2010 tax return   The removal or sale of blended gasoline by the blender is taxable. Amendment to 2010 tax return See Blended taxable fuel under Definitions, earlier. Amendment to 2010 tax return   The blender is liable for the tax. Amendment to 2010 tax return The tax is figured on the number of gallons not previously subject to the tax on gasoline. Amendment to 2010 tax return   Persons who blend alcohol with gasoline to produce an alcohol fuel mixture outside the bulk transfer/terminal system must pay the gasoline tax on the volume of alcohol in the mixture. Amendment to 2010 tax return See Form 720 to report this tax. Amendment to 2010 tax return You also must be registered with the IRS as a blender. Amendment to 2010 tax return See Form 637. Amendment to 2010 tax return   However, if an untaxed liquid is sold as taxed taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. Amendment to 2010 tax return Notification certificate. Amendment to 2010 tax return   The notification certificate is used to notify a person of the registration status of the registrant. Amendment to 2010 tax return A copy of the registrant's letter of registration cannot be used as a notification certificate. Amendment to 2010 tax return A model notification certificate is shown in the Appendix as Model Certificate C. Amendment to 2010 tax return A notification certificate must contain all information necessary to complete the model. Amendment to 2010 tax return   The certificate may be included as part of any business records normally used for a sale. Amendment to 2010 tax return A certificate expires on the earlier of the date the registrant provides a new certificate, or the date the recipient of the certificate is notified that the registrant's registration has been revoked or suspended. Amendment to 2010 tax return The registrant must provide a new certificate if any information on a certificate has changed. Amendment to 2010 tax return Additional persons liable. Amendment to 2010 tax return   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or Anyone who willfully causes the person to fail to pay the tax. Amendment to 2010 tax return Gasoline Blendstocks Gasoline blendstocks may be subject to $. Amendment to 2010 tax return 001 per gallon LUST tax as discussed below. Amendment to 2010 tax return Gasoline includes gasoline blendstocks. Amendment to 2010 tax return The previous discussions apply to these blendstocks. Amendment to 2010 tax return However, if certain conditions are met, the removal, entry, or sale of gasoline blendstocks are taxed at $. Amendment to 2010 tax return 001 per gallon or are not subject to the excise tax. Amendment to 2010 tax return Blendstocks. Amendment to 2010 tax return   Gasoline blendstocks are: Alkylate, Butane, Butene, Catalytically cracked gasoline, Coker gasoline, Ethyl tertiary butyl ether (ETBE), Hexane, Hydrocrackate, Isomerate, Methyl tertiary butyl ether (MTBE), Mixed xylene (not including any separated isomer of xylene), Natural gasoline, Pentane, Pentane mixture, Polymer gasoline, Raffinate, Reformate, Straight-run gasoline, Straight-run naphtha, Tertiary amyl methyl ether (TAME), Tertiary butyl alcohol (gasoline grade) (TBA), Thermally cracked gasoline, and Toluene. Amendment to 2010 tax return   However, gasoline blendstocks do not include any product that cannot be used without further processing in the production of finished gasoline. Amendment to 2010 tax return Not used to produce finished gasoline. Amendment to 2010 tax return   Gasoline blendstocks not used to produce finished gasoline are not taxable (other than LUST) if the following conditions are met. Amendment to 2010 tax return Removals and entries not connected to sale. Amendment to 2010 tax return   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant. Amendment to 2010 tax return Removals and entries connected to sale. Amendment to 2010 tax return   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant, and at the time of the sale, meets the following requirements. Amendment to 2010 tax return The person has an unexpired certificate (discussed later) from the buyer. Amendment to 2010 tax return The person has no reason to believe any information in the certificate is false. Amendment to 2010 tax return Sales after removal or entry. Amendment to 2010 tax return   The sale of a gasoline blendstock that was not subject to tax on its nonbulk removal or entry, as discussed earlier, is taxable. Amendment to 2010 tax return The seller is liable for the tax. Amendment to 2010 tax return However, the sale is not taxable if, at the time of the sale, the seller meets the following requirements. Amendment to 2010 tax return The seller has an unexpired certificate (discussed next) from the buyer. Amendment to 2010 tax return The seller has no reason to believe any information in the certificate is false. Amendment to 2010 tax return Certificate of buyer. Amendment to 2010 tax return   The certificate from the buyer certifies the gasoline blendstocks will not be used to produce finished gasoline. Amendment to 2010 tax return The certificate may be included as part of any business records normally used for a sale. Amendment to 2010 tax return A model certificate is shown in the Appendix as Model Certificate D. Amendment to 2010 tax return The certificate must contain all information necessary to complete the model. Amendment to 2010 tax return   A certificate expires on the earliest of the following dates. Amendment to 2010 tax return The date 1 year after the effective date (not earlier than the date signed) of the certificate. Amendment to 2010 tax return The date a new certificate is provided to the seller. Amendment to 2010 tax return The date the seller is notified that the buyer's right to provide a certificate has been withdrawn. Amendment to 2010 tax return The buyer must provide a new certificate if any information on a certificate has changed. Amendment to 2010 tax return   The IRS may withdraw the buyer's right to provide a certificate if that buyer uses the gasoline blendstocks in the production of finished gasoline or resells the blendstocks without getting a certificate from its buyer. Amendment to 2010 tax return Received at approved terminal or refinery. Amendment to 2010 tax return   The nonbulk removal or entry of gasoline blendstocks received at an approved terminal or refinery is not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) meets all the following requirements. Amendment to 2010 tax return The person is a registrant. Amendment to 2010 tax return The person has an unexpired notification certificate (discussed earlier) from the operator of the terminal or refinery where the gasoline blendstocks are received. Amendment to 2010 tax return The person has no reason to believe any information on the certificate is false. Amendment to 2010 tax return Bulk transfers to registered industrial user. Amendment to 2010 tax return   The removal of gasoline blendstocks from a pipeline or vessel is not taxable (other than LUST) if the blendstocks are received by a registrant that is an industrial user. Amendment to 2010 tax return An industrial user is any person that receives gasoline blendstocks by bulk transfer for its own use in the manufacture of any product other than finished gasoline. Amendment to 2010 tax return Credits or Refunds. Amendment to 2010 tax return   A credit or refund of the gasoline tax may be allowable if gasoline is used for a nontaxable purpose or exempt use. Amendment to 2010 tax return For more information, see chapter 2. Amendment to 2010 tax return Diesel Fuel and Kerosene Generally, diesel fuel and kerosene are taxed in the same manner as gasoline (discussed earlier). Amendment to 2010 tax return However, special rules (discussed later) apply to dyed diesel fuel and dyed kerosene, and to undyed diesel fuel and undyed kerosene sold or used in Alaska for certain nontaxable uses and undyed kerosene used for a feedstock purpose. Amendment to 2010 tax return Diesel fuel means: Any liquid that without further processing or blending is suitable for use as a fuel in a diesel-powered highway vehicle or train, and Transmix. Amendment to 2010 tax return A liquid is suitable for this use if the liquid has practical and commercial fitness for use in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. Amendment to 2010 tax return A liquid may possess this practical and commercial fitness even though the specified use is not the predominant use of the liquid. Amendment to 2010 tax return However, a liquid does not possess this practical and commercial fitness solely by reason of its possible or rare use as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. Amendment to 2010 tax return Diesel fuel does not include gasoline, kerosene, excluded liquid, No. Amendment to 2010 tax return 5 and No. Amendment to 2010 tax return 6 fuel oils covered by ASTM specification D396, or F-76 (Fuel Naval Distillate) covered by military specification MIL-F-16884. Amendment to 2010 tax return An excluded liquid is either of the following. Amendment to 2010 tax return A liquid that contains less than 4% normal paraffins. Amendment to 2010 tax return A liquid with all the following properties. Amendment to 2010 tax return Distillation range of 125 degrees Fahrenheit or less. Amendment to 2010 tax return Sulfur content of 10 ppm or less. Amendment to 2010 tax return Minimum color of +27 Saybolt. Amendment to 2010 tax return Transmix means a by-product of refined products created by the mixing of different specification products during pipeline transportation. Amendment to 2010 tax return Kerosene. Amendment to 2010 tax return   This means any of the following liquids. Amendment to 2010 tax return One of the two grades of kerosene (No. Amendment to 2010 tax return 1-K and No. Amendment to 2010 tax return 2-K) covered by ASTM specification D3699. Amendment to 2010 tax return Kerosene-type jet fuel covered by ASTM specification D1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8). Amendment to 2010 tax return See Kerosene for Use in Aviation, later. Amendment to 2010 tax return   However, kerosene does not include excluded liquid, discussed earlier. Amendment to 2010 tax return   Kerosene also includes any liquid that would be described above but for the presence of a dye of the type used to dye kerosene for a nontaxable use. Amendment to 2010 tax return Diesel-powered highway vehicle. Amendment to 2010 tax return   This is any self-propelled vehicle designed to carry a load over public highways (whether or not also designed to perform other functions) and propelled by a diesel-powered engine. Amendment to 2010 tax return Specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation are generally not considered diesel-powered highway vehicles. Amendment to 2010 tax return For more information about these vehicles and for information about vehicles not considered highway vehicles, see Off-Highway Business Use (No. Amendment to 2010 tax return 2) in chapter 2. Amendment to 2010 tax return Diesel-powered train. Amendment to 2010 tax return   This is any diesel-powered equipment or machinery that rides on rails. Amendment to 2010 tax return The term includes a locomotive, work train, switching engine, and track maintenance machine. Amendment to 2010 tax return Taxable Events The tax on diesel fuel and kerosene is $. Amendment to 2010 tax return 244 per gallon. Amendment to 2010 tax return It is imposed on the removal, entry, or sale of diesel fuel and kerosene. Amendment to 2010 tax return Each of these events is discussed later. Amendment to 2010 tax return Only the $. Amendment to 2010 tax return 001 LUST tax applies to dyed diesel fuel and dyed kerosene, discussed later. Amendment to 2010 tax return If the tax is paid on the diesel fuel or kerosene in more than one event, a refund may be allowed for the “second” tax paid. Amendment to 2010 tax return See Refunds of Second Tax in chapter 2. Amendment to 2010 tax return Use in certain intercity and local buses. Amendment to 2010 tax return   Dyed diesel fuel and dyed kerosene cannot be used in certain intercity and local buses. Amendment to 2010 tax return A claim for $. Amendment to 2010 tax return 17 per gallon may be made by the registered ultimate vendor (under certain conditions) or the ultimate purchaser for undyed diesel fuel or undyed kerosene sold for use in certain intercity or local buses. Amendment to 2010 tax return An intercity or local bus is a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. Amendment to 2010 tax return The bus must be engaged in one of the following activities. Amendment to 2010 tax return Scheduled transportation along regular routes regardless of the size of the bus. Amendment to 2010 tax return Nonscheduled transportation if the seating capacity of the bus is at least 20 adults (not including the driver). Amendment to 2010 tax return A bus is available to the general public if the bus is available for hire to more than a limited number of persons, groups, or organizations. Amendment to 2010 tax return Removal from terminal. Amendment to 2010 tax return   All removals of diesel fuel and kerosene at a terminal rack are taxable. Amendment to 2010 tax return The position holder for that fuel is liable for the tax. Amendment to 2010 tax return Two-party exchanges. Amendment to 2010 tax return   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. Amendment to 2010 tax return A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. Amendment to 2010 tax return The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. Amendment to 2010 tax return The exchange transaction occurs before or at the same time as completion of removal across the rack by the receiving person. Amendment to 2010 tax return The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. Amendment to 2010 tax return The transaction is subject to a written contract. Amendment to 2010 tax return Terminal operator's liability. Amendment to 2010 tax return   The terminal operator is jointly and severally liable for the tax if the terminal operator provides any person with any bill of lading, shipping paper, or similar document indicating that diesel fuel or kerosene is dyed (discussed later). Amendment to 2010 tax return   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. Amendment to 2010 tax return However, a terminal operator will not be liable for the tax in this situation if, at the time of the removal, the following conditions are met. Amendment to 2010 tax return The terminal operator is a registrant. Amendment to 2010 tax return The terminal operator has an unexpired notification certificate (discussed under Gasoline) from the position holder. Amendment to 2010 tax return The terminal operator has no reason to believe any information on the certificate is false. Amendment to 2010 tax return Removal from refinery. Amendment to 2010 tax return   The removal of diesel fuel or kerosene from a refinery is taxable if the removal meets either of the following conditions. Amendment to 2010 tax return It is made by bulk transfer and the refiner, the owner of the fuel immediately before the removal, or the operator of the pipeline or vessel is not a registrant. Amendment to 2010 tax return It is made at the refinery rack. Amendment to 2010 tax return The refiner is liable for the tax. Amendment to 2010 tax return Exception. Amendment to 2010 tax return   The tax does not apply to a removal of diesel fuel or kerosene at the refinery rack if all the following conditions are met. Amendment to 2010 tax return The diesel fuel or kerosene is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. Amendment to 2010 tax return The diesel fuel or kerosene is received at a facility operated by a registrant and located within the bulk transfer/terminal system. Amendment to 2010 tax return The removal from the refinery is by: Railcar and the same person operates the refinery and the facility at which the diesel fuel or kerosene is received, or For diesel fuel only, a trailer or semi-trailer used exclusively to transport the diesel fuel from a refinery (described in (1)) to a facility (described in (2)) less than 20 miles from the refinery. Amendment to 2010 tax return Entry into the United States. Amendment to 2010 tax return   The entry of diesel fuel or kerosene into the United States is taxable if the entry meets