om 3468 Computation of Job Development investment Credit | 1974

> Attach to your tax return.

Use this form for—Calendar year 1971,
Department of the Treasury Fiscal years beginning in 1970 and anding in 1971, and
internal ue Service Fiscal years beginning in 1971 and ending in 1972.

The investment credit has been restored for property or- August 15, 1971, regardless of when begun. In the case of
dered by the taxpayer after March 31, 1971, or acquired by property (except pre-termination property) where construction,
the taxpayer after August 15, 1971, regardless of when ordered. reconstruction, or erection is begun by the taxpayer before

April 1, 1971, only that portion of the basis attributable to

The credit has also been restored for pre where con- construction, reconstruction, or erection after August 15, 1971,
struction, reconstruction, or erection was peated by the tax. |S taken into account in determining the credit.

payer after March 31, 1971, or where the construction, re- For pre-termination Property eligible for credit under prior
construction, or erection was completed by the taxpayer after law, see the instructions for the different life years.
Name Identifying number as shown on
page I of your tax return
1 Qualified investment in new and used property (See instruction © for eligible property) _ _
NOTE: Include your share of investment in property by a partnership, estate, trust, small business corporation, or lessor.
Type of a 2 @) ] @
Property tine Life years Cost or basis fsa | (Column? ie soluran'3)
(2) | 3 or more but less than 5 334 |
prowerty (©) | 5 or more but less than 7 | 66%
© 7 oF more 100
(@) | 3 or more but less than 5 33,
Property ~ — a ——=| es i
rope ..
(See instructions for | ©) | 5 oF more but less than 7 66%
dollar limitation) — —_ — - “| -
(0) 7 or more 100
2 Total qualified investment—Add lines l(a) through lf) . . 2. ew ew. ee

3 Tentative investment credit—7% (4% for public utility property) of line 2 woe
4 Carryback and carryover of unused credit(s). (See instruction 4 for special limitation—attach
computation.) . 6 6 6 ee ee
5 Total—Addlines3and4. . . . . . . we ee ee
Limitation
6 (a) Individuals—Enter amount from line 19, page 1, Form 1040. . . 1...
(b) Estates and trusts—Enter amount from line 24 or 25, page 1, Form 1041. . . .}.
(c) Corporations—Enter amount from line 7, Schedule J, Form 1120. . .
7 Individuals, estates, and trusts: (a) Foreign tax credit . .
(b) Retirement income credit. .
8 Total—Add lines 7(a)and(b). 6. 6 ee ee |
9 Line6lessline8 . soe OO
i

(Married persons filing separately, controlled corporate groups, estates and trusts, see instruction 10)

10 (a) Enter amount on line 9 or $25,000, whicheverislessep . 2. 2. 2. 1. 2... we |

(b) If line 9 exceeds $25,000, enter 50% oftheexcess © 2 1 1 ww eg

11 Total—Add lines 10(a) and(b) . ss se ew ee,

12 _Investment_credit—Enter amount from line 5 or line 11, whichever is lesser

Schedule A
{f any part of your investment in 1 above was made by a partnership, estate, trust, small business corporation, or lessor, complete the following:
{
Name Address Property

| —
(Partnership, estate, trust, etc.) | Used Life years



General Instructions

(References are to the Internal Revenue Code)

A. Who Must File.—Any individual, estate,
trust, or corporation claiming an investment
credit must attach this form to its income
tax return, Partnerships and small business
corporations are not required to file this form
because the credit 1s claimed by the partners
and shareholders.

‘Small business corporations and_partner-
ships must attach a statement to their returns
showing the allocation of investment to the
shareholders by amount, type and life of
property as shown in item 1 of this form.

‘An estate or trust is allowed a credit for
its share of the investment in certain de-
preciable property having an estimated useful
life of 3 or more years. The estate and trust
that apportions the investment between the
estate or trust and the beneficiaries should,
in addition to filing this form, attach a state-
ment showing the allocation of the investment
among the beneficiaries, The statement at-
tached must show (a) each beneficiary's al-
locable share of the basis of the new property
and (b) each beneficiary's allocable share of
the cost of used property and the “life years”
assigned to the property.

