om B468

Department of the Treasury
Internal Revenue Service

» Attach to your tax return.

Computation of Investment Credit

For calendar year 1972 or other taxable year beginning
1 1972, and ending

| 1972

19

The investment credit has been restored for property or-
dered by the taxpayer after March 31, 1971, or acquired by
the taxpayer after August 15, 1971, regardless of when ordered.

The credit has also been restored for property whose con-
struction, reconstruction, or erection was begun by the tax-
payer after March 31, 1971, or whose construction, recon-

struction, or erection was completed by the taxpayer after
August 15, 1971, regardless of when begun. In the case of
property whose construction, reconstruction, or erection was
begun by the taxpayer before April 1, 1971, only that portion
of the basis attributable to construction, reconstruction, or
erection after August 15, 1971, may be taken into account in
determining the credit.

Name

Identifying number as shown on
Page I of your tax return

1 Qualified investment in new and used property (See instruction C for eligible property)

NOTE: Include your share of investment property by a partnership, estate, trust, small business corporation, or lessor.
Type of , @ @ (3) | itiea 2)
property Line Life years Cost or basis Paleelrerid | Gontied, investment,

|
(a) 3 or more but less than 5 334,
New () 5 or more but less than 7 662,
Property _ ‘3
© 7 or more 100
(dd) 3 or more but less than 5 334,
Used
Property (O) 5 or more but less than 7 662,
(See instructions for
dollar limitation)
(Oy 7 or more 100

2 Total qualified investment—Add lines 1(a) through 1(f). . oo
3 Tentative investment credit—7% (4% for public utility property) of line2. . . . ene
4 Carryback and carryover of unused credit(s). (See instruction 4—attach computation.) . eee

5 Total—Add lines 3 and 4 .

Limitation

6 (a) Individuals—Enter amount from line 18, page 1, Form 1040.
(b) Estates and trusts—Enter amount from line 24 or 25, page 1, Form 1041.
(c) Corporations—Enter amount from line 5, Schedule J, Form 1120. . .

7 Less: (a) Foreign tax credit. . .
(b) Retirement income credit (individuals only) .

8 Total—Add lines 7(a) and (b)
9 Line 6 less line 8

10 (a) Enter amount on line 9 oF $25,000, whichever is lesser. (Married p persons filing separately, ¢ con-
trolled corporate groups, estates, and trusts, see instruction10.). . . . . . .

(b) If line 9 exceeds $25,000, enter 50% of the excess.

11 Total—Add lines 10(a)and(b) . . . . . . .

12 Investment credit—Enter amount from line 5 or line 11, whichever is lesser. . . .

Schedule A
If 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.) New Used Life years
$ $

16—82002-1


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 is claimed by the partners and
shareholders.

The investment credit is not applicable
to a Domestic International Sales Cor-
poration (DISC) and it does not pass
through to any shareholder of a DISC.

Small business corporations and part-
nerships must attach a statement to their
returns showing the allocation of invest-
ment 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
depreciable 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 bene-
ficiaries should, in addition to filing this
form, attach a statement showing the al-
location of the investment among the
beneficiaries. The statement attached
must show (a) each beneficiary’s allo-
cable share of the basis of the new prop-
erty 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 cer-
tain depreciable property having an esti-
mated useful life of 3 years or more. The
credit is allowed for the first year the
property is placed in service.

C. Property Defined.—Except as pro-
vided below, the investment credit is ap-
plicable to (a) tangible personal property,
(b) elevators and escalators, (c) real
property (except for buildings and their
structural components) if used as an in-
tegral part of manufacturing, production
or extraction, etc., or used as a research
facility or bulk storage facility for fungi-
ble commodities in connection with these
activities, and (d) livestock (other than
horses) if substantially identical livestock
(not subject 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 live-
stock must be reduced by the amount
realized on the disposition of the sub-
stantially identical livestock.

The investment credit is not applicable
te

0:
(1) certain property used predomi-
nantly outside the United States;

(2) certain property completed outside
the United States or predominantly
of foreign origin;

(3) property used for lodging or in con-
nection with furnishing lodging,
except (a) property used in certain
commercial facilities located there-
in (such as a restaurant), (b) prop-
erty used by a hotel or motel, or
(c) coin-operated vending ma-
chines, washing machines, and
dryers;

(4) property used by a tax-exempt or-

ganization (except where the
unrelated business income tax
applies);

(5) property used by governmental
units; and

(6) that portion of a pollution control
facility, railroad rolling stock, coal
mine safety equipment expendi-
tures, rehabilitation of low income
housing, job training facilities, or
day care facilities (see sections
169, 184, 187, 167(k), 188, re-
spectively) that the taxpayer 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 investment in new property as if
made by the lessee instead of the lessor.
See section 48(d). For limitation on avail-
ability of the credit to certain lessors, see
section 46(d)(3).

E. Recomputed Tax on Early Disposi-
tion of Property.—If property is disposed
of prior to the life-years category used in
computing the investment credit, the
credit must be recomputed using as the
useful life the period the property was
actually held. In recomputing the credit,
use the life year categories shown on
page 1. If the credit taken, including

carrybacks and carryovers, is more than
the recomputed credit, the tax for the
year of disposition must be increased by
the excess. Form 4255 may be used to
compute the increase in tax.

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 carry-
back of a net capital loss or a net operat-
ing loss) may be carried back 3 years
and forward 7 and may be used to the
extent permissible within the limitations
applicable in those years.

Special rule for carryover of unused
credits from taxable years ending before
1971.—Unused credits from taxable
years ending before 1971 which can be
carried over to a taxable year beginning
after 1970 may be carried forward for a
total of 10 years.

Similarly, unused credits which are not
absorbed because of the special 20%
limitation on the amount of unused credit
carryovers and carrybacks to years be-
ginning after 1968 and before 1971 may
also be carried forward a total of 10 years.

A claim for refund based upon the
carryback 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 (indi-
viduals) 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
depreciation or salvage value is required.

The same useful life must be used for
depreciation as well as for investment
credit.

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

Used Property.—Enter the cost (sub-
ject to dollar limitation below) of used
property placed in service during the tax-
able year. See instruction G. Property in-
herited, 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 re-
gard to the applicable percentages based
on useful life).

If a husband and wife file separate re-
turns, 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 $50,000.

The amount of used property placed
in service by a partnership, small busi-
ness corporation, estate, or trust that

Specific Instructions

may be taken into account may not ex-
ceed $50,000. The $50,000 limitation
also applies to each partner, shareholder,
and beneficiary.

Acontrolled 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 apportion-
ment is made without regard to both the
$50,000 limitation and the applicable per-
centages based on useful life.

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

Line 4. Priority of Application of Un-
used Credits.—The limitation is first ab-
sorbed by:

(a) Unused credits carried from years

ending before 1971, then by

‘Ye US. GOVERNMENT PRINTING OFFICE :1972~O-458-132

(b) Credits for property placed in serv-
ice in the current year, and then by

(c) Unused credits from taxable years
ending after 1970.

Line 10. Limitation.—If the tax liabil-
ity (line 9) is $25,000 or less, the invest-
ment 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 re-
turns and both are entitled to an invest-
ment credit, the limitation is computed
by substituting $12,500 for the $25,000
shown in lines 10(a) and (b).

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

For an estate or trust, the $25,000
amount must be reduced to (a) $25,000
multiplied by (b) the qualified investment
apportioned to the estate or trust, divided
by (c) the aggregate qualified investment
apportioned among the estate or trust
and its beneficiaries.

16—82002-1