Form 4255 Recapture of Investment Credit OMB No. 1545-0166

(Rev. April 1997) Attachment

Sequence No. 65 Department of the Treasury

Internal Revenue Service © Attach to your income tax return.

Name(s) as shown on return Identifying number

Type of property—State whether rehabilitation, energy, reforestation, or transition property. (See the Instructions for Form 3468 for the year the

investment credit property was placed in service for definitions.) If rehabilitation property, also show type of building. If energy property, show type. Properties

A

B

C

D

Computation Steps: Properties

(see Specific Instructions) A B C D

1 Original rate of credit

Date property was placed in service

2 Cost or other basis

3

4

5

6

Original Investment Credit

Original credit. Multiply line 2 by the percentage on

line 1

7

Date property ceased to be qualified investment

credit property

8

Number of full years between the date on line 4 and

the date on line 5

9

Recapture percentage (see instructions)

10

Tentative recapture tax. Multiply line 3 by the

percentage on line 7

11

Add line 8, columns A through D

12

13

Enter the recapture tax from property for which there was an increase in nonqualified nonrecourse

financing (attach separate computation)

Add lines 9 and 10

Portion of original credit (line 3) not used to offset tax in any year, plus any carryback and carryforward

of credits you now can 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 11—see instructions

Computation of Recapture Tax

Total increase in tax. Subtract line 12 from line 11. Enter here and on the appropriate line of your tax

return. See section 29(b)(4) if you claim the nonconventional source fuel credit

General Instructions Purpose of Form

Section references are to the Internal

Revenue Code unless otherwise noted.

Paperwork Reduction Act

Notice

Form 4255 (Rev. 4-97)

The time needed to complete and file

this form will vary depending on individual

circumstances. The estimated average time

is:

Recordkeeping 6 hr., 28 min.

Learning about the

law or the form 1 hr., 23 min.

If you have comments concerning the

accuracy of these time estimates or

suggestions for making this form simpler,

we would be happy to hear from you. You

can write to the IRS at the address listed

in the instructions for the tax return with

which this form is filed.

Preparing, copying,

assembling, and sending

the form to the IRS 1 hr., 33 min.

Cat. No. 41488C

We ask for the information on this form to

carry out the Internal 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.

Use Form 4255 to figure the increase in

tax for the recapture of investment credit

claimed.

// // // //

// // // //

Who Must Refigure the

Investment Credit

Generally, you must refigure the

investment credit and may have to

recapture all or part of it if:

● You disposed of investment credit

property before the end of 5 full years after

the property was placed in service

(recapture period).

● You changed the use of the property

before the end of the recapture period so

that it no longer qualifies as investment

credit property.

● The business use of the property

decreased before the end of the recapture

You are not required to provide the

information requested on a form that is

subject to the Paperwork Reduction Act

unless the form displays a valid OMB

control number. Books or records relating

to a form or its instructions must be

retained as long as their contents may

become material in the administration of

any Internal Revenue law. Generally, tax

returns and return information are

confidential, as required by section 6103.
Form 4255 (Rev. 4-97) Page 2

Complete lines 1 through 8 for each

property on which you are refiguring the

credit. Use a separate column for each

item. If you need more columns, use

additional Forms 4255, or other schedules

that include all the information shown on

Form 4255. Enter the total from the

separate sheets on line 9.

Line 1.—Enter the rate you used to figure

the original credit from the Form 3468 that

you filed.

Then the recapture

percentage is:

If number of full

years on line 6

of Form 4255 is:

0 100

1 80

2 60

3 40

4 20

Line 4.—Enter the month, day, and year

that the property was available for service.

Line 9.—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 to the left of the entry

space “Tax from attached” and the total

tax from the separate sheets. Include the

amount in the total for line 9.

Line 2.—Enter the cost or other basis that

you used to figure the original credit.

Line 10.—For certain taxpayers, the basis

or cost of property is limited to the amount

the taxpayer is at risk for the property at

year end. The basis or cost must be

reduced by the amount of any

“nonqualified nonrecourse financing”

related to the property at year end. If there

is an increase in nonqualified nonrecourse

financing, recapture may be required. See

section 49(b) for details. Attach a separate

computation schedule to figure the

recapture tax and enter the total tax on

line 10.