either of the following conditions. Amendment to 2010 tax return It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. Amendment to 2010 tax return It is not made by bulk transfer. Amendment to 2010 tax return The enterer is liable for the tax. Amendment to 2010 tax return Importer of record's liability. Amendment to 2010 tax return   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. Amendment to 2010 tax return   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. Amendment to 2010 tax return The importer of record has an unexpired notification certificate (discussed under Gasoline) from the enterer. Amendment to 2010 tax return The importer of record has no reason to believe any information in the certificate is false. Amendment to 2010 tax return Customs bond. Amendment to 2010 tax return   The customs bond will not be charged for the tax imposed on the entry of the diesel fuel or kerosene if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. Amendment to 2010 tax return Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. Amendment to 2010 tax return   The removal by bulk transfer of diesel fuel or kerosene from a terminal is taxable if the position holder for that fuel or the operator of the pipeline or vessel is not a registrant. Amendment to 2010 tax return The position holder is liable for the tax. Amendment to 2010 tax return The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. Amendment to 2010 tax return However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. Amendment to 2010 tax return Bulk transfers not received at approved terminal or refinery. Amendment to 2010 tax return   The removal by bulk transfer of diesel fuel or kerosene from a terminal or refinery or the entry of diesel fuel or kerosene by bulk transfer into the United States is taxable if the following conditions apply. Amendment to 2010 tax return No tax was previously imposed (as discussed earlier) on any of the following events. Amendment to 2010 tax return The removal from the refinery. Amendment to 2010 tax return The entry into the United States. Amendment to 2010 tax return The removal from a terminal by an unregistered position holder. Amendment to 2010 tax return Upon removal from the pipeline or vessel, the diesel fuel or kerosene is not received at an approved terminal or refinery (or at another pipeline or vessel). Amendment to 2010 tax return   The owner of the diesel fuel or kerosene when it is removed from the pipeline or vessel is liable for the tax. Amendment to 2010 tax return However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. Amendment to 2010 tax return The owner is a registrant. Amendment to 2010 tax return The owner has an unexpired notification certificate (discussed under Gasoline) from the operator of the terminal or refinery where the diesel fuel or kerosene is received. Amendment to 2010 tax return The owner has no reason to believe any information on the certificate is false. Amendment to 2010 tax return The operator of the facility where the diesel fuel or kerosene is received is liable for the tax if the owner meets these conditions. Amendment to 2010 tax return The operator is jointly and severally liable if the owner does not meet these conditions. Amendment to 2010 tax return Sales to unregistered person. Amendment to 2010 tax return   The sale of diesel fuel or kerosene located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. Amendment to 2010 tax return   The seller is liable for the tax. Amendment to 2010 tax return However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. Amendment to 2010 tax return The seller is a registrant. Amendment to 2010 tax return The seller has an unexpired notification certificate (discussed under Gasoline) from the buyer. Amendment to 2010 tax return The seller has no reason to believe any information on the certificate is false. Amendment to 2010 tax return The buyer of the diesel fuel or kerosene is liable for the tax if the seller meets these conditions. Amendment to 2010 tax return The buyer is jointly and severally liable if the seller does not meet these conditions. Amendment to 2010 tax return Exception. Amendment to 2010 tax return   The tax does not apply to a sale if all of the following apply. Amendment to 2010 tax return The buyer's principal place of business is not in the United States. Amendment to 2010 tax return The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. Amendment to 2010 tax return The seller is a registrant and the exporter of record. Amendment to 2010 tax return The fuel was exported. Amendment to 2010 tax return Removal or sale of blended diesel fuel or kerosene. Amendment to 2010 tax return   The removal or sale of blended diesel fuel or blended kerosene by the blender is taxable. Amendment to 2010 tax return Blended taxable fuel produced using biodiesel is subject to the tax. Amendment to 2010 tax return See Blended taxable fuel under Definitions, earlier. Amendment to 2010 tax return   The blender is liable for the tax. Amendment to 2010 tax return The tax is figured on the number of gallons not previously subject to the tax. Amendment to 2010 tax return   Persons who blend biodiesel with undyed diesel fuel to produce and sell or use a biodiesel mixture outside the bulk transfer/terminal system must pay the diesel fuel tax on the volume of biodiesel in the mixture. Amendment to 2010 tax return Generally, the biodiesel mixture must be diesel fuel (defined earlier). Amendment to 2010 tax return See Form 720 to report this tax. Amendment to 2010 tax return You also must be registered by the IRS as a blender. Amendment to 2010 tax return See Form 637 for more information. Amendment to 2010 tax return   However, if an untaxed liquid is sold as taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. Amendment to 2010 tax return Additional persons liable. Amendment to 2010 tax return   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax applies to: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty; or Anyone who willfully causes the person to fail to pay the tax. Amendment to 2010 tax return Credits or Refunds. Amendment to 2010 tax return   A credit or refund is allowable for the tax on undyed diesel fuel or undyed kerosene used for a nontaxable use. Amendment to 2010 tax return For more information, see chapter 2. Amendment to 2010 tax return Dyed Diesel Fuel and Dyed Kerosene Dyed diesel fuel and dyed kerosene are subject to $. Amendment to 2010 tax return 001 per gallon LUST tax as discussed below, unless the fuel is for export. Amendment to 2010 tax return The excise tax is not imposed on the removal, entry, or sale of diesel fuel or kerosene (other than the LUST tax) if all the following tests are met. Amendment to 2010 tax return The person otherwise liable for tax (for example, the position holder) is a registrant. Amendment to 2010 tax return In the case of a removal from a terminal, the terminal is an approved terminal. Amendment to 2010 tax return The diesel fuel or kerosene satisfies the dyeing requirements (described next). Amendment to 2010 tax return Dyeing requirements. Amendment to 2010 tax return   Diesel fuel or kerosene satisfies the dyeing requirements only if it satisfies the following requirements. Amendment to 2010 tax return It contains the dye Solvent Red 164 (and no other dye) at a concentration spectrally equivalent to at least 3. Amendment to 2010 tax return 9 pounds of the solid dye standard Solvent Red 26 per thousand barrels of fuel or any dye of a type and in a concentration that has been approved by the Commissioner. Amendment to 2010 tax return Is indelibly dyed by mechanical injection. Amendment to 2010 tax return See section 6 of Notice 2005-80 for transition rules that apply until final regulations are issued by the IRS. Amendment to 2010 tax return Notice required. Amendment to 2010 tax return   A legible and conspicuous notice stating either: DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE or DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE must be: Provided by the terminal operator to any person that receives dyed diesel fuel or dyed kerosene at a terminal rack of that operator, and Posted by a seller on any retail pump or other delivery facility where it sells dyed diesel fuel or dyed kerosene for use by its buyer. Amendment to 2010 tax return   The notice under item (1) must be provided by the time of the removal and must appear on all shipping papers, bills of lading, and similar documents accompanying the removal of the fuel. Amendment to 2010 tax return   Any seller that fails to post the required notice under item (2) is presumed to know that the fuel will be used for a taxable use (a use other than a nontaxable use listed later). Amendment to 2010 tax return That seller is subject to the penalty described next. Amendment to 2010 tax return Penalty. Amendment to 2010 tax return   A penalty is imposed on a person if any of the following situations apply. Amendment to 2010 tax return Any dyed fuel is sold or held for sale by the person for a use the person knows or has reason to know is not a nontaxable use of the fuel. Amendment to 2010 tax return Any dyed fuel is held for use or used by the person for a use other than a nontaxable use and the person knew, or had reason to know, that the fuel was dyed. Amendment to 2010 tax return The person willfully alters, chemically or otherwise, or attempts to so alter, the strength or composition of any dye in dyed fuel. Amendment to 2010 tax return The person has knowledge that a dyed fuel that has been altered, as described in (3) above, sells or holds for sale such fuel for any use for which the person knows or has reason to know is not a nontaxable use of the fuel. Amendment to 2010 tax return   The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. Amendment to 2010 tax return After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. Amendment to 2010 tax return   This penalty is in addition to any tax imposed on the fuel. Amendment to 2010 tax return   If the penalty is imposed, each officer, employee, or agent of a business entity who willfully participated in any act giving rise to the penalty is jointly and severally liable with that entity for the penalty. Amendment to 2010 tax return   There is no administrative appeal or review allowed for the third and subsequent penalty imposed by section 6715 on any person except for: Fraud or a mistake in the chemical analysis, or Mathematical calculation of the penalty. Amendment to 2010 tax return   If you are liable for the penalty, you may also be liable for the back-up tax, discussed later. Amendment to 2010 tax return However, the penalty applies only to dyed diesel fuel and dyed kerosene, while the back-up tax may apply to other fuels. Amendment to 2010 tax return The penalty may apply if the fuel is held for sale or use for a taxable use while the back-up tax does not apply unless the fuel is delivered into a fuel supply tank. Amendment to 2010 tax return Exception to penalty. Amendment to 2010 tax return   The penalty under item (3) will not apply in any of the following situations. Amendment to 2010 tax return Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any undyed liquid and the resulting product meets the dyeing requirements. Amendment to 2010 tax return Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any other liquid (other than diesel fuel or kerosene) that contains the type and amount of dye required to meet the dyeing requirements. Amendment to 2010 tax return The alteration or attempted alteration occurs in an exempt area of Alaska. Amendment to 2010 tax return See Removal for sale or use in Alaska, later. Amendment to 2010 tax return Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with diesel fuel or kerosene not meeting the dyeing requirements and the blending occurs as part of a nontaxable use (other than export), discussed later. Amendment to 2010 tax return Alaska and Feedstocks Tax of $. Amendment to 2010 tax return 001 per gallon is imposed on: Undyed diesel fuel or undyed kerosene sold or used in Alaska for certain nontaxable uses (see Later sales on page 10). Amendment to 2010 tax return Undyed kerosene used for feedstock purposes. Amendment to 2010 tax return Removal for sale or use in Alaska. Amendment to 2010 tax return   No tax is imposed on the removal, entry, or sale of diesel fuel or kerosene in Alaska for ultimate sale or use in certain areas of Alaska for certain nontaxable uses. Amendment to 2010 tax return The removal or entry of any diesel fuel or kerosene is not taxed if all the following requirements are satisfied. Amendment to 2010 tax return The person otherwise liable for the tax (position holder, refiner, or enterer): Is a registrant, Can show satisfactory evidence of the nontaxable nature of the transaction, and Has no reason to believe the evidence is false. Amendment to 2010 tax return In the case of a removal from a terminal, the terminal is an approved terminal. Amendment to 2010 tax return The owner of the fuel immediately after the removal or entry holds the fuel for its own use in a nontaxable use (discussed later) or is a qualified dealer. Amendment to 2010 tax return   If all three of the requirements above are not met, then tax is imposed at $. Amendment to 2010 tax return 244 per gallon. Amendment to 2010 tax return   A qualified dealer is any person that holds a qualified dealer license from the state of Alaska or has been registered by the IRS as a qualified retailer. Amendment to 2010 tax return Satisfactory evidence may include copies of qualified dealer licenses or exemption certificates obtained for state tax purposes. Amendment to 2010 tax return Later sales. Amendment to 2010 tax return   The excise tax applies to diesel fuel or kerosene sold by a qualified dealer after the removal or entry. Amendment to 2010 tax return The tax is imposed at the time of the sale and the qualified dealer is liable for the tax. Amendment to 2010 tax return However, the sale is not taxable (other than the LUST tax at $. Amendment to 2010 tax return 001 per gallon) if all the following requirements are met. Amendment to 2010 tax return The fuel is sold in Alaska for certain nontaxable uses. Amendment to 2010 tax return The buyer buys the fuel for its own use in a nontaxable use or is a qualified dealer. Amendment to 2010 tax return The seller can show satisfactory evidence of the nontaxable nature of the transaction and has no reason to believe the evidence is false. Amendment to 2010 tax return Feedstock purposes. Amendment to 2010 tax return   The $. Amendment to 2010 tax return 001 per gallon LUST tax is imposed on the removal or entry of undyed kerosene if all the following conditions are met. Amendment to 2010 tax return The person otherwise liable for tax (position holder, refiner, or enterer) is a registrant. Amendment to 2010 tax return In the case of a removal from a terminal, the terminal is an approved terminal. Amendment to 2010 tax return Either: The person otherwise liable for tax uses the kerosene for a feedstock purpose, or The kerosene is sold for use by the buyer for a feedstock purpose and, at the time of the sale, the person otherwise liable for tax has an unexpired certificate (described later) from the buyer and has no reason to believe any information on the certificate is false. Amendment to 2010 tax return   If all of the requirements above are not met, then tax is imposed at $. Amendment to 2010 tax return 244 per gallon. Amendment to 2010 tax return   Kerosene is used for a feedstock purpose when it is used for nonfuel purposes in the manufacture or production of any substance other than gasoline, diesel fuel, or Other Fuels. Amendment to 2010 tax return For example, kerosene is used for a feedstock purpose when it is used as an ingredient in the production of paint, but is not used for a feedstock purpose when it is used to power machinery at a factory where paint is produced. Amendment to 2010 tax return A feedstock user is a person that uses kerosene for a feedstock purpose. Amendment to 2010 tax return A registered feedstock user is a person that has been registered by the IRS as a feedstock user. Amendment to 2010 tax return See Registration Requirements, earlier. Amendment to 2010 tax return Later sales. Amendment to 2010 tax return   The excise tax ($. Amendment to 2010 tax return 244 