B. When Allowed.-—A credit against your
tax is allowed for investment in certain de-
preciable property having an estimated useful
life of 3 years or more. The credit 1s allowed
for the first year such property is placed in
service.

©. Property Defined.—Except as provided
below, the investment credit is applicable to
(a) tangible personal property, (b) elevators
and escalators, (c) real property (except for
buildings and their structural components) if
used as an integral part of manufacturing, pro-
duction or extraction, etc., or used as a re-
search facility or bulk storage facility for fun-
gible commodities in connection with these
activities, and (d) livestock (other than horses)
if substantiaily identical livestock (not subject

Specific Instructions

Line 1. New Property.—-Enter the basis of
property (as described in instructions C and
G) placed in service during the taxable year.

Used Property.—Enter the cost (subject to
dollar limitation below) of used property placed
in service during the taxable year. See instruc-
tion G. Property inherited, received as a gift,
‘or acquired from certain related parties does
not qualify for the investment credit.

Dollar Limitation on Used Property.—in
general, the amount of used property that may
be taken into account may not exceed $50,000
(determined without regard to the applicable
percentages based on useful life).

if a husband and wife file separate returns,
each may count only up to $25,000 unless
‘one of them has no qualifying used property,
in which case the other may claim up to
$590,000.

The amount of used property placed in
service by a partnership or small business
corporation that may be taken into account by
the partners or shareholders may not exceed
$5C,000. The $50,000 limitation also applies
to each partner and shareholder.

A controlled group of corporations (see
section 48(c)(3)(C)) must apportion the
$50,000 limitation among the component
members of the group on the basis of the
total cost of used property placed in service
by each member. The apportionment 1s made
without regard to both the $50,000 limitation
and the applicable percentages based on useful
life

Pre-termination property is eligible for
credit Unless the property 1s described in
section 50 of the code, the old useful life
categories must be used in computing the
credit. Such property will be placed in the
related categories as follows: the pre-termina:
tion property with a life class of 4 to 6 years

to recapture tax) is not sold or disposed of
(except in an involuntary conversion) during
the one-year period beginning 6 months before
the date of acquisition. The cost of the
acquired livestock must be reduced by the
amount realized on the disposition of the sub-
stantially identical livestock.

The investment credit is not applicable to
(1) certain property used predominantly out-
side the United States; (2) certain property
completed outside the United States or pre-
dominantly of foreign origin; (3) property used
for lodging or in connection with furnishing
lodging, except (a) property used in certain
commercial facilities focated therein (such a3
a restaurant); (b) property used by a-hote! or
motel, or (c) coin-operated vending machines,
washing machines, and dryers; (4) property
used by a tax-exempt organization (except
where the unrelated business income tax ap-

ies); (5) property used by governmental
and (6) that portion of a pollution con-
trol facility, railroad rolling stock, coal mine
safety equipment expenditures, rehabilitation
of low income housing, job training facilities,
or day care facilities (see sections 169, 184,
187, 167(k), 188, respectively) that the tai
payer has elected to amortize over a 5-year
period.

D. Election for Leased Property.—A lessor
may elect to treat all or a portion of an invest-
ment in new property as if made by the lessee
instead of the lessor. See section 48(d). For
limitation on availability of the credit to certain
lessors, see section 46(d)(3).

E. Recomputed Tax on Early Disposition of
Property.-—If property is disposed of prior to
the life-years category used in computing the
investment credit, the tax for the year of dis-
position must be increased by the difference
between the credit taken (including carrybacks
and carryovers) on such property and the
credit that would have been allowed had the
actual life been used. Form 4255 may be
used to compute the increase in tax.

will be included in the 3 to 5 year category;
6 to 8 years will be included in the 5 to 7
year category; and 8 or more will be included
in the 7 or more category.

Estates and Trusts.—-In case of an estate
or trust the amount of investment is appor-
tioned between the estate or trust and the
beneficiaries on the basis of the income of
the estate or trust allocable to each.

Line 3.—Public utility property not de-
scribed in section 50 of the code should use
3% instead of 4%.

