§ 1.168(k)-1 Additional first year depreciation deduction.
(a) Scope and definitions.
(1) Scope.
(2) Definitions.
(b) Qualified property or 50-percent bonus depreciation property.
(1) In general.
(2) Description of qualified property or 50-percent bonus depreciation property.
(i) In general.
(ii) Property not eligible for additional first year depreciation deduction.
(A) Property that is not qualified property.
(B) Property that is not 50-percent bonus depreciation property.
(3) Original use.
(i) In general.
(ii) Conversion to business or income-producing use.
(A) Personal use to business or income-producing use.
(B) Inventory to business or income-producing use.
(iii) Sale-leaseback, syndication, and certain other transactions.
(A) Sale-leaseback transaction.
(B) Syndication transaction and certain other transactions.
(C) Sale-leaseback transaction followed by a syndication transaction and certain other transactions.
(iv) Fractional interests in property.
(v) Examples.
(4) Acquisition of property.
(i) In general.
(A) Qualified property.
(B) 50-percent bonus depreciation property.
(ii) Definition of binding contract.
(A) In general.
(B) Conditions.
(C) Options.
(D) Supply agreements.
(E) Components.
(iii) Self-constructed property.
(A) In general.
(B) When does manufacture, construction, or production begin.
(1) In general.
(2) Safe harbor.
(C) Components of self-constructed property.
(1) Acquired components.
(2) Self-constructed components.
(iv) Disqualified transactions.
(A) In general.
(B) Related party defined.
(v) Examples.
(5) Placed-in-service date.
(i) In general.
(ii) Sale-leaseback, syndication, and certain other transactions.
(A) Sale-leaseback transaction.
(B) Syndication transaction and certain other transactions.
(C) Sale-leaseback transaction followed by a syndication transaction and certain other transactions.
(iii) Technical termination of a partnership.
(iv) Section 168(i)(7) transactions.
(v) Example.
(c) Qualified leasehold improvement property.
(1) In general.
(2) Certain improvements not included.
(3) Definitions.
(d) Computation of depreciation deduction for qualified property or 50-percent bonus depreciation property.
(1) Additional first year depreciation deduction.
(i) In general.
(ii) Property having a longer production period.
(iii) Alternative minimum tax.
(2) Otherwise allowable depreciation deduction.
(i) In general.
(ii) Alternative minimum tax.
(3) Examples.
(e) Election not to deduct additional first year depreciation.
(1) In general.
(i) Qualified property.
(ii) 50-percent bonus depreciation property.
(2) Definition of class of property.
(3) Time and manner for making election.
(i) Time for making election.
(ii) Manner of making election.
(4) Special rules for 2000 or 2001 returns.
(5) Failure to make election.
(6) Alternative minimum tax.
(7) Revocation.
(i) In general.
(ii) Automatic 6-month extension.
(f) Special rules.
(1) Property placed in service and disposed of in the same taxable year.
(i) In general.
(ii) Technical termination of a partnership.
(iii) Section 168(i)(7) transactions.
(iv) Examples.
(2) Redetermination of basis.
(i) Increase in basis.
(ii) Decrease in basis.
(iii) Definition.
(iv) Examples.
(3) Section 1245 and 1250 depreciation recapture.
(4) Coordination with section 169.
(5) Like-kind exchanges and involuntary conversions.
(i) Scope.
(ii) Definitions.
(iii) Computation.
(A) In general.
(B) Year of disposition and year of replacement.
(C) Property having a longer production period.
(D) Alternative minimum tax.
(iv) Sale-leasebacks.
(v) Acquired MACRS property or acquired computer software that is acquired and placed in service before disposition of involuntarily converted MACRS property or involuntarily converted computer software.
(A) Time of replacement.
(B) Depreciation of acquired MACRS property or acquired computer software.
(vi) Examples.
(6) Change in use.
(i) Change in use of depreciable property.
(ii) Conversion to personal use.
(iii) Conversion to business or income-producing use.
(A) During the same taxable year.
(B) Subsequent to the acquisition year.
(iv) Depreciable property changes use subsequent to the placed-in-service year.
(v) Examples.
(7) Earnings and profits.
(8) Limitation of amount of depreciation for certain passenger automobiles.
(9) Section 754 election.
(10) Coordination with section 47.
(11) Coordination with section 514(a)(3).
(g) Effective date.
(1) In general.
(2) Technical termination of a partnership or section 168(i)(7) transactions.
(3) Like-kind exchanges and involuntary conversions.
(4) Change in method of accounting.
(i) Special rules for 2000 or 2001 returns.
(ii) Like-kind exchanges and involuntary conversions.
(5) Revisions to paragraphs (b)(3)(ii)(B) and (b)(5)(ii)(B).
(6) Rehabilitation credit.
§ 1.168(k)-2 Additional first year depreciation deduction for property acquired and placed in service after September 27, 2017.
(a) Scope and definitions.
(1) Scope.
(2) Definitions.
(b) Qualified property.
(1) In general.
(2) Description of qualified property.
(i) In general.
(ii) Property not eligible for additional first year depreciation deduction.
(iii) Examples.
(3) Original use or used property acquisition requirements.
(i) In general.
(ii) Original use.
(A) In general.
(B) Conversion to business or income-producing use.
(C) Fractional interests in property.
(iii) Used property acquisition requirements.
(A) In general.
(B) Property was not used by the taxpayer at any time prior to acquisition.
(C) Special rules for a series of related transactions.
(iv) Application to partnerships.