per gallon) applies to kerosene sold for use by the buyer for a feedstock purpose (item (3)(b) above) if the buyer in that sale later sells the kerosene. Amendment to 2010 tax return The tax is imposed at the time of the later sale and that seller is liable for the tax. Amendment to 2010 tax return Certificate. Amendment to 2010 tax return   The certificate from the buyer certifies the buyer is a registered feedstock user and the kerosene will be used by the buyer for a feedstock purpose. Amendment to 2010 tax return The certificate may be included as part of any business records normally used for a sale. Amendment to 2010 tax return A model certificate is shown in the Appendix as Model Certificate G. Amendment to 2010 tax return Your certificate must contain all information necessary to complete the model. Amendment to 2010 tax return   A certificate expires on the earliest of the following dates. Amendment to 2010 tax return The date 1 year after the effective date (not earlier than the date signed) of the certificate. Amendment to 2010 tax return The date the seller is provided a new certificate or notice that the current certificate is invalid. Amendment to 2010 tax return The date the seller is notified the buyer's registration has been revoked or suspended. Amendment to 2010 tax return   The buyer must provide a new certificate if any information on a certificate has changed. Amendment to 2010 tax return Back-up Tax Tax is imposed on the delivery of any of the following into the fuel supply tank of a diesel-powered highway vehicle. Amendment to 2010 tax return Any dyed diesel fuel or dyed kerosene for other than a nontaxable use. Amendment to 2010 tax return Any undyed diesel fuel or undyed kerosene on which a credit or refund (for fuel used for a nontaxable purpose) has been allowed. Amendment to 2010 tax return Any liquid other than gasoline, diesel fuel, or kerosene. Amendment to 2010 tax return Generally, this back-up tax is imposed at a rate of $. Amendment to 2010 tax return 244 per gallon. Amendment to 2010 tax return Liability for tax. Amendment to 2010 tax return   Generally, the operator of the vehicle into which the fuel is delivered is liable for the tax. Amendment to 2010 tax return In addition, the seller of the diesel fuel or kerosene is jointly and severally liable for the tax if the seller knows or has reason to know that the fuel will be used for other than a nontaxable use. Amendment to 2010 tax return Exemptions from the back-up tax. Amendment to 2010 tax return   The back-up tax does not apply to a delivery of diesel fuel or kerosene for uses 1, 2, 6, 7, 12, 13, 14, and 15 listed under Definitions of Nontaxable Uses in chapter 2. Amendment to 2010 tax return   In addition, since the back-up tax is imposed only on the delivery into the fuel supply tank of a diesel-powered vehicle or train, the tax does not apply to diesel fuel or kerosene used as heating oil or in stationary engines. Amendment to 2010 tax return Diesel-Water Fuel Emulsion Diesel-water fuel emulsion means diesel fuel at least 14% of which is water and for which the emulsion additive is registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. Amendment to 2010 tax return A reduced tax rate of $. Amendment to 2010 tax return 198 per gallon is imposed on a diesel-water fuel emulsion. Amendment to 2010 tax return To be eligible for the reduced rate, the person who sells, removes, or uses the diesel-water fuel emulsion must be registered by the IRS. Amendment to 2010 tax return If the diesel-water fuel emulsion does not meet the requirements above, or if the person who sells, removes, or uses the fuel is not registered, the diesel-water fuel emulsion is taxed at $. Amendment to 2010 tax return 244 per gallon. Amendment to 2010 tax return Credits or refunds. Amendment to 2010 tax return   The allowance for a credit or refund on a diesel-water fuel emulsion is discussed in chapter 2. Amendment to 2010 tax return Kerosene for Use in Aviation Taxable Events Generally, kerosene is taxed at $. Amendment to 2010 tax return 244 per gallon unless a reduced rate applies (see Diesel Fuel and Kerosene, earlier). Amendment to 2010 tax return For kerosene removed directly from a terminal into the fuel tank of an aircraft for use in noncommercial aviation, the tax rate is $. Amendment to 2010 tax return 219. Amendment to 2010 tax return The rate of $. Amendment to 2010 tax return 219 also applies if kerosene is removed into any aircraft from a qualified refueler truck, tanker, or tank wagon that is loaded with the kerosene from a terminal that is located within an airport. Amendment to 2010 tax return The airport terminal does not need to be a secured airport terminal for this rate to apply. Amendment to 2010 tax return However, the refueler truck, tanker, or tank wagon must meet the requirements discussed under Certain refueler trucks, tankers, and tank wagons, treated as terminals, later. Amendment to 2010 tax return For kerosene removed directly into the fuel tank of an aircraft for use in commercial aviation, the rate of tax is $. Amendment to 2010 tax return 044 per gallon. Amendment to 2010 tax return For kerosene removed into an aircraft from a qualified refueler truck, tanker, or tank wagon, the $. Amendment to 2010 tax return 044 rate applies only if the truck, tanker, or tank wagon is loaded at a terminal that is located in a secured area of the airport. Amendment to 2010 tax return See Terminal located within a secured area of an airport, later. Amendment to 2010 tax return In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. Amendment to 2010 tax return For kerosene removed directly into the fuel tank of an aircraft for a use exempt from tax under section 4041(c) (such as use in an aircraft for the exclusive use of a state or local government), the rate of tax is $. Amendment to 2010 tax return 001. Amendment to 2010 tax return There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. Amendment to 2010 tax return The kerosene must be removed from a qualifying refueler truck, tanker, or tank wagon loaded at a terminal located within a secured area of an airport. Amendment to 2010 tax return See Terminal located within a secured area of an airport, later. Amendment to 2010 tax return In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. Amendment to 2010 tax return The position holder is liable for the $. Amendment to 2010 tax return 001 per gallon tax. Amendment to 2010 tax return For kerosene removed directly from a terminal into the fuel tank of an fractional ownership program aircraft after March 31, 2012, a surtax of $. Amendment to 2010 tax return 141 per gallon applies. Amendment to 2010 tax return Certain refueler trucks, tankers, and tank wagons treated as terminals. Amendment to 2010 tax return   For purposes of the tax imposed on kerosene for use in aviation removed directly into the fuel tank of an aircraft for use in commercial aviation, certain refueler trucks, tankers, and tank wagons are treated as part of a terminal if the following conditions are met. Amendment to 2010 tax return Such terminal is located within an area of an airport. Amendment to 2010 tax return Any kerosene for use in aviation that is loaded in a refueler truck, tanker, or tank wagon at a terminal is for delivery into aircraft at the airport in which the terminal is located. Amendment to 2010 tax return Except in exigent circumstances, such as those identified in Notice 2005-80, no vehicle registered for highway use is loaded with kerosene for use in aviation at the terminal. Amendment to 2010 tax return The refueler truck, tanker, or tank wagon meets the following requirements: Has storage tanks, hose, and coupling equipment designed and used for fueling aircraft, Is not registered for highway use, and Is operated by the terminal operator or a person that makes a daily accounting to the terminal operator of each delivery of fuel from the refueler truck, tanker, or tank wagon. Amendment to 2010 tax return Information reporting will be required by terminal operators regarding this provision. Amendment to 2010 tax return Until the format of this information reporting is issued, taxpayers are required to retain records regarding the daily accounting, but are not required to report such information. Amendment to 2010 tax return Terminal located within a secured area of an airport. Amendment to 2010 tax return   See Notice 2005-4 and Notice 2005-80 for the list of terminals located within a secured area of an airport. Amendment to 2010 tax return This list refers to fueling operations at airport terminals as it applies to the federal excise tax on kerosene for use in aviation, and has nothing to do with the general security of airports either included or not included in the list. Amendment to 2010 tax return Liability For Tax If the kerosene is removed directly into the fuel tank of an aircraft for use in commercial aviation, the operator of the aircraft in commercial aviation is liable for the tax on the removal at the rate of $. Amendment to 2010 tax return 044 per gallon. Amendment to 2010 tax return However, the position holder is liable for the LUST tax for kerosene for use in aviation removed directly into the fuel tank of an aircraft for use exempt from tax under section 4041(c) (except foreign trade). Amendment to 2010 tax return For example, for kerosene removed directly into the aircraft for use in military aircraft, the position holder is liable for the tax. Amendment to 2010 tax return For the aircraft operator to be liable for the tax $. Amendment to 2010 tax return 044 rate, the position holder must meet the following requirements: Is a taxable fuel registrant, Has an unexpired certificate (a model certificate is shown in the Appendix as Model Certificate K) from the operator of the aircraft, and Has no reason to believe any of the information in the certificate is false. Amendment to 2010 tax return Commercial aviation. Amendment to 2010 tax return   Commercial aviation is any use of an aircraft in the business of transporting persons or property by air for pay. Amendment to 2010 tax return However, commercial aviation does not include any of the following uses. Amendment to 2010 tax return Any use exclusively for the purpose of skydiving. Amendment to 2010 tax return Certain air transportation by seaplane. Amendment to 2010 tax return See Seaplanes under Transportation of Persons by Air in chapter 4. Amendment to 2010 tax return Any use of an aircraft owned or leased by a member of an affiliated group and unavailable for hire by nonmembers. Amendment to 2010 tax return For more information, see Aircraft used by affiliated corporations under Special Rules on Transportation Taxes in chapter 4. Amendment to 2010 tax return Any use of an aircraft that has a maximum certificated takeoff weight of 6,000 pounds or less, unless the aircraft is operated on an established line. Amendment to 2010 tax return For more information, see Small aircraft under Special Rules on Transportation Taxes in chapter 4. Amendment to 2010 tax return Any use where the surtax on fuel used in a fractional ownership program aircraft is imposed. Amendment to 2010 tax return See Surtax on any liquid used in a fractional ownership program aircraft as fuel below. Amendment to 2010 tax return Surtax on any liquid used in a fractional ownership program aircraft as fuel Fuel used in a fractional ownership program aircraft (as defined below) after March 31, 2012, is subject to a surtax of $. Amendment to 2010 tax return 141 per gallon. Amendment to 2010 tax return The fractional ownership program manager is liable for the tax. Amendment to 2010 tax return The surtax applies in addition to any other taxes imposed on the removal, entry, use, or sale of the fuel. Amendment to 2010 tax return If the surtax is imposed, the following air transportation taxes do not apply. Amendment to 2010 tax return Transportation of persons by air. Amendment to 2010 tax return Transportation of property by air. Amendment to 2010 tax return Use of international air travel facilities. Amendment to 2010 tax return These taxes are described under Air Transportation Taxes, later. Amendment to 2010 tax return A fractional ownership program aircraft flight is considered noncommercial aviation, for the rules for kerosene used in noncommercial aviation, see Kerosene for Use in Aviation above. Amendment to 2010 tax return Fractional ownership aircraft program    is a program under which:  A single fractional ownership program manager provides fractional ownership program management services on behalf of the fractional owners; There are one or more fractional owners per fractional program aircraft, with at least one fractional program aircraft having more than one owner; For at least two fractional program aircraft, none of the ownership interests in the aircraft are less than the minimum fractional ownership interest or held by the program manager; There exists a dry-lease aircraft exchange arrangement among all of the fractional owners; and There are multi-year program agreements covering the fractional ownership, fractional ownership program management services, and dry-lease aircraft exchange aspects of the program. Amendment to 2010 tax return Fractional program aircraft. Amendment to 2010 tax return   Any aircraft that, in any fractional ownership aircraft program, is listed as a fractional program aircraft in the management specifications issued to the manager of such program by Federal Aviation Administration under subpart K of part 91 title 14, Code of Federal Regulations, and is registered in the U. Amendment to 2010 tax return S. Amendment to 2010 tax return   Fractional program aircraft are not considered used for transportation of a qualified fractional owner, or on account of such qualified fractional owner when they are used for flight demonstration, maintenance or crew training. Amendment to 2010 tax return In such situations, the flight is not commercial aviation. Amendment to 2010 tax return Instead, the tax on the fuel used in the flight is imposed at the non-commercial aviation rate. Amendment to 2010 tax return Fractional owner. Amendment to 2010 tax return   Any person owning any interest (including the entire interest) in a fractional program aircraft. Amendment to 2010 tax return Dry lease aircraft exchange. Amendment to 2010 tax return   An agreement, documented by the written program agreements, under which the fractional program aircraft are available, on an as-needed basis without crew, to each fractional owner. Amendment to 2010 tax return Special rule relating to deadhead service. Amendment to 2010 tax return   A fractional program aircraft will not be considered to be used on account of a qualified fractional owner when it is used in deadhead service and a person other than a qualified fractional owner is separately charged for such service. Amendment to 2010 tax return More information. Amendment to 2010 tax return   See section 4043 for more information on the surtax. Amendment to 2010 tax return Certificate for Commercial Aviation and Exempt Uses A certificate is required from the aircraft operator: To support aircraft operator liability for tax on removal of kerosene for use in aviation directly into the fuel tank of an aircraft in commercial aviation, or For exempt uses. Amendment to 2010 tax return Certificate. Amendment to 2010 tax return   The certificate may be included as part of any business records normally used for a sale. Amendment to 2010 tax return See Model Certificate K in the Appendix. Amendment to 2010 tax return   A certificate expires on the earliest of the following dates. Amendment to 2010 tax return The date 1 year after the effective date (not earlier than the date signed) of the certificate. Amendment to 2010 tax return The date the buyer provides the seller a new certificate or notice that the current certificate is invalid. Amendment to 2010 tax return The date the IRS or the buyer notifies the seller that the buyer's right to provide a certificate has been withdrawn. Amendment to 2010 tax return   The buyer must provide a new certificate if any information on a certificate has changed. Amendment to 2010 tax return   The IRS may withdraw the buyer's right to provide a certificate if the buyer uses the kerosene for use in aviation to which a certificate relates other than as