Line 4. Limitation on carryovers for taxable
years ending before 1/1/72.—The amount of
unused credits that may be carried over and
claimed as a credit in the taxable year is sub-
ject to a special limitation. This limitation
provides that the amount of available invest-
ment credit carrybacks and carryovers that
may be claimed as a credit may not exceed
20% of the higher of (1) the aggregate amount
of investment credit carrybacks and carryovers
to the taxable year, or (2) the highest total
amount of carrybacks and carryovers to any
preceding taxable year (prior to the current
taxable year) that began after 1968. In no
event may the amount claimed on line 4 ex-
ceed the available amount of investment credit
carrybacks and carryovers to the taxable year.

The special 20% limitation referred to
above is in addition to the general limitation
based on the amount of tax liability. Unused
credit carryovers to a taxable year from 2 or
more other years are to be used up in the
order in which they occur.

TAXABLE YEARS ENDING AFTER 8/15/71
AND BEFORE 1/1/72

The 20% limitation contained in the pre-
ceding paragraphs is increased 6 percentage
points for each month (or portion thereof)
in the taxable year after 8/15/71. For ex-
ample, a year ending 12/31/71 would use

F. Carryback and Carryover of Unused
Credits.—Any part of an investment credit that
may not be used because it exceeds the
amount allowable (including an unused credit
created by the carryback of a net capital loss
sustained in taxable years beginning after
12/31/69 or by the carryback of a net oper-
ating loss) may be carried back 3 years and
forward 7 and may be used to the extent per-
missible within the limitations applicable in
those years.

Special rules for carryovers of pre-1971 un-
used credits.—

Pre-1971 unused credits which can be car-

ried over to calendar year 1971 or later years
may be carried forward for a total of 10 years.
Similarly, pre-1971 unused credits, which are
not absorbed because of the special 20%
limitation (see instruction for line 4) on the
amount of unused credit carryover to years
beginning after 12/31/68 and before 1/1/71
may also be carried forward a total of 10
years.
A claim for refund based upon the carry-
back of an unused investment credit may be
made on Form 843 or by filing Form 1040X
(individuals), Form 1120X (corporations), or
an amended return for the year to which the
unused credit is carried. Taxpayers who desire
a tentative (quick) refund may file Form 1045
(individuals) or Form 1139 (corporations).

G. Basis and Cost—The credit for new
property applies to the basis of the property.
The credit for used property applies to the
cost of the property. The cost of used property
does not include the basis of any property
traded in unless the trade-in resulted in the
recapture of all or any portion of an investment
credit previously allowed or in a reduction of
an investment credit carryback or carryover.

No adjustment for additional first-year de-
preciation or salvage value 1s required.

The same useful life must be used for de-
preciation as well as for investment credit.

50%. The 20% limitation plus 30% (5
months X 6 percentage points for each month).

Priority of application of unused credits—

Calendar year 1971.—The limitation ($25,-
000 plus 50% of tax liability) on the amount
of credit which may be claimed is first ab-
sorbed by carryovers of pre-1971 unused
credits, and then to the extent of any re-
maining limitation not absorbed by pre-1971
unused credits, the credit generated in 1971.

Years ending before calendar year 1971 (fis-
cal years ending in 1971).—The limitation is
first absorbed by credits generated in the cur-
rent credit year and then by unused credit
carryovers from other years.

Years ending after 1971 (fiscal years ending
in 1972).-—The limitation is first absorbed by
carryovers of pre-1971 unused credits, then
by credits generated in the current year, and
then by the unused credits from fiscal years
ending in 1971.

Line 10. _Limitation.—if the tax liability
(ine 9) is $25,000 or less, the investment
credit may not exceed the amount of the tax
liability.

if the tax liability exceeds $25,000, the
credit may not exceed $25,000 plus 50% of
the excess.

If a husband and wife file separate returns
and both are entitled to an investment credit,
the limitation is computed by substituting
$12,500 for the $25,000 shown in lines 10(a)
and (b).

Controlled corporate groups (see section
46(a)(5)) must apportion the $25,000 among
all component members.

In the case of an estate or trust, the $25,000
amount must be reduced to (a) $25,000 mul-
tiplied by (b) the qualified investment appor-
tioned to the estate or trust, divided by (c)
the aggregate qualified investment apportioned
among the estate or trust and its beneficiaries.