Line 12.—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 include any carryforwards

from previous years, plus any carrybacks

arising within the 3 tax 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 Rev. Rul.

72-221, 1972-1 C.B. 15, for details.

Specific Instructions

Note: Do not figure the recapture tax on

lines 1 through 9 if there is an increase in

nonqualified nonrecourse financing related

to certain at-risk property. Figure the

recapture tax for these properties on

separate schedules and enter the recapture

tax on line 10. Include any unused credit

for these properties on line 12.

Note: You must also take into account any

applicable 35% reduction in credit under

section 49(c)(2) (as in effect on November

4, 1990) when computing the amount to

enter on line 12.

Line 5.—Generally, this will be the date

you disposed of the property. For more

details, see Regulations section 1.47-1(c).

Figure the unused portion on a separate

sheet and enter it on this line. Do not enter

more than the recapture tax on line 11.

Line 6.—Do not enter partial years. If the

property was held less than 12 months,

enter zero.

Lines A through D.—Describe the

property for which you must refigure the

credit.

Note: Be sure to adjust your current

unused credit to reflect any unused portion

of the original credit that was entered on

line 12 of this form.

Line 7.—Enter the recapture percentage

from the following table:

5 or more 0

● Any building to which section 47(d)

applies will no longer be a qualified

rehabilitated building when placed in

service.

● Any property to which section 48(a)(5)

applies will no longer qualify as investment

credit property when placed in service.

● Before the end of the recapture period,

your proportionate interest was reduced by

more than one-third in a partnership, S

corporation, estate, or trust that allocated

the cost or other basis of property to you

for which you claimed a credit.

● You returned leased property (on which

you claimed a credit) to the lessor before

the end of the recapture period.

● A net increase in the amount of

nonqualified nonrecourse financing

occurred for any property to which section

49(a)(1) applied. For more details, see the

instructions for line 10.

For more details on the recapture rules,

see section 50(a).

Caution: See section 46(g)(4) (as in effect

on November 4, 1990) to figure the

recapture tax if you made a withdrawal

from a capital construction fund set up

under the Merchant Marine Act of 1936 to

pay the principal of any debt incurred in

connection with a vessel on which you

claimed investment credit.

period so that it no longer qualifies (in

whole or in part) as investment credit

property.

Basis Adjustment on

Recapture

For property subject to investment credit

recapture, increase the property’s basis as

follows:

● For qualified rehabilitation expenditures,

increase the basis by 100% of the

recapture tax (or adjustment to carrybacks

and carryovers).

● For energy property or qualified timber

property, increase the basis by 50% of the

recapture tax (or adjustment to carrybacks

and carryovers).

If you are a partner or S corporation

shareholder, the adjusted basis of your

interest in the partnership or stock in the

S corporation is adjusted to take into

account the adjustment made to the basis

of property held by the partnership or

S corporation.

Partnerships, S corporations, estates,

and trusts.—For a partnership,

S corporation, estate, or trust that

allocated any or all of the investment credit

to its partners, shareholders, or

beneficiaries, provide the information they

need to refigure the credit. See

Regulations sections 1.47-4, 1.47-5, and

1.47-6.

Partners, shareholders, and

beneficiaries.—If your Schedule K-1

shows recapture of investment credit

claimed in an earlier year, you will need

your copy of the original Form 3468 to

complete lines 1 through 6 of this Form

4255.

Exceptions to recapture.—Recapture of

the investment credit does not apply to:

● A transfer because of the death of the

taxpayer.

● A transfer between spouses or incident

to divorce under section 1041. However, a

later disposition by the transferee is

subject to recapture to the same extent as

if the transferor had disposed of the

property at the later date.

● A transaction to which section 381(a)

applies (relating to certain acquisitions of

the assets of one corporation by another

corporation).

● A mere change in the form of

conducting a trade or business if:

1. The property is retained as investment

credit property in that trade or business,

AND

2. The taxpayer retains a substantial

interest in that trade or business.

A mere change in the form of conducting

a trade or business includes a corporation

that elects to be an S corporation and a

corporation whose S election is revoked or

terminated.