stated in the certificate. Amendment to 2010 tax return Exempt use. Amendment to 2010 tax return   The rate on kerosene for use in aviation is $. Amendment to 2010 tax return 001 (LUST tax) if it is removed from any refinery or terminal directly into the fuel tank of an aircraft for an exempt use. Amendment to 2010 tax return An exempt use includes kerosene for the exclusive use of a state or local government. Amendment to 2010 tax return There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. Amendment to 2010 tax return Flash title transaction. Amendment to 2010 tax return   A position holder is not liable for tax if, among other conditions, it obtains a certificate (described above) from the operator of the aircraft into which the kerosene is delivered. Amendment to 2010 tax return In a “flash title transaction” the position holder sells the kerosene to a wholesale distributor (reseller) that in turn sells the kerosene to the aircraft operator as the kerosene is being removed from a terminal into the fuel tank of an aircraft. Amendment to 2010 tax return In this case, the position holder will be treated as having a certificate from the operator of the aircraft if: The aircraft operator puts the reseller's name, address, and EIN on the certificate in place of the position holder's information; and The reseller provides the position holder with a statement of the kerosene reseller. Amendment to 2010 tax return Reseller statement. Amendment to 2010 tax return   This is a statement that is signed under penalties of perjury by a person with authority to bind the reseller; is provided at the bottom or on the back of the certificate (or in an attached document); and contains: The reseller's name, address, and EIN; The position holder's name, address, and EIN; and A statement that the reseller has no reason to believe that any information in the accompanying aircraft operator's certificate is false. Amendment to 2010 tax return Credits or Refunds. Amendment to 2010 tax return   A claim may be made by the ultimate purchaser (the operator) for taxed kerosene for use in aviation used in commercial aviation (other than foreign trade) and noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia). Amendment to 2010 tax return A claim may be made by a registered ultimate vendor for certain sales. Amendment to 2010 tax return For more information, see chapter 2. Amendment to 2010 tax return Other Fuels (Including Alternative Fuels) Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under section 4081. Amendment to 2010 tax return Other Fuels include alternative fuels. Amendment to 2010 tax return Alternative fuels are: Liquefied petroleum gas (LPG), “P Series” fuels, Compressed natural gas (CNG) (discussed later), Liquefied hydrogen, Any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, Liquid fuel derived from biomass, Liquefied natural gas (LNG), and Liquefied gas derived from biomass. Amendment to 2010 tax return Liquefied petroleum gas includes propane, butane, pentane, or mixtures of those products. Amendment to 2010 tax return Qualified methanol and ethanol fuels. Amendment to 2010 tax return   Qualified ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from coal, including peat. Amendment to 2010 tax return The tax rates are listed in the Instructions for Form 720. Amendment to 2010 tax return Partially exempt methanol and ethanol fuels. Amendment to 2010 tax return   A reduced tax rate applies to these fuels. Amendment to 2010 tax return Partially exempt ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from natural gas. Amendment to 2010 tax return The tax rates are listed in the Instructions for Form 720. Amendment to 2010 tax return Motor vehicles. Amendment to 2010 tax return   Motor vehicles include all types of vehicles, whether or not registered (or required to be registered) for highway use, that have both the following characteristics. Amendment to 2010 tax return They are propelled by a motor. Amendment to 2010 tax return They are designed for carrying or towing loads from one place to another, regardless of the type of material or load carried or t
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Tax Information for Churches and Religious Organizations

Exemption Requirements - 501(c)(3) Organizations
A brief description of the requirements for exemption under IRC Section 501(c)(3).

Unrelated Business Income Tax
Unrelated business income tax requirements for tax-exempt organizations.

Filing Requirements
A brief description of annual filing requirements for tax-exempt churches and religious organizations.

The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations
Political Campaign Activity by section 501(c)(3) tax-exempt organizations

Special Rules Limiting IRS Authority to Audit a Church
Overview of rules on tax inquiries and examinations of churches.

Tax Information for Charitable Organizations
Tax information for charitable, religious, scientific, literary, and other organizations exempt under Internal Revenue Code ("IRC") section 501(c)(3).

Publication 4573, Group Exemptions
A publication describing, in question and answer format, the federal tax rules that apply to group rulings of exemption under Internal Revenue Code section 501.

Webinar for Churches and Religious Organizations
A survey of tax-exempt status for churches and religious organizations

Page Last Reviewed or Updated: 30-Mar-2014

The Amendment To 2010 Tax Return

Amendment to 2010 tax return 4. Amendment to 2010 tax return   Figuring Depreciation Under MACRS Table of Contents Introduction Useful Items - You may want to see: Which Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS?Rent-to-own dealer. Amendment to 2010 tax return Rent-to-own contract. Amendment to 2010 tax return What Is the Placed in Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies?Recovery Periods Under GDS Recovery Periods Under ADS Additions and Improvements Which Convention Applies? Which Depreciation Method Applies?Depreciation Methods for Farm Property Electing a Different Method How Is the Depreciation Deduction Figured?Using the MACRS Percentage Tables Figuring the Deduction Without Using the Tables Figuring the Deduction for Property Acquired in a Nontaxable Exchange Figuring the Deduction for a Short Tax Year How Do You Use General Asset Accounts?Grouping Property Figuring Depreciation for a GAA Disposing of GAA Property Terminating GAA Treatment Electing To Use a GAA When Do You Recapture MACRS Depreciation? Introduction The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. Amendment to 2010 tax return MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Amendment to 2010 tax return Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. Amendment to 2010 tax return To be sure you can use MACRS to figure depreciation for your property, see What Method Can You Use To Depreciate Your Property in chapter 1. Amendment to 2010 tax return This chapter explains how to determine which MACRS depreciation system applies to your property. Amendment to 2010 tax return It also discusses other information you need to know before you can figure depreciation under MACRS. Amendment to 2010 tax return This information includes the property's recovery class, placed in service date, and basis, as well as the applicable recovery period, convention, and depreciation method. Amendment to 2010 tax return It explains how to use this information to figure your depreciation deduction and how to use a general asset account to depreciate a group of properties. Amendment to 2010 tax return Finally, it explains when and how to recapture MACRS depreciation. Amendment to 2010 tax return Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 463 Travel, Entertainment, Gift, and Car  Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. Amendment to 2010 tax return Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. Amendment to 2010 tax return You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Amendment to 2010 tax return If you placed your property in service in 2013, complete Part III of Form 4562 to report depreciation using MACRS. Amendment to 2010 tax return Complete section B of Part III to report depreciation using GDS, and complete section C of Part III to report depreciation using ADS. Amendment to 2010 tax return If you placed your property in service before 2013 and are required to file Form 4562, report depreciation using either GDS or ADS on line 17 in Part III. Amendment to 2010 tax return Required use of ADS. Amendment to 2010 tax return   You must use ADS for the following property. Amendment to 2010 tax return Listed property used 50% or less in a qualified business use. Amendment to 2010 tax return See chapter 5 for information on listed property. Amendment to 2010 tax return Any tangible property used predominantly outside the United States during the year. Amendment to 2010 tax return Any tax-exempt use property. Amendment to 2010 tax return Any tax-exempt bond-financed property. Amendment to 2010 tax return All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. Amendment to 2010 tax return Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. Amendment to 2010 tax return If you are required to use ADS to depreciate your property, you cannot claim any special depreciation allowance (discussed in chapter 3) for the property. Amendment to 2010 tax return Electing ADS. Amendment to 2010 tax return   Although your property may qualify for GDS, you can elect to use ADS. Amendment to 2010 tax return The election generally must cover all property in the same property class that you placed in service during the year. Amendment to 2010 tax return However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. Amendment to 2010 tax return Once you make this election, you can never revoke it. Amendment to 2010 tax return   You make the election by completing line 20 in Part III of Form 4562. Amendment to 2010 tax return Which Property Class Applies Under GDS? The following is a list of the nine property classifications under GDS and examples of the types of property included in each class. Amendment to 2010 tax return These property classes are also listed under column (a) in section B, Part III, of Form 4562. Amendment to 2010 tax return For detailed information on property classes, see Appendix B, Table of Class Lives and Recovery Periods, in this publication. Amendment to 2010 tax return 3-year property. Amendment to 2010 tax return Tractor units for over-the-road use. Amendment to 2010 tax return Any race horse over 2 years old when placed in service. Amendment to 2010 tax return (All race horses placed in service after December 31, 2008, and before January 1, 2014, are deemed to be 3-year property, regardless of age. Amendment to 2010 tax return ) Any other horse (other than a race horse) over 12 years old when placed in service. Amendment to 2010 tax return Qualified rent-to-own property (defined later). Amendment to 2010 tax return 5-year property. Amendment to 2010 tax return Automobiles, taxis, buses, and trucks. Amendment to 2010 tax return Computers and peripheral equipment. Amendment to 2010 tax return Office machinery (such as typewriters, calculators, and copiers). Amendment to 2010 tax return Any property used in research and experimentation. Amendment to 2010 tax return Breeding cattle and dairy cattle. Amendment to 2010 tax return Appliances, carpets, furniture, etc. Amendment to 2010 tax return , used in a residential rental real estate activity. Amendment to 2010 tax return Certain geothermal, solar, and wind energy property. Amendment to 2010 tax return 7-year property. Amendment to 2010 tax return Office furniture and fixtures (such as desks, files, and safes). Amendment to 2010 tax return Agricultural machinery and equipment. Amendment to 2010 tax return Any property that does not have a class life and has not been designated by law as being in any other class. Amendment to 2010 tax return Certain motorsports entertainment complex property (defined later) placed in service before January 1, 2014. Amendment to 2010 tax return Any natural gas gathering line placed in service after April 11, 2005. Amendment to 2010 tax return See Natural gas gathering line and electric transmission property , later. Amendment to 2010 tax return 10-year property. Amendment to 2010 tax return Vessels, barges, tugs, and similar water transportation equipment. Amendment to 2010 tax return Any single purpose agricultural or horticultural structure. Amendment to 2010 tax return Any tree or vine bearing fruits or nuts. Amendment to 2010 tax return Qualified small electric meter and qualified smart electric grid system (defined later) placed in service on or after October 3, 2008. Amendment to 2010 tax return 15-year property. Amendment to 2010 tax return Certain improvements made directly to land or added to it (such as shrubbery, fences, roads, sidewalks, and bridges). Amendment to 2010 tax return Any retail motor fuels outlet (defined later), such as a convenience store. Amendment to 2010 tax return Any municipal wastewater treatment plant. Amendment to 2010 tax return Any qualified leasehold improvement property (defined later) placed in service before January 1, 2014. Amendment to 2010 tax return Any qualified restaurant property (defined later) placed in service before January 1, 2014. Amendment to 2010 tax return Initial clearing and grading land improvements for gas utility property. Amendment to 2010 tax return Electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity placed in service after April 11, 2005. Amendment to 2010 tax return See Natural gas gathering line and electric transmission property , later. Amendment to 2010 tax return Any natural gas distribution line placed in service after April 11, 2005 and before January 1, 2011. Amendment to 2010 tax return Any qualified retail improvement property placed in service before January 1, 2014. Amendment to 2010 tax return 20-year property. Amendment to 2010 tax return Farm buildings (other than single purpose agricultural or horticultural structures). Amendment to 2010 tax return Municipal sewers not classified as 25-year property. Amendment to 2010 tax return Initial clearing and grading land improvements for electric utility transmission and distribution plants. Amendment to 2010 tax return 25-year property. Amendment to 2010 tax return This class is water utility property, which is either of the following. Amendment to 2010 tax return Property that is an integral part of the gathering, treatment, or commercial distribution of water, and that, without regard to this provision, would be 20-year property. Amendment to 2010 tax return Municipal sewers other than property placed in service under a binding contract in effect at all times since June 9, 1996. Amendment to 2010 tax return Residential rental property. Amendment to 2010 tax return This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. Amendment to 2010 tax return A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. Amendment to 2010 tax return It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. Amendment to 2010 tax return If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy. Amendment to 2010 tax return Nonresidential real property. Amendment to 2010 tax return This is section 1250 property, such as an office building, store, or warehouse, that is neither residential rental property nor property with a class life of less than 27. Amendment to 2010 tax return 5 years. Amendment to 2010 tax return Qualified rent-to-own property. Amendment to 2010 tax return   Qualified rent-to-own property is property held by a rent-to-own dealer for purposes of being subject to a rent-to-own contract. Amendment to 2010 tax return It is tangible personal property generally used in the home for personal use. Amendment to 2010 tax return It includes computers and peripheral equipment, televisions, videocassette recorders, stereos, camcorders, appliances, furniture, washing machines and dryers, refrigerators, and other similar consumer durable property. Amendment to 2010 tax return Consumer durable property does not include real property, aircraft, boats, motor vehicles, or trailers. Amendment to 2010 tax return   If some of the property you rent to others under a rent-to-own agreement is of a type that may be used by the renters for either personal or business