rom 4259

(Rev. April 1991)
Department of the Treasury
Internal Revenue Service

Recapture of Investment Credit
(Including Energy Investment Credit)
> Attach to your income tax return.

OMB No. 1545-0166
Expires 4-30-94

Attachment
Sequence No. 65,

Name(s) as shown on return

Taxpayer Identifying number

Properties Kind of property—State whether recovery or nonrecovery (see the Instructions for Form 3468 for definitions).
P If energy property, show type. Also indicate if rehabilitation expenditure property.
A
B
c
D
Original Investment Credit
Computation Steps: Properties
A B c D

(see Specific Instructions)

1 Original rate of credit. .

2. Date property was placed in service .

3 Cost or other basis .

4 Original estimated useful life or r class of property,

5 Applicable percentage

6 Original qualified investment (Muttiply line 3 by the
percentage on line 5.) . .

7 Original credit (Multiply line 6 by the percentage on line 1)

8 Date property ceased to be qualified investment credit

property. . .

9 Number of full y years between the ‘date on line 2 and
the date on line 8 ren

“Computation of Recapture Tax

10 Recapture percentage (from instructions) .

11 + Tentative recapture tax (Multiply line 7 by the
percentage on line 10.) .

12 Add line 11, columns A through D woe ee es wee ee

13 Enter tax from property ceasing to be at risk, or for which there was an increase in nonqualified nonrecourse
financing (attach separate computation). ry

14 Total—Add lines 12 and 13 .

15 Portion of original credit (line 7) not used to offset tax in any year, plus any cartyback and carryforward of
credits you can now apply to the original credit year because you have freed up tax liability in the amount of
the tax recaptured (Do not enter more than line 14—see instructions).

16 Total increase in tax—Subtract line 15 from line 14. Enter here and on the appropriate | line of your tax'return

General Instructions

(Section references are to the Internal Revenue
Code before amendment by the Revenue
Reconciliation Act of 1990 (the Act), unless
otherwise noted.)

Paperwork Reduction Act Notice.—We ask for
the information on this form to carry out the
Interna! Revenue laws of the United States. You
are required to give us the information. We need
it to ensure that you are complying with these
laws and to allow us to figure and collect the right
amount of tax.

The time needed to complete and file this form
will vary depending on individual circumstances.
The estimated average time is:

Recordkeeping . 7 br’, 53 min.
Learning about the

law or the form. 2 hr., 23 min.
Preparing and sending

the form to IRS. 2 hr., 37 min.

Ifyou have comments concerning the accuracy
of these time estimates or suggestions for making

this form more simple, we would be happy to hear

from you. You can write to both the IRS and the
Office of Management and Budget at the
addresses listed in the instructions of the tax
return with which this form is filed.

Purpose of Form.—Use Form 4255 to figure the
increase in tax for the recapture of investment
credit for regular and energy property.

You must refigure the credit if you took it in an
earlier year, but disposed of the property before
the end of the recapture period or the useful life
you used to figure the original credit. You must
also refigure the credit if you returned leased
property (on which you had taken a credit) to the
lessor before the end of the recapture period or
useful life.

You must refigure the credit if you changed
the use of property so that it no longer qualifies
as regular or energy investment credit property.
For example, you must refigure the credit if you
change the use of property from business use
to personal use, or if there is any decrease in
the percentage of business use of investment
credit property. See sections 50(a)(2) (as

amended by the Act), 47(a)(3), 47(aX'5)(C),
and 49(e)(2) for information on recapture for
progress expenditure property. Also see the
instructions for line 13 regarding recapture if
property ceases to be at risk, or if there is an
increase in nonqualified, nonrecourse financing
related to certain at-risk property placed in
service after July 18, 1984.

If certain “listed property” (i.e., automobiles,
certain other vehicles, computers, and property
used for entertainment, recreation, or
amusement) placed in service after June 18,
1984, ceases to be used more than 50% for
business, you may have to recapture
investment credit taken on the property. See
section 280F for details.