(A) Section 704(c) remedial allocations.
(B) Basis determined under section 732.
(C) Section 734(b) adjustments.
(D) Section 743(b) adjustments.
(v) Application to members of a consolidated group.
(vi) Syndication transaction.
(vii) Examples.
(4) Placed-in-service date.
(i) In general.
(ii) Specified plant.
(iii) Qualified film, television, or live theatrical production.
(A) Qualified film or television production.
(B) Qualified live theatrical production.
(iv) Syndication transaction.
(v) Technical termination of a partnership.
(vi) Section 168(i)(7) transactions.
(5) Acquisition of property.
(i) In general.
(ii) Acquisition date.
(A) In general.
(B) Determination of acquisition date for property acquired pursuant to a written binding contract.
(iii) Definition of binding contract.
(A) In general.
(B) Conditions.
(C) Options.
(D) Letter of intent.
(E) Supply agreements.
(F) Components.
(G) Acquisition of a trade or business or an entity.
(iv) Self-constructed property.
(A) In general.
(B) When does manufacture, construction, or production begin.
(C) Components of self-constructed property.
(v) Determination of acquisition date for property not acquired pursuant to a written binding contract.
(vi) Qualified film, television, or live theatrical production.
(A) Qualified film or television production.
(B) Qualified live theatrical production.
(vii) Specified plant.
(viii) Examples.
(c) Election for components of larger self-constructed property for which the manufacture, construction, or production begins before September 28, 2017.
(1) In general.
(2) Eligible larger self-constructed property.
(i) In general.
(ii) Residential rental property or nonresidential real property.
(iii) Beginning of manufacture, construction, or production.
(iv) Exception.
(3) Eligible components.
(i) In general.
(ii) Acquired components.
(iii) Self-constructed components.
(4) Special rules.
(i) Installation costs.
(ii) Property described in section 168(k)(2)(B).
(5) Computation of additional first year depreciation deduction.
(i) Election is made.
(ii) Election is not made.
(6) Time and manner for making election.
(i) Time for making election.
(ii) Manner of making election.
(7) Revocation of election.
(i) In general.
(ii) Automatic 6-month extension.
(8) Additional procedural guidance.
(9) Examples.
(d) Property described in section 168(k)(2)(B) or (C).
(1) In general.
(2) Definition of binding contract.
(3) Self-constructed property.
(i) In general.
(ii) When does manufacture, construction, or production begin.
(A) In general.
(B) Safe harbor.
(iii) Components of self-constructed property.
(A) Acquired components.
(B) Self-constructed components.
(iv) Determination of acquisition date for property not acquired pursuant to a written binding contract.
(4) Examples.
(e) Computation of depreciation deduction for qualified property.
(1) Additional first year depreciation deduction.
(i) Allowable taxable year.
(ii) Computation.
(iii) Property described in section 168(k)(2)(B).
(iv) Alternative minimum tax.
(A) In general.
(B) Special rules.
(2) Otherwise allowable depreciation deduction.
(i) In general.
(ii) Alternative minimum tax.
(3) Examples.
(f) Elections under section 168(k).
(1) Election not to deduct additional first year depreciation.
(i) In general.
(ii) Definition of class of property.
(iii) Time and manner for making election.
(A) Time for making election.
(B) Manner of making election.
(iv) Failure to make election.
(2) Election to apply section 168(k)(5) for specified plants.
(i) In general.
(ii) Time and manner for making election.
(A) Time for making election.
(B) Manner of making election.
(iii) Failure to make election.
(3) Election for qualified property placed in service during the 2017 taxable year.
(i) In general.
(ii) Time and manner for making election.
(A) Time for making election.
(B) Manner of making election.
(iii) Failure to make election.
(4) Alternative minimum tax.
(5) Revocation of election.
(i) In general.
(ii) Automatic 6-month extension.
(6) Special rules for 2016 and 2017 returns.
(7) Additional procedural guidance.
(g) Special rules.
(1) Property placed in service and disposed of in the same taxable year.
(i) In general.
(ii) Technical termination of a partnership.
(iii) Section 168(i)(7) transactions.
(iv) Examples.
(2) Redetermination of basis.
(i) Increase in basis.
(ii) Decrease in basis.
(iii) Definitions.
(iv) Examples.
(3) Sections 1245 and 1250 depreciation recapture.
(4) Coordination with section 169.
(5) Like-kind exchanges and involuntary conversions.
(i) Scope.
(ii) Definitions.
(iii) Computation.
(A) In general.
(B) Year of disposition and year of replacement.
(C) Property described in section 168(k)(2)(B).
(D) Effect of § 1.168(i)-6(i)(1) election.
(E) Alternative minimum tax.
(iv) Replacement MACRS property or replacement computer software that is acquired and placed in service before disposition of relinquished MACRS property or relinquished computer software.
(v) Examples.
(6) Change in use.
(i) Change in use of MACRS property.
(ii) Conversion to personal use.
(iii) Conversion to business or income-producing use.
(A) During the same taxable year.
(B) Subsequent to the acquisition year.
(iv) Depreciable property changes use subsequent to the placed-in-service year.
(v) Examples.
(7) Earnings and profits.
(8) Limitation of amount of depreciation for certain passenger automobiles.
(9) Coordination with section 47.
(i) In general.
(ii) Example.
(10) Coordination with section 514(a)(3).
(11) Mid-quarter convention.
(h) Applicability dates.
(1) In general.
(2) Early application of this section.
(3) Early application of regulation project REG-104397-18.