purposes, you still can treat this property as qualified property as long as it does not represent a significant portion of your leasing property. Amendment to 2010 tax return However, if this dual-use property does represent a significant portion of your leasing property, you must prove that this property is qualified rent-to-own property. Amendment to 2010 tax return Rent-to-own dealer. Amendment to 2010 tax return   You are a rent-to-own dealer if you meet all the following requirements. Amendment to 2010 tax return You regularly enter into rent-to-own contracts (defined below) in the ordinary course of your business for the use of consumer property. Amendment to 2010 tax return A substantial portion of these contracts end with the customer returning the property before making all the payments required to transfer ownership. Amendment to 2010 tax return The property is tangible personal property of a type generally used within the home for personal use. Amendment to 2010 tax return Rent-to-own contract. Amendment to 2010 tax return   This is any lease for the use of consumer property between a rent-to-own dealer and a customer who is an individual which— Is titled “Rent-to-Own Agreement,” “Lease Agreement with Ownership Option,” or other similar language. Amendment to 2010 tax return Provides a beginning date and a maximum period of time, not to exceed 156 weeks or 36 months from the beginning date, for which the contract can be in effect (including renewals or options to extend). Amendment to 2010 tax return Provides for regular periodic (weekly or monthly) payments that can be either level or decreasing. Amendment to 2010 tax return If the payments are decreasing, no payment can be less than 40% of the largest payment. Amendment to 2010 tax return Provides for total payments that generally exceed the normal retail price of the property plus interest. Amendment to 2010 tax return Provides for total payments that do not exceed $10,000 for each item of property. Amendment to 2010 tax return Provides that the customer has no legal obligation to make all payments outlined in the contract and that, at the end of each weekly or monthly payment period, the customer can either continue to use the property by making the next payment or return the property in good working order with no further obligations and no entitlement to a return of any prior payments. Amendment to 2010 tax return Provides that legal title to the property remains with the rent-to-own dealer until the customer makes either all the required payments or the early purchase payments required under the contract to acquire legal title. Amendment to 2010 tax return Provides that the customer has no right to sell, sublease, mortgage, pawn, pledge, or otherwise dispose of the property until all contract payments have been made. Amendment to 2010 tax return Motorsports entertainment complex. Amendment to 2010 tax return   This is a racing track facility permanently situated on land that hosts one or more racing events for automobiles, trucks, or motorcycles during the 36-month period after the first day of the month in which the facility is placed in service. Amendment to 2010 tax return The events must be open to the public for the price of admission. Amendment to 2010 tax return Qualified smart electric grid system. Amendment to 2010 tax return   A qualified smart electric grid system means any smart grid property used as part of a system for electric distribution grid communications, monitoring, and management placed in service after October 3, 2008, by a taxpayer who is a supplier of electrical energy or a provider of electrical energy services. Amendment to 2010 tax return Smart grid property includes electronics and related equipment that is capable of: Sensing, collecting, and monitoring data of or from all portions of a utility's electric distribution grid, Providing real-time, two-way communications to monitor or to manage the grid, and Providing real-time analysis of an event prediction based on collected data that can be used to provide electric distribution system reliability, quality, and performance. Amendment to 2010 tax return Retail motor fuels outlet. Amendment to 2010 tax return   Real property is a retail motor fuels outlet if it is used to a substantial extent in the retail marketing of petroleum or petroleum products (whether or not it is also used to sell food or other convenience items) and meets any one of the following three tests. Amendment to 2010 tax return It is not larger than 1,400 square feet. Amendment to 2010 tax return 50% or more of the gross revenues generated from the property are derived from petroleum sales. Amendment to 2010 tax return 50% or more of the floor space in the property is devoted to petroleum marketing sales. Amendment to 2010 tax return A retail motor fuels outlet does not include any facility related to petroleum and natural gas trunk pipelines. Amendment to 2010 tax return Qualified leasehold improvement property. Amendment to 2010 tax return    Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. Amendment to 2010 tax return   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor's death or in any of the following types of transactions. Amendment to 2010 tax return A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or reacquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor's or distributor's basis in the property. Amendment to 2010 tax return Examples include the following. Amendment to 2010 tax return A complete liquidation of a subsidiary. Amendment to 2010 tax return A transfer to a corporation controlled by the transferor. Amendment to 2010 tax return An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. Amendment to 2010 tax return Qualified restaurant property. Amendment to 2010 tax return   Qualified restaurant property is any section 1250 property that is a building placed in service after December 31, 2008, and before January 1, 2014. Amendment to 2010 tax return Also, more than 50% of the building's square footage must be devoted to preparation of meals and seating for on-premises consumption of prepared meals. Amendment to 2010 tax return Qualified smart electric meter. Amendment to 2010 tax return   A qualified smart electric meter is any time-based meter and related communication equipment which is placed in service by a supplier of electric energy or a provider of electric energy services and which is capable of being used by you as part of a system that: Measures and records electricity usage data on a time-differentiated basis in at least 24 separate time segments per day; Provides for the exchange of information between the supplier or provider and the customer's smart electric meter in support of time-based rates or other forms of demand response; Provides data to the supplier or provider so that the supplier or provider can provide energy usage information to customers electronically, and Provides all commercial and residential customers of such supplier or provider with net metering. Amendment to 2010 tax return Net metering means allowing a customer a credit, if any, as complies with applicable federal and state laws and regulations for providing electricity to the supplier or provider. Amendment to 2010 tax return Natural gas gathering line and electric transmission property. Amendment to 2010 tax return   Any natural gas gathering line placed in service after April 11, 2005, is treated as 7-year property, and electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity and any natural gas distribution line placed in service after April 11, 2005, are treated as 15-year property, if the following requirements are met. Amendment to 2010 tax return The original use of the property must have begun with you after April 11, 2005. Amendment to 2010 tax return Original use means the first use to which the property is put, whether or not by you. Amendment to 2010 tax return Therefore, property used by any person before April 12, 2005, is not original use. Amendment to 2010 tax return Original use includes additional capital expenditures you incurred to recondition or rebuild your property. Amendment to 2010 tax return However, original use does not include the cost of reconditioned or rebuilt property you acquired. Amendment to 2010 tax return Property containing used parts will not be treated as reconditioned or rebuilt if the cost of the used parts is not more than 20% of the total cost of the property. Amendment to 2010 tax return The property must not be placed in service under a binding contract in effect before April 12, 2005. Amendment to 2010 tax return The property must not be self-constructed property (property you manufacture, construct, or produce for your own use), if you began the manufacture, construction, or production of the property before April 12, 2005. Amendment to 2010 tax return Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into by you or a related party before the manufacture, construction, or production of the property is considered to be manufactured, constructed, or produced by you. Amendment to 2010 tax return What Is the Placed in Service Date? You begin to claim depreciation when your property is placed in service for either use in a trade or business or the production of income. Amendment to 2010 tax return The placed in service date for your property is the date the property is ready and available for a specific use. Amendment to 2010 tax return It is therefore not necessarily the date it is first used. Amendment to 2010 tax return If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. Amendment to 2010 tax return See Placed in Service under When Does Depreciation Begin and End in chapter 1 for examples illustrating when property is placed in service. Amendment to 2010 tax return What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. Amendment to 2010 tax return For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . Amendment to 2010 tax return Reduce that amount by any credits and deductions allocable to the property. Amendment to 2010 tax return The following are examples of some credits and deductions that reduce basis. Amendment to 2010 tax return Any deduction for section 179 property. Amendment to 2010 tax return Any deduction under section 179B of the Internal Revenue Code for capital costs to comply with Environmental Protection Agency sulfur regulations. Amendment to 2010 tax return Any deduction under section 179C of the Internal Revenue Code for certain qualified refinery property placed in service after August 8, 2005, and before January 1, 2014. Amendment to 2010 tax return Any deduction under section 179D of the Internal Revenue Code for certain energy efficient commercial building property placed in service after December 31, 2005, and before January 1, 2014. Amendment to 2010 tax return Any deduction under section 179E of the Internal Revenue Code for qualified advanced mine safety equipment property placed in service after December 20, 2006, and before January 1, 2014 . Amendment to 2010 tax return Any deduction for removal of barriers to the disabled and the elderly. Amendment to 2010 tax return Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. Amendment to 2010 tax return Any special depreciation allowance. Amendment to 2010 tax return Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. Amendment to 2010 tax return For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. Amendment to 2010 tax return Enter the basis for depreciation under column (c) in Part III of Form 4562. Amendment to 2010 tax return For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . Amendment to 2010 tax return Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. Amendment to 2010 tax return It is determined based on the depreciation system (GDS or ADS) used. Amendment to 2010 tax return Recovery Periods Under GDS Under GDS, property that is not qualified Indian reservation property is depreciated over one of the following recovery periods. Amendment to 2010 tax return Property Class Recovery Period 3-year property   3 years 1   5-year property   5 years     7-year property   7 years     10-year property   10 years     15-year property   15 years 2   20-year property   20 years     25-year property   25 years 3   Residential rental property   27. Amendment to 2010 tax return 5 years     Nonresidential real property   39 years 4   15 years for qualified rent-to-own property placed in service before August 6, 1997. Amendment to 2010 tax return 239 years for property that is a retail motor fuels outlet placed in service before August 20, 1996 (31. Amendment to 2010 tax return 5 years if placed in service before May 13, 1993), unless you elected to depreciate it over 15 years. Amendment to 2010 tax return 320 years for property placed in service before June 13, 1996, or under a binding contract in effect before June 10, 1996. Amendment to 2010 tax return 431. Amendment to 2010 tax return 5 years for property placed in service before May 13, 1993 (or before January 1, 1994, if the purchase or construction of the property is under a binding contract in effect before May 13, 1993, or if construction began before May 13, 1993). Amendment to 2010 tax return The GDS recovery periods for property not listed above can be found in Appendix B, Table of Class Lives and Recovery Periods. Amendment to 2010 tax return Residential rental property and nonresidential real property are defined earlier under Which Depreciation System (GDS or ADS) Applies. Amendment to 2010 tax return Enter the appropriate recovery period on Form 4562 under column (d) in section B of Part III, unless already shown (for 25-year property, residential rental property, and nonresidential real property). Amendment to 2010 tax return Office in the home. Amendment to 2010 tax return   If your home is a personal-use single family residence and you begin to use part of your home as an office, depreciate that part of your home as nonresidential real property over 39 years (31. Amendment to 2010 tax return 5 years if you began using it for business before May 13, 1993). Amendment to 2010 tax return However, if your home is an apartment in an apartment building that you own and the building is residential rental property as defined earlier under Which Depreciation System (GDS or ADS) Applies , depreciate the part used as an office as residential rental property over 27. Amendment to 2010 tax return 5 years. Amendment to 2010 tax return See Publication 587 for a discussion of the tests you must meet to claim expenses, including depreciation, for the business use of your home. Amendment to 2010 tax return Home changed to rental use. Amendment to 2010 tax return   If you begin to rent a home that was your personal home before 1987, you depreciate it as residential rental property over 27. Amendment to 2010 tax return 5 years. Amendment to 2010 tax return Indian Reservation Property The recovery periods for qualified property you placed in service on an Indian reservation after 1993 and before 2014 are shorter than those listed earlier. Amendment to 2010 tax return The following table shows these shorter recovery periods. Amendment to 2010 tax return Property Class Recovery  Period 3-year property 2 years 5-year property 3 years 7-year property 4 years 10-year property 6 years 15-year property 9 years 20-year property 12 years Nonresidential real property 22 years Nonresidential real property is defined earlier under Which Property Class Applies Under GDS . Amendment to 2010 tax return Use this chart to find the correct percentage table to use for qualified Indian reservation property. Amendment to 2010 tax return IF your recovery period is: THEN use the following table in Appendix A: 2 years A-21 3 years A-1, A-2, A-3, A-4, or A-5 4 years A-22 6 years A-23 9 years A-14, A-15, A-16, A-17, or A-18 12 years A-14, A-15, A-16, A-17, or A-18 22 years A-24 Qualified property. Amendment to 2010 tax return   Property eligible for the shorter recovery periods are 3-, 5-, 7-, 10-, 15-, and 20-year property and nonresidential real property. Amendment to 2010 tax return You must use this property predominantly in the active conduct of a trade or business within an Indian reservation. Amendment to 2010 tax return The rental of real property that is located on an Indian reservation is treated as the active conduct of a trade or business