An election to be treated as an S corporation
does not automatically trigger recapture of
investment credit taken before the election was
effective. However, the S corporation is liable for
any recapture of investment credit taken before
the election.

If property on which you took both regular and
energy investment credit ceases to be energy

Cat. No. 41488C

Form 4255 (Rev. 4-91)


Form 4255 (Rev. 4-91)

Page 2

credit property, but still qualifies as regular
investment credit property, you need only
refigure the energy investment credit. However,
if you took both credits, and you dispose of the
property, or the property ceases to be both
energy and regular investment credit property,
you must refigure both credits.

If you are an S corporation, a partnership, or
an estate or trust that allocated any or all of
the investment credit to your shareholders,
partners, or beneficiaries, you must give them
the information they need to refigure the credit.
See Regulations sections 1.47-4, 1.47-5 and

Partners, shareholders and beneficiaries. —If
your Schedule K-1 shows that you must recapture
investment credit taken in an earlier year, you will
need your retained copy of the original Form
3468 to complete lines 1 through 9 of this Form

Special Rules.—If you took a credit on the
following kinds of property, see the sections listed
below before you complete Form 4255:

Property Section
Motion picture films and video tapes. -47(a)(8)
Ships . «46(8)(4)
Commuter highway vehicles A7(a)(4)

Ifyou took any nonconventional source fuel
credit, see section 29(b)(4).

If, before the end of the recapture period, you
dispose of recovery property placed in service
after 1982 (or the business use percentage
decreases), increase the basis of this property by
50% of the recapture amount unless you
originally made the section 48(q)(4) election to
take a reduced credit instead of reducing the
basis of the property.

Note: The Act changed these rules for property
eligible for the rehabilitation credit under
section 47, as amended by the Act. Increase
the basis of this property by 100% of the
recapture amount instead of 50%. For details,
see sections 50(c)(2) and 50(c)(3), as amended
by the Act.

Specific Instructions

Note: Do not figure the recapture tax on lines 1
through 12 for property ceasing to be at risk, or if
there is an increase in nonqualified, nonrecourse
financing related to certain at-risk property
placed in service after July 18, 1984. Figure the
recapture tax for these properties on separate
schedules and enter the recapture tax on line 13.
Include any unused credit for these properties on
line 15.

Lines A through D.—Describe the property for
which you must refigure the credit.

Complete lines 1 through 11 for each
property on which you are refiguring the credit.
Use a separate column for each item. If you
must recapture both the energy investment
credit and the regular investment credit for the
same item, use a separate column for each
credit. If you need more columns, use
additional Forms 4255, or other schedules with
all the information shown on Form 4255. Enter
the total from the separate sheets on line 12.

Line 1.—Enter the rate you used to figure the
original credit from the tables below:

Regular Investment Property

Qualifying property acquired or constructed and placed in
service. oe. 10%

Ifat the time the credit was taken the regular
10% credit above was subject to all or part of the
35% reduction under section 49(c), reduce the
10% accordingly.

For example, if a 10% regular credit was
used in calendar year 1987 when it was
reduced by 17.5% under section 49(c), enter
8.25% on line 1 (10% minus 17.5% of 10%).
If parts of the credit were used in different tax

years (for example, part in 1986 when the full
10% was allowed, part in 1987 when the 10%
credit was reduced under 49(c) by a portion of
35%, and part in 1988 when the credit was
reduced by 35%), use a weighted average
based on the portion of the credit used in each
year.

Be sure to include any ESOP credit, or other
credits listed under the special rules above.

See section 46(b)(4) for the rates for qualified
rehabilitation expenditures made after 1981.

Energy Investment Property

See the table in section 46(b)(2)(A) for a listing
of the energy percentages. For property eligible
under section 48(a), as amended by the Act,
the percentage is 10%.