within an Indian reservation. Amendment to 2010 tax return   The following property is not qualified property. Amendment to 2010 tax return Property used or located outside an Indian reservation on a regular basis, other than qualified infrastructure property. Amendment to 2010 tax return Property acquired directly or indirectly from a related person. Amendment to 2010 tax return Property placed in service for purposes of conducting or housing class I, II, or III gaming activities. Amendment to 2010 tax return These activities are defined in section 4 of the Indian Regulatory Act (25 U. Amendment to 2010 tax return S. Amendment to 2010 tax return C. Amendment to 2010 tax return 2703). Amendment to 2010 tax return Any property you must depreciate under ADS. Amendment to 2010 tax return Determine whether property is qualified without regard to the election to use ADS and after applying the special rules for listed property not used predominantly for qualified business use (discussed in chapter 5). Amendment to 2010 tax return Qualified infrastructure property. Amendment to 2010 tax return   Item (1) above does not apply to qualified infrastructure property located outside the reservation that is used to connect with qualified infrastructure property within the reservation. Amendment to 2010 tax return Qualified infrastructure property is property that meets all the following rules. Amendment to 2010 tax return It is qualified property, as defined earlier, except that it is outside the reservation. Amendment to 2010 tax return It benefits the tribal infrastructure. Amendment to 2010 tax return It is available to the general public. Amendment to 2010 tax return It is placed in service in connection with the active conduct of a trade or business within a reservation. Amendment to 2010 tax return Infrastructure property includes, but is not limited to, roads, power lines, water systems, railroad spurs, and communications facilities. Amendment to 2010 tax return Related person. Amendment to 2010 tax return   For purposes of item (2) above, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 for a description of related persons. Amendment to 2010 tax return Indian reservation. Amendment to 2010 tax return   The term Indian reservation means a reservation as defined in section 3(d) of the Indian Financing Act of 1974 (25 U. Amendment to 2010 tax return S. Amendment to 2010 tax return C. Amendment to 2010 tax return 1452(d)) or section 4(10) of the Indian Child Welfare Act of 1978 (25 U. Amendment to 2010 tax return S. Amendment to 2010 tax return C. Amendment to 2010 tax return 1903(10)). Amendment to 2010 tax return Section 3(d) of the Indian Financing Act of 1974 defines reservation to include former Indian reservations in Oklahoma. Amendment to 2010 tax return For a definition of the term “former Indian reservations in Oklahoma,” see Notice 98-45 in Internal Revenue Bulletin 1998-35. Amendment to 2010 tax return Recovery Periods Under ADS The recovery periods for most property generally are longer under ADS than they are under GDS. Amendment to 2010 tax return The following table shows some of the ADS recovery periods. Amendment to 2010 tax return Property Recovery  Period Rent-to-own property 4 years Automobiles and light duty trucks 5 years Computers and peripheral equipment 5 years High technology telephone station equipment installed on customer premises 5 years High technology medical equipment 5 years Personal property with no class life 12 years Natural gas gathering lines 14 years Single purpose agricultural and horticultural structures 15 years Any tree or vine bearing fruit or nuts 20 years Initial clearing and grading land  improvements for gas utility property 20 years Initial clearing and grading land  improvements for electric utility  transmission and distribution plants 25 years Electric transmission property used in the transmission at 69 or more kilovolts of electricity 30 years Natural gas distribution lines 35 years Any qualified leasehold improvement property 39 years Any qualified restaurant property 39 years Nonresidential real property 40 years Residential rental property 40 years Section 1245 real property not listed in Appendix B 40 years Railroad grading and tunnel bore 50 years The ADS recovery periods for property not listed above can be found in the tables in Appendix B. Amendment to 2010 tax return Rent-to-own property, qualified leasehold improvement property, qualified restaurant property, residential rental property, and nonresidential real property are defined earlier under Which Property Class Applies Under GDS . Amendment to 2010 tax return Tax-exempt use property subject to a lease. Amendment to 2010 tax return   The ADS recovery period for any property leased under a lease agreement to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership) cannot be less than 125% of the lease term. Amendment to 2010 tax return Additions and Improvements An addition or improvement you make to depreciable property is treated as separate depreciable property. Amendment to 2010 tax return See How Do You Treat Repairs and Improvements in chapter 1 for a definition of improvements. Amendment to 2010 tax return Its property class and recovery period are the same as those that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. Amendment to 2010 tax return The recovery period begins on the later of the following dates. Amendment to 2010 tax return The date you place the addition or improvement in service. Amendment to 2010 tax return The date you place in service the property to which you made the addition or improvement. Amendment to 2010 tax return If the improvement you make is qualified leasehold improvement property, qualified restaurant property, or qualified retail improvement property, the GDS recovery period is 15 years (39 years under ADS). Amendment to 2010 tax return Example. Amendment to 2010 tax return You own a rental home that you have been renting out since 1981. Amendment to 2010 tax return If you put an addition on the home and place the addition in service this year, you would use MACRS to figure your depreciation deduction for the addition. Amendment to 2010 tax return Under GDS, the property class for the addition is residential rental property and its recovery period is 27. Amendment to 2010 tax return 5 years because the home to which the addition is made would be residential rental property if you had placed it in service this year. Amendment to 2010 tax return Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. Amendment to 2010 tax return The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. Amendment to 2010 tax return The mid-month convention. Amendment to 2010 tax return   Use this convention for nonresidential real property, residential rental property, and any railroad grading or tunnel bore. Amendment to 2010 tax return   Under this convention, you treat all property placed in service or disposed of during a month as placed in service or disposed of at the midpoint of the month. Amendment to 2010 tax return This means that a one-half month of depreciation is allowed for the month the property is placed in service or disposed of. Amendment to 2010 tax return   Your use of the mid-month convention is indicated by the “MM” already shown under column (e) in Part III of Form 4562. Amendment to 2010 tax return The mid-quarter convention. Amendment to 2010 tax return   Use this convention if the mid-month convention does not apply and the total depreciable bases of MACRS property you placed in service during the last 3 months of the tax year (excluding nonresidential real property, residential rental property, any railroad grading or tunnel bore, property placed in service and disposed of in the same year, and property that is being depreciated under a method other than MACRS) are more than 40% of the total depreciable bases of all MACRS property you placed in service during the entire year. Amendment to 2010 tax return   Under this convention, you treat all property placed in service or disposed of during any quarter of the tax year as placed in service or disposed of at the midpoint of that quarter. Amendment to 2010 tax return This means that 1½ months of depreciation is allowed for the quarter the property is placed in service or disposed of. Amendment to 2010 tax return   If you use this convention, enter “MQ” under column (e) in Part III of Form 4562. Amendment to 2010 tax return    For purposes of determining whether the mid-quarter convention applies, the depreciable basis of property you placed in service during the tax year reflects the reduction in basis for amounts expensed under section 179 and the part of the basis of property attributable to personal use. Amendment to 2010 tax return However, it does not reflect any reduction in basis for any special depreciation allowance. Amendment to 2010 tax return The half-year convention. Amendment to 2010 tax return   Use this convention if neither the mid-quarter convention nor the mid-month convention applies. Amendment to 2010 tax return   Under this convention, you treat all property placed in service or disposed of during a tax year as placed in service or disposed of at the midpoint of the year. Amendment to 2010 tax return This means that a one-half year of depreciation is allowed for the year the property is placed in service or disposed of. Amendment to 2010 tax return   If you use this convention, enter “HY” under column (e) in Part III of Form 4562. Amendment to 2010 tax return Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. Amendment to 2010 tax return The 200% declining balance method over a GDS recovery period. Amendment to 2010 tax return The 150% declining balance method over a GDS recovery period. Amendment to 2010 tax return The straight line method over a GDS recovery period. Amendment to 2010 tax return The straight line method over an ADS recovery period. Amendment to 2010 tax return For property placed in service before 1999, you could have elected the 150% declining balance method using the ADS recovery periods for certain property classes. Amendment to 2010 tax return If you made this election, continue to use the same method and recovery period for that property. Amendment to 2010 tax return Table 4–1 lists the types of property you can depreciate under each method. Amendment to 2010 tax return It also gives a brief explanation of the method, including any benefits that may apply. Amendment to 2010 tax return Depreciation Methods for Farm Property If you place personal property in service in a farming business after 1988, you generally must depreciate it under GDS using the 150% declining balance method unless you are a farmer who must depreciate the property under ADS using the straight line method or you elect to depreciate the property under GDS or ADS using the straight line method. Amendment to 2010 tax return You can depreciate real property using the straight line method under either GDS or ADS. Amendment to 2010 tax return Fruit or nut trees and vines. Amendment to 2010 tax return   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a recovery period of 10 years. Amendment to 2010 tax return ADS required for some farmers. Amendment to 2010 tax return   If you elect not to apply the uniform capitalization rules to any plant produced in your farming business, you must use ADS. Amendment to 2010 tax return You must use ADS for all property you place in service in any year the election is in effect. Amendment to 2010 tax return See the regulations under section 263A of the Internal Revenue Code for information on the uniform capitalization rules that apply to farm property. Amendment to 2010 tax return Electing a Different Method As shown in Table 4–1 , you can elect a different method for depreciation for certain types of property. Amendment to 2010 tax return You must make the election by the due date of the return (including extensions) for the year you placed the property in service. Amendment to 2010 tax return However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Amendment to 2010 tax return Attach the election to the amended return and write “Filed pursuant to section 301. Amendment to 2010 tax return 9100-2” on the election statement. Amendment to 2010 tax return File the amended return at the same address you filed the original return. Amendment to 2010 tax return Once you make the election, you cannot change it. Amendment to 2010 tax return If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. Amendment to 2010 tax return However, you can make the election on a property-by-property basis for nonresidential real and residential rental property. Amendment to 2010 tax return 150% election. Amendment to 2010 tax return   Instead of using the 200% declining balance method over the GDS recovery period for nonfarm property in the 3-, 5-, 7-, and 10-year property classes, you can elect to use the 150% declining balance method. Amendment to 2010 tax return Make the election by entering “150 DB” under column (f) in Part III of Form 4562. Amendment to 2010 tax return Straight line election. Amendment to 2010 tax return   Instead of using either the 200% or 150% declining balance methods over the GDS recovery period, you can elect to use the straight line method over the GDS recovery period. Amendment to 2010 tax return Make the election by entering  “S/L” under column (f) in Part III of Form 4562. Amendment to 2010 tax return Election of ADS. Amendment to 2010 tax return   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. Amendment to 2010 tax return ADS uses the straight line method of depreciation over fixed ADS recovery periods. Amendment to 2010 tax return Most ADS recovery periods are listed in Appendix B, or see the table under Recovery Periods Under ADS , earlier. Amendment to 2010 tax return   Make the election by completing line 20 in Part III of Form 4562. Amendment to 2010 tax return Farm property. Amendment to 2010 tax return   Instead of using the 150% declining balance method over a GDS recovery period for property you use in a farming business (other than real property), you can elect to depreciate it using either of the following methods. Amendment to 2010 tax return The straight line method over a GDS recovery period. Amendment to 2010 tax return The straight line method over an ADS recovery period. Amendment to 2010 tax return Table 4-1. Amendment to 2010 tax return Depreciation Methods Note. Amendment to 2010 tax return The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. Amendment to 2010 tax return Method Type of Property Benefit GDS using 200% DB • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction GDS using 150% DB • All farm property (except real property) • All 15- and 20-year property (except qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property placed in service before January 1, 2014) • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction1 GDS using SL • Nonresidential real property • Qualified leasehold improvement property placed in service before January 1, 2014 • Qualified restaurant property placed in service before January 1, 2014 • Qualified retail improvement property placed in service before January 1, 2014 • Residential rental property • Trees or vines bearing fruit or nuts • Water utility property • All 3-, 5-, 7-, 10-, 15-, and 20-year property2 • Property for which you elected section 168(k)(4) • Provides for equal yearly deductions (except for the first and last years) ADS using SL • Listed property used 50% or less for business • Property used predominantly outside the U. Amendment to 2010 tax return S. Amendment to 2010 tax return  • Tax-exempt property • Tax-exempt bond-financed property • Farm property used when an election not to apply the uniform capitalization rules is in effect • Imported property3 • Any property for which you elect to use this method4 • Provides for equal yearly deductions (except for the first and last years) 1The MACRS percentage tables in Appendix A have the switch to the straight line method built into their rates 2See section 168(b)(5) of the Internal Revenue Code. Amendment to 2010 tax return 3See section 168(g)(6) of the Internal Revenue Code 4See section 168(g)(7) of the Internal Revenue Code How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed in service date, basis amount, recovery period, convention, and depreciation method that applies to your property. Amendment to 2010 tax return Then, you are ready to figure your depreciation deduction. Amendment to 2010 tax return You can figure it using a percentage table provided by the IRS, or you can figure it yourself without using the table. Amendment to 2010 tax return Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. Amendment to 2010 tax return These percentage tables are in Appendix A near the end of this publication. Amendment to 2010 tax return Which table to use. Amendment to 2010 tax return    Appendix A contains the MACRS Percentage Table Guide, which is designed to help you locate the correct percentage table to use for depreciating your property. Amendment to 2010 tax return The percentage tables immediately follow the guide. Amendment to 2010 tax return Rules Covering the Use of the Tables The following rules cover the use of the percentage tables. Amendment to 2010 tax return You must apply the rates in the percentage tables to your property's unadjusted basis. Amendment to 2010 tax return You cannot use the percentage tables for a short tax year. Amendment to 2010 tax return See Figuring the Deduction for a Short Tax Year, later, for information on the short tax year rules. Amendment to 2010 tax return Once you start using the percentage tables for any item of property, you generally must continue to use them for the entire recovery period of the property. Amendment to 2010 tax return You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to that property that is depreciated as a separate item of property. Amendment to 2010 tax return Basis adjustments other than those made due to the items listed in (4) include an increase in basis for the recapture of a clean-fuel deduction or credit and a reduction in basis for a casualty loss. Amendment to 2010 tax return Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. Amendment to 2010 tax return   If you increase the basis of your property because of the recapture of part or all of a deduction for clean-fuel vehicles or the credit for clean-fuel vehicle refueling property placed in service before January 1, 2006, you cannot continue to use the percentage tables. Amendment to 2010 tax return For the year of the adjustment and the remaining recovery period, you must figure the depreciation deduction yourself using the property's adjusted basis at the end of the year. Amendment to 2010 tax return See Figuring the Deduction Without Using the Tables, later. Amendment to 2010 tax return Basis adjustment due to casualty loss. Amendment to 2010 tax return   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. Amendment to 2010 tax return For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. Amendment to 2010 tax return See Figuring the Deduction Without Using the Tables, later. Amendment to 2010 tax return Example. Amendment to 2010 tax return On October 26, 2012, Sandra Elm, a calendar year taxpayer, bought and placed in service in her business a new item of 7-year property. Amendment to 2010 tax return It cost $39,000 and she elected a section 179 deduction of $24,000. Amendment to 2010 tax return She also took a special depreciation allowance of $7,500 [50% of $15,000 ($39,000 − $24,000)]. Amendment to 2010 tax return Her unadjusted basis after the section 179 deduction and special depreciation allowance was $7,500 ($15,000 − $7,500). Amendment to 2010 tax return She figured her MACRS depreciation deduction using the percentage tables. Amendment to 2010 tax return For 2012, her MACRS depreciation deduction was $268. Amendment to 2010 tax return In July 2013, the property was vandalized and Sandra had a deductible casualty loss of $3,000. Amendment to 2010 tax return She must adjust the property's basis for the casualty loss, so she can no longer use the percentage tables. Amendment to 2010 tax return Her adjusted basis at the end of 2013, before figuring her 2013 depreciation, is $4,232. Amendment to 2010 tax return She figures that amount by subtracting the 2012 MACRS depreciation of $268 and the casualty loss of $3,000 from the unadjusted basis of $7,500. Amendment to 2010 tax return She must now figure her depreciation for 2013 without using the percentage tables. Amendment to 2010 tax return Figuring the Unadjusted Basis of Your Property You must apply the table rates to your property's unadjusted basis each year of the recovery period. Amendment to 2010 tax return Unadjusted basis is the same basis amount you would use to figure gain on a sale, but you figure it without reducing your original basis by any MACRS depreciation taken in earlier years. Amendment to 2010 tax return However, you do reduce your original basis by other amounts, including the following. Amendment to 2010 tax return Any amortization taken on the property. Amendment to 2010 tax return Any section 179 deduction claimed. Amendment to 2010 tax return Any special depreciation allowance taken on the property. Amendment to 2010 tax return For business property you purchase during the year, the unadjusted basis is its cost minus these and other applicable adjustments. Amendment to 2010 tax return If you trade property, your unadjusted basis in the property received is the cash paid plus the adjusted basis of the property traded minus these adjustments. Amendment to 2010 tax return MACRS Worksheet You can use this worksheet to help you figure your depreciation deduction using the percentage tables. Amendment to 2010 tax return Use a separate worksheet for each item of property. Amendment to 2010 tax return Then, use the information from this worksheet to prepare Form 4562. Amendment to 2010 tax return Do not use this worksheet for automobiles. Amendment to 2010 tax return Use the Depreciation Worksheet for Passenger Automobiles in chapter 5. Amendment to 2010 tax return MACRS Worksheet Part I   1. Amendment to 2010 tax return MACRS system (GDS or ADS)   2. Amendment to 2010 tax return Property class   3. Amendment to 2010 tax return Date placed in service   4. Amendment to 2010 tax return Recovery period   5. Amendment to 2010 tax return Method and convention   6. Amendment to 2010 tax return Depreciation rate (from tables)   Part II   7. Amendment to 2010 tax return Cost or other basis* $     8. Amendment to 2010 tax return Business/investment use   %   9. Amendment to 2010 tax return Multiply line 7 by line 8   $ 10. Amendment to 2010 tax return Total claimed for section 179 deduction and other items   $ 11. Amendment to 2010 tax return Subtract line 10 from line 9. Amendment to 2010 tax return This is your tentative basis for depreciation   $ 12. Amendment to 2010 tax return Multiply line 11 by . Amendment to 2010 tax return 50 if the 50% special depreciation allowance applies. Amendment to 2010 tax return This is your special depreciation allowance. Amendment to 2010 tax return Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   $ 13. Amendment to 2010 tax return Subtract line 12 from line 11. Amendment to 2010 tax return This is your basis for depreciation     14. Amendment to 2010 tax return Depreciation rate (from line 6)     15. Amendment to 2010 tax return Multiply line 13 by line 14. Amendment to 2010 tax return This is your MACRS depreciation deduction   $ *If real estate, do not include cost (basis) of land. Amendment to 2010 tax return The following example shows how to figure your MACRS depreciation deduction using the percentage tables and the MACRS worksheet. Amendment to 2010 tax return Example. Amendment to 2010 tax return You bought office furniture (7-year property) for $10,000 and placed it in service on August 11, 2013. Amendment to 2010 tax return You use the furniture only for business. Amendment to 2010 tax return This is the only property you placed in service this year. Amendment to 2010 tax return You did not elect a section 179 deduction and the property is not qualified property for purposes of claiming a special depreciation allowance so your property's unadjusted basis is its cost, $10,000. Amendment to 2010 tax return You use GDS and the half-year convention to figure your depreciation. Amendment to 2010 tax return You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-1. Amendment to 2010 tax return Multiply your property's unadjusted basis each year by the percentage for 7-year property given in Table A-1. Amendment to 2010 tax return You figure your depreciation deduction using the MACRS worksheet as follows. Amendment to 2010 tax return MACRS Worksheet Part I 1. Amendment to 2010 tax return MACRS system (GDS or ADS) GDS 2. Amendment to 2010 tax return Property class 7-year 3. Amendment to 2010 tax return Date placed in service 8/11/13 4. Amendment to 2010 tax return Recovery period 7-Year 5. Amendment to 2010 tax return Method and convention 200%DB/Half-Year 6. Amendment to 2010 tax return Depreciation rate (from tables) . Amendment to 2010 tax return 1429 Part II 7. Amendment to 2010 tax return Cost or other basis* $10,000     8. Amendment to 2010 tax return Business/investment use 100 %   9. Amendment to 2010 tax return Multiply line 7 by line 8   $10,000 10. Amendment to 2010 tax return Total claimed for section 179 deduction and other items   -0- 11. Amendment to 2010 tax return Subtract line 10 from line 9. Amendment to 2010 tax return This is your tentative basis for depreciation   $10,000 12. Amendment to 2010 tax return Multiply line 11 by . Amendment to 2010 tax return 50 if the 50% special depreciation allowance applies. Amendment to 2010 tax return This is your special depreciation allowance. Amendment to 2010 tax return Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   -0- 13. Amendment to 2010 tax return Subtract line 12 from line 11. Amendment to 2010 tax return This is your basis for depreciation   $10,000 14. Amendment to 2010 tax return Depreciation rate (from line 6)   . Amendment to 2010 tax return 1429 15. Amendment to 2010 tax return Multiply line 13 by line 14. Amendment to 2010 tax return This is your MACRS depreciation deduction   $1,429 *If real estate, do not include cost (basis) of land. Amendment to 2010 tax return If there are no adjustments to the basis of the property other than depreciation, your depreciation deduction for each subsequent year of the recovery period will be as follows. Amendment to 2010 tax return Year   Basis Percentage Deduction 2014 $ 10,000 24. Amendment to 2010 tax return 49%   $2,449   2015   10,000 17. Amendment to 2010 tax return 49   1,749   2016   10,000 12. Amendment to 2010 tax return 49   1,249   2017   10,000 8. Amendment to 2010 tax return 93   893   2018   10,000 8. Amendment to 2010 tax return 92   892   2019   10,000 8. Amendment to 2010 tax return 93   893   2020   10,000 4. Amendment to 2010 tax return 46   446   Examples The following examples are provided to show you how to use the percentage tables. Amendment to 2010 tax return In both examples, assume the following. Amendment to 2010 tax return You use the property only for business. Amendment to 2010 tax return You use the calendar year as your tax year. Amendment to 2010 tax return You use GDS for all the properties. Amendment to 2010 tax return Example 1. Amendment to 2010 tax return You bought a building and land for $120,000 and placed it in service on March 8. Amendment to 2010 tax return The sales contract showed that the building cost $100,000 and the land cost $20,000. Amendment to 2010 tax return It is nonresidential real property. Amendment to 2010 tax return The building's unadjusted basis is its original cost, $100,000. Amendment to 2010 tax return You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-7a. Amendment to 2010 tax return March is the third month of your tax year, so multiply the building's unadjusted basis, $100,000, by the percentages for the third month in Table A-7a. Amendment to 2010 tax return Your depreciation deduction for each of the first 3 years is as follows: Year   Basis Percentage Deduction 1st $ 100,000 2. Amendment to 2010 tax return 033%   $2,033   2nd   100,000 2. Amendment to 2010 tax return 564   2,564   3rd   100,000 2. Amendment to 2010 tax return 564   2,564   Example 2. Amendment to 2010 tax return During the year, you bought a machine (7-year property) for $4,000, office furniture (7-year property) for $1,000, and a computer (5-year property) for $5,000. Amendment to 2010 tax return You placed the machine in service in January, the furniture in September, and the computer in October. Amendment to 2010 tax return You do not elect a section 179 deduction and none of these items is qualified property for purposes of claiming a special depreciation allowance. Amendment to 2010 tax return You placed property in service during the last 3 months of the year, so you must first determine if you have to use the mid-quarter convention. Amendment to 2010 tax return The total bases of all property you placed in service during the year is $10,000. Amendment to 2010 tax return The $5,000 basis of the computer, which you placed in service during the last 3 months (the fourth quarter) of your tax year, is more than 40% of the total bases of all property ($10,000) you placed in service during the year. Amendment to 2010 tax return Therefore, you must use the mid-quarter convention for all three items. Amendment to 2010 tax return You refer to the MACRS Percentage Table Guide in Appendix A to determine which table you should use under the mid-quarter convention. Amendment to 2010 tax return The machine is 7-year property placed in service in the first quarter, so you use Table A-2. Amendment to 2010 tax return The furniture is 7-year property placed in service in the third quarter, so you use Table A-4. Amendment to 2010 tax return Finally, because the computer is 5-year property placed in service in the fourth quarter, you use Table A-6. Amendment to 2010 tax return Knowing what table to use for each property, you figure the depreciation for the first 2 years as follows. Amendment to 2010 tax return Year Property Basis Percentage Deduction 1st Machine $4,000 25. Amendment to 2010 tax return 00 $1,000   2nd Machine 4,000 21. Amendment to 2010 tax return 43 857   1st Furniture 1,000 10. Amendment to 2010 tax return 71 107   2nd Furniture 1,000 25. Amendment to 2010 tax return 51 255   1st Computer 5,000 5. Amendment to 2010 tax return 00 250   2nd Computer 5,000 38. Amendment to 2010 tax return 00 1,900   Sale or Other Disposition Before the Recovery Period Ends If you sell or otherwise dispose of your property before the end of its recovery period, your depreciation deduction for the year of the disposition will be only part of the depreciation amount for the full year. Amendment to 2010 tax return You have disposed of your property if you have permanently withdrawn it from use in your business or income-producing activity because of its sale, exchange, retirement, abandonment, involuntary conversion, or destruction. Amendment to 2010 tax return After you figure the full-year depreciation amount, figure the deductible part using the convention that applies to the property. Amendment to 2010 tax return Half-year convention used. Amendment to 2010 tax return   For property for which you used a half-year convention, the depreciation deduction for the year of the disposition is half the depreciation determined for the full year. Amendment to 2010 tax return Mid-quarter convention used. Amendment to 2010 tax return   For property for which you used the mid-quarter convention, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter in which you disposed of the property. Amendment to 2010 tax return Quarter Percentage First 12. Amendment to 2010 tax return 5% Second 37. Amendment to 2010 tax return 5 Third 62. Amendment to 2010 tax return 5 Fourth 87. Amendment to 2010 tax return 5 Example. Amendment to 2010 tax return On December 2, 2010, you placed in service an item of 5-year property costing $10,000. Amendment to 2010 tax return You did not claim a section 179 deduction and the property does not qualify for a special depreciation allowance. Amendment to 2010 tax return Your unadjusted basis for the property was $10,000. Amendment to 2010 tax return You used the mid-quarter convention because this was the only item of business property you placed in service in 2010 and it was placed in service during the last 3 months of your tax year. Amendment to 2010 tax return