Reforestation Credit Property
The reforestation percentage is 10% for
property eligible under section 48(b), as
amended by the Act.
Line 2.—For both recovery and nonrecovery
property, enter the first day of the first month,
and the year, that the property was available for
service.
Line 3.—Enter the cost or other basis that you
used to figure the original credit.
Line 4.—Enter the estimated useful life that you
used to figure the original credit for nonrecovery
property. Enter the class of property for recovery
property.
Line 5.—Enter the applicable percentage that
you used to figure the original qualified
investment from the tables below:

Nonrecovery Property

Original estimated Applicable
useful life percentage
3 or more but less than 5 years, . 334%
5 or more but less than 7 years  . 66A%
Tormoreyeas. 2 2. ye ee. 100%
Recovery Property
Class of Applicable
property percentage
Other ke es 100%

Section 48(q) Election Recovery Property
(Placed in service after 12/31/82 and before 1/1/86)

Class of Applicable
property percentage
Other . 80%

Generally, the applicable percentage will be
100% for property eligible for the investment
credit under section 46, as amended by the
Act.

Line 8.—Generally, this will be the date you
disposed of the property. See Regulations
section 1.47-1(c) for more information.

Line 9.—Do not enter partial years. If the
property was held less than 12 months, enter
zero.

Line 10.—Enter the recapture percentage from
the following tables:

Nonrecovery Property

The recapture percentage for prop-
erty with an original useful life of:

Taree Sor more

Mmumberaf ul, [eter tls Tae

Form 4255is: | yeosis:___yeatois:_yeats
i) 100 100 100
1 100 100 100
2 100 100 100
3 0 50 66.6
4 Oo 50 66.6
5 0 i) 33.3
6 ie) 0 33.3

Recovery Property

The recapture percentage for:

Hf number of full Other than
years on line 9 of 3year
Form 4255 ts property 1s:

oO 100

1 80

2 60

3 40

4 20

For property eligible for the investment credit
under section 46, as amended by the Act, the
recapture percentage is the same as the
recapture percentage in the above table for
Recovery Property.

Decrease in Business Use.—If you take
investment credit for property and the
percentage of business use in a later year falls
below the percentage for the year placed in
service, you are treated as having disposed of
part of the property and may have to recapture
part of the investment credit.

Line 12.—If you have used more than one Form
4255, or separate sheets to list additional items
on which you figured an increase in tax, write on
the dotted line “Tax from attached, $ -_..... .”
Include the amount in the total for line 12.

Line 13.—For certain taxpayers, the basis or
cost of property placed in service after February
18, 1981, is limited to the amount the taxpayer
is at risk for the property at year-end. For
property placed in service after July 18, 1984,
the basis or cost must be reduced by the
amount of any “nonqualified, nonrecourse
financing” related to the property at year-end.

If property ceases to be at risk in a later year,
or if there is an increase in nonqualified,
nonrecourse financing, recapture may be
required. See section 49(b), as amended by the
Act, for details. Attach a separate computation
schedule to figure the recapture tax and enter
the total tax on line 13.

Line 15.—If you did not use all the credit you
originally figured, either in the year you figured
it or in a carryback or carryforward year, you do
not have to recapture the amount of the credit
you did not use. In refiguring the credit for the
original credit year, be sure to take into
account any carryforwards from previous years,
plus any carrybacks arising within the 3 taxable
years after the original credit year that are now
allowed because the recapture and
recomputation of the original credit made
available some additional tax liability in that
year. See Regulations section 1.47-1(d) and
Revenue Ruling 72-221 for more information.
Note: You must also take into account any
applicable 35% reduction in credit under
section 49(c)(2) when computing the amount
to enter on line 15.

Figure the unused portion on a separate sheet
and enter it on this line. Do not enter more than
the recapture taxon line 14.

Reminder: Be sure to adjust your current
unused credit to reflect any unused portion of
the original credit that was entered on line 15
of this form.