Your property is in the 5-year property class, so you used Table A-5 to figure your depreciation deduction. Amendment to 2010 tax return Your deductions for 2010, 2011, and 2012 were $500 (5% of $10,000), $3,800 (38% of $10,000), and $2,280 (22. Amendment to 2010 tax return 80% of $10,000). Amendment to 2010 tax return You disposed of the property on April 6, 2013. Amendment to 2010 tax return To determine your depreciation deduction for 2013, first figure the deduction for the full year. Amendment to 2010 tax return This is $1,368 (13. Amendment to 2010 tax return 68% of $10,000). Amendment to 2010 tax return April is in the second quarter of the year, so you multiply $1,368 by 37. Amendment to 2010 tax return 5% to get your depreciation deduction of $513 for 2013. Amendment to 2010 tax return Mid-month convention used. Amendment to 2010 tax return   If you dispose of residential rental or nonresidential real property, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by a fraction. Amendment to 2010 tax return The numerator of the fraction is the number of months (including partial months) in the year that the property is considered in service. Amendment to 2010 tax return The denominator is 12. Amendment to 2010 tax return Example. Amendment to 2010 tax return On July 2, 2011, you purchased and placed in service residential rental property. Amendment to 2010 tax return The property cost $100,000, not including the cost of land. Amendment to 2010 tax return You used Table A-6 to figure your MACRS depreciation for this property. Amendment to 2010 tax return You sold the property on March 2, 2013. Amendment to 2010 tax return You file your tax return based on the calendar year. Amendment to 2010 tax return A full year of depreciation for 2013 is $3,636. Amendment to 2010 tax return This is $100,000 multiplied by . Amendment to 2010 tax return 03636 (the percentage for the seventh month of the third recovery year) from Table A-6 . Amendment to 2010 tax return You then apply the mid-month convention for the 2½ months of use in 2013. Amendment to 2010 tax return Treat the month of disposition as one-half month of use. Amendment to 2010 tax return Multiply $3,636 by the fraction, 2. Amendment to 2010 tax return 5 over 12, to get your 2013 depreciation deduction of $757. Amendment to 2010 tax return 50. Amendment to 2010 tax return Figuring the Deduction Without Using the Tables Instead of using the rates in the percentage tables to figure your depreciation deduction, you can figure it yourself. Amendment to 2010 tax return Before making the computation each year, you must reduce your adjusted basis in the property by the depreciation claimed the previous year. Amendment to 2010 tax return Figuring MACRS deductions without using the tables generally will result in a slightly different amount than using the tables. Amendment to 2010 tax return Declining Balance Method When using a declining balance method, you apply the same depreciation rate each year to the adjusted basis of your property. Amendment to 2010 tax return You must use the applicable convention for the first tax year and you must switch to the straight line method beginning in the first year for which it will give an equal or greater deduction. Amendment to 2010 tax return The straight line method is explained later. Amendment to 2010 tax return You figure depreciation for the year you place property in service as follows. Amendment to 2010 tax return Multiply your adjusted basis in the property by the declining balance rate. Amendment to 2010 tax return Apply the applicable convention. Amendment to 2010 tax return You figure depreciation for all other years (before the year you switch to the straight line method) as follows. Amendment to 2010 tax return Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years. Amendment to 2010 tax return Multiply this new adjusted basis by the same declining balance rate used in earlier years. Amendment to 2010 tax return If you dispose of property before the end of its recovery period, see Using the Applicable Convention, later, for information on how to figure depreciation for the year you dispose of it. Amendment to 2010 tax return Figuring depreciation under the declining balance method and switching to the straight line method is illustrated in Example 1 , later, under Examples. Amendment to 2010 tax return Declining balance rate. Amendment to 2010 tax return   You figure your declining balance rate by dividing the specified declining balance percentage (150% or 200% changed to a decimal) by the number of years in the property's recovery period. Amendment to 2010 tax return For example, for 3-year property depreciated using the 200% declining balance method, divide 2. Amendment to 2010 tax return 00 (200%) by 3 to get 0. Amendment to 2010 tax return 6667, or a 66. Amendment to 2010 tax return 67% declining balance rate. Amendment to 2010 tax return For 15-year property depreciated using the 150% declining balance method, divide 1. Amendment to 2010 tax return 50 (150%) by 15 to get 0. Amendment to 2010 tax return 10, or a 10% declining balance rate. Amendment to 2010 tax return   The following table shows the declining balance rate for each property class and the first year for which the straight line method gives an equal or greater deduction. Amendment to 2010 tax return Property Class Method Declining Balance Rate Year 3-year 200% DB 66. Amendment to 2010 tax return 667% 3rd 5-year 200% DB 40. Amendment to 2010 tax return 0 4th 7-year 200% DB 28. Amendment to 2010 tax return 571 5th 10-year 200% DB 20. Amendment to 2010 tax return 0 7th 15-year 150% DB 10. Amendment to 2010 tax return 0 7th 20-year 150% DB 7. Amendment to 2010 tax return 5 9th Straight Line Method When using the straight line method, you apply a different depreciation rate each year to the adjusted basis of your property. Amendment to 2010 tax return You must use the applicable convention in the year you place the property in service and the year you dispose of the property. Amendment to 2010 tax return You figure depreciation for the year you place property in service as follows. Amendment to 2010 tax return Multiply your adjusted basis in the property by the straight line rate. Amendment to 2010 tax return Apply the applicable convention. Amendment to 2010 tax return You figure depreciation for all other years (including the year you switch from the declining balance method to the straight line method) as follows. Amendment to 2010 tax return Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years (under any method). Amendment to 2010 tax return Determine the depreciation rate for the year. Amendment to 2010 tax return Multiply the adjusted basis figured in (1) by the depreciation rate figured in (2). Amendment to 2010 tax return If you dispose of property before the end of its recovery period, see Using the Applicable Convention , later, for information on how to figure depreciation for the year you dispose of it. Amendment to 2010 tax return Straight line rate. Amendment to 2010 tax return   You determine the straight line depreciation rate for any tax year by dividing the number 1 by the years remaining in the recovery period at the beginning of that year. Amendment to 2010 tax return When figuring the number of years remaining, you must take into account the convention used in the year you placed the property in service. Amendment to 2010 tax return If the number of years remaining is less than 1, the depreciation rate for that tax year is 1. Amendment to 2010 tax return 0 (100%). Amendment to 2010 tax return Using the Applicable Convention The applicable convention (discussed earlier under Which Convention Applies ) affects how you figure your depreciation deduction for the year you place your property in service and for the year you dispose of it. Amendment to 2010 tax return It determines how much of the recovery period remains at the beginning of each year, so it also affects the depreciation rate for property you depreciate under the straight line method. Amendment to 2010 tax return See Straight line rate in the previous discussion. Amendment to 2010 tax return Use the applicable convention as explained in the following discussions. Amendment to 2010 tax return Half-year convention. Amendment to 2010 tax return   If this convention applies, you deduct a half-year of depreciation for the first year and the last year that you depreciate the property. Amendment to 2010 tax return You deduct a full year of depreciation for any other year during the recovery period. Amendment to 2010 tax return   Figure your depreciation deduction for the year you place the property in service by dividing the depreciation for a full year by 2. Amendment to 2010 tax return If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. Amendment to 2010 tax return If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final 6 months of the recovery period is the amount of your unrecovered basis in the property. Amendment to 2010 tax return Mid-quarter convention. Amendment to 2010 tax return   If this convention applies, the depreciation you can deduct for the first year you depreciate the property depends on the quarter in which you place the property in service. Amendment to 2010 tax return   A quarter of a full 12-month tax year is a period of 3 months. Amendment to 2010 tax return The first quarter in a year begins on the first day of the tax year. Amendment to 2010 tax return The second quarter begins on the first day of the fourth month of the tax year. Amendment to 2010 tax return The third quarter begins on the first day of the seventh month of the tax year. Amendment to 2010 tax return The fourth quarter begins on the first day of the tenth month of the tax year. Amendment to 2010 tax return A calendar year is divided into the following quarters. Amendment to 2010 tax return Quarter Months First January, February, March Second April, May, June Third July, August, September Fourth October, November, December   Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by the percentage listed below for the quarter you place the property in service. Amendment to 2010 tax return Quarter Percentage First 87. Amendment to 2010 tax return 5% Second 62. Amendment to 2010 tax return 5 Third 37. Amendment to 2010 tax return 5 Fourth 12. Amendment to 2010 tax return 5   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter you dispose of the property. Amendment to 2010 tax return Quarter Percentage First 12. Amendment to 2010 tax return 5% Second 37. Amendment to 2010 tax return 5 Third 62. Amendment to 2010 tax return 5 Fourth 87. Amendment to 2010 tax return 5   If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final quarter of the recovery period is the amount of your unrecovered basis in the property. Amendment to 2010 tax return Mid-month convention. Amendment to 2010 tax return   If this convention applies, the depreciation you can deduct for the first year that you depreciate the property depends on the month in which you place the property in service. Amendment to 2010 tax return Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by a fraction. Amendment to 2010 tax return The numerator of the fraction is the number of full months in the year that the property is in service plus ½ (or 0. Amendment to 2010 tax return 5). Amendment to 2010 tax return The denominator is 12. Amendment to 2010 tax return   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. Amendment to 2010 tax return If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final month of the recovery period is the amount of your unrecovered basis in the property. Amendment to 2010 tax return Example. Amendment to 2010 tax return You use the calendar year and place nonresidential real property in service in August. Amendment to 2010 tax return The property is in service 4 full months (September, October, November, and December). Amendment to 2010 tax return Your numerator is 4. Amendment to 2010 tax return 5 (4 full months plus 0. Amendment to 2010 tax return 5). Amendment to 2010 tax return You multiply the depreciation for a full year by 4. Amendment to 2010 tax return 5/12, or 0. Amendment to 2010 tax return 375. Amendment to 2010 tax return Examples The following examples show how to figure depreciation under MACRS without using the percentage tables. Amendment to 2010 tax return Figures are rounded for purposes of the examples. Amendment to 2010 tax return Assume for all the examples that you use a calendar year as your tax year. Amendment to 2010 tax return Example 1—200% DB method and half-year convention. Amendment to 2010 tax return In February, you placed in service depreciable property with a 5-year recovery period and a basis of $1,000. Amendment to 2010 tax return You do not elect to take the section 179 deduction and the property does not qualify for a special depreciation allowance. Amendment to 2010 tax return You use GDS and the 200% declining balance (DB) method to figure your depreciation. Amendment to 2010 tax return When the straight line (SL) method results in an equal or larger deduction, you switch to the SL method. Amendment to 2010 tax return You did not place any property in service in the last 3 months of the year, so you must use the half-year convention. Amendment to 2010 tax return First year. Amendment to 2010 tax return You figure the depreciation rate under the 200% DB method by dividing 2 (200%) by 5 (the number of years in the recovery period). Amendment to 2010 tax return The result is 40%. Amendment to 2010 tax return You multiply the adjusted basis of the property ($1,000) by the 40% DB rate. Amendment to 2010 tax return You apply the half-year convention by dividing the result ($400) by 2. Amendment to 2010 tax return Depreciation for the first year under the 200% DB method is $200. Amendment to 2010 tax return You figure the depreciation rate under the straight line (SL) method by dividing 1 by 5, the number of years in the recovery period. Amendment to 2010 tax return The result is 20%. Amendment to 2010 tax return You multiply the adjusted basis of the property ($1,000) by the 20% SL rate. Amendment to 2010 tax return You apply the half-year convention by dividing the result ($200) by 2. Amendment to 2010 tax return Depreciation for the first year under the SL method is $100. Amendment to 2010 tax return The DB method provides a larger deduction, so you deduct the $200 figured under the 200% DB method. Amendment to 2010 tax return Second year. Amendment to 2010 tax return You reduce the adjusted basis ($1,000) by the depreciation claimed in the first year ($200). Amendment to 2010 tax return You multiply the result ($800) by the DB rate (40%). Amendment to 2010 tax return Depreciation for the second year under the 200% DB method is $320. Amendment to 2010 tax return You figure the SL depreciation rate by dividing 1 by 4. Amendment to 2010 tax return 5, the number of years remaining in the recovery period. Amendment to 2010 tax return (Based on the half-year convention, you used only half a year of the recovery period in the first year. Amendment to 2010 tax return ) You multiply the reduced adjusted basis ($800) by the result (22. Amendment to 2010 tax return 22%). Amendment to 2010 tax return Depreciation under the SL method for the second year is $178. Amendment to 2010 tax return The DB method provides a larger deduction, so you deduct the $320 figured under the 200% DB method. Amendment to 2010 tax return Third year. Amendment to 2010 tax return You reduce the adjusted basis ($800) by the depreciation claimed in the second year ($320). Amendment to 2010 tax return You multiply the result ($480) by the DB rate (40%). Amendment to 2010 tax return Depreciation for the third year under the 200% DB method is $192. Amendment to 2010 tax return You figure the SL depreciation rate by dividing 1 by 3. Amendment to 2010 tax return 5. Amendment to 2010 tax return You multiply the reduced adjusted basis ($480) by the result (28. Amendment to 2010 tax return 57%). Amendment to 2010 tax return Depreciation under the SL method for the third year is $137. Amendment to 2010 tax return The DB method provides a larger deduction, so you deduct the $192 figured under the 200% DB method. Amendment to 2010 tax return Fourth year. Amendment to 2010 tax return You reduce the adjusted basis ($480) by the de