rorm 4255 Recapture of Investment Credit

(Rev. Oct. 1980) (Including Energy Investment Credit)
Department of the Treasury .
Internal Revenue Service » Attach to your income tax return

For the calendar year 19.
Name

, or other tax year beginning ..... . , and ending ..... 19.
Identifying number as shown on page 1 of your tax return

For disposed qualified progress expenditure property, see instructions for line 17.
Properties Kind of property. (State whether new or used. If energy property, give type.)

A

Properties
Computation Steps: A B c D E

1 Original rate of credit. .
2 Date property was placed in
service. « + s+ se es

3 Cost or other basis. . . +

4 Original estimated useful life .

a

Applicable percentage. . -
Original qualified investment
(line 3 times line 5). . - +

Original credit (line 1 times
line 6). . + + + ee

Original Investment Credi
a

N

Date item ceased to be invest-
ment credit property. . -

9 Period actually used . . -

°

10 Applicable percentage. .
11 Qualified investment (line 3
times line 10) . . . + ©
12 Refigured credit (line 1 times
line 11). ee ee
13 Tentative recapture (subtract
line 12 from line7). . -

Refigured Investment
Credit

14 Add line 13, columns Athrough EE. 2 6 + ee we
15 Unused credit (see instructions). . . . . -

16 Increase in tax (subtract line 15 from line 14) . . -

Increase in Tax

I

17 Enter tax from disposed qualified progress expenditure property (attach computation) .

18 Total increase in tax (add lines 16 and 17). Enter here and on the proper line of your tax return. Do not
use this amount to reduce current year’s investment credit figured on Form 3468, Computation of In-
vestment Credit. Any unused credit on line 15 cannot be used in any year as a carryback or carryover

313-232-1 Form 4255 (Rev. 10-80)



General Instructions

References are to the Internal Revenue
Code.

Purpose.—An individual, estate, trust
or corporation may use Form 4255 to fig-
ure 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 later dis-
posed of the property before the end of
the useful life you used to figure the origi-
nal credit. You must also refigure the credit
if you changed the use of the property so
that it no longer qualified as regular or
energy investment credit property. You
need not refigure the credit if you held the
property 7 or more years. For more infor-
mation on the recapture of regular or
energy investment credit, see Publication
572, Investment Credit.

If property on which you took both the
regular and energy investment credit
ceases to be energy 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 prop-
erty, or the property ceases to be both
energy and regular investment credit prop-
erty, you must refigure both credits.

If you are a small business corporation,
a partnership, or an estate or trust that
shared the investment credit among the
estate or trust and the beneficiaries, you
must give your shareholders, partners, or
beneficiaries the information they need to
refigure the credit. See regulations sec-
tions 1.47—-4, 1.47-5 and 1.47-6.

Special rules.—If you took the credit on
the following kinds of property, see the In-
ternal Revenue Code section listed before
you complete Form 4255.

Property IRC section
Motion picture films and video tape . . 47(a)(7)
Ships... eee ee +» 46(g)(4)
Commuter highway vehicles . + 47(a)(4)

If you dispose of property and you
had elected the basic or basic and match-
ing employee plan percentage for contribu-
tions to tax credit employee stock option
plans, see section 48(n)(4).

If you took an investment credit on rail-
road property, and then transferred the
property to Conrail after March 31, 1976,
you do not have to refigure the credit.

If you took any credit for production of
fuel from non-conventional sources, see
section 44D(b)(4).

Specific Instructions

Lines A through E.—Describe the prop-
erty for which you must refigure the
credit for regular or energy investment.
Tell whether the property was new or used,
and give the type of energy property.

Fill in lines 1 through 13 for each prop-
erty on which you are refiguring the credit.
Use a separate column for each item. If
you must recapture both the energy in-
vestment credit and the regular invest-
ment credit for the same item, use a sepa-
rate column for each credit. If you need
more columns, use additional Forms 4255,
or other schedule with all the information
shown on Form 4255. Enter the total from
the separate sheets on line 14.

Line 1.—Enter the rate you used to
figure the original credit (see section 46(a)
(2)):

Regular Investment Property:

Public utility property ordered after March 31,
1971, or acquired after August 15, 1971, and
before January 22,1975. . . . . . .
Property acquired or constructed before Janu-
ary22,1975. 6 ww ee ee
Property (including public utility property)
acquired or constructed and placed in service
after January 21, 1975. oe - 10%
(The part constructed before January 22,
1975, is at the 7% (or 4%) rate, even if
placed in service after that date.)

Energy Investment Property:
Alternative energy property, specially defined
energy property, recycling equipment, shale
oil equipment, equipment for producing nat-
ural gas from geopressured brine, cogenera-
tion equipment, and intercity buses - 10%
Qualified hydroelectric generating equipment . 11%
Solar and wind equipment acquired or con-
structed before 1/1/80 . . . . . . «10%
Solar and wind equipment, ocean thermal
equipment, and geothermal equipment ac-
quired or constructed after 12/31/79 . + 15%

Line 2.—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
of the property that you used to figure the
original credit.

Line 4.—Enter the estimated useful
life of the property that you used to figure
the original credit.

Line 5.—Enter the percentage of the
cost or other basis that you used to figure
the original qualified investment.

Original estimated Applicable

useful life: percentage
3 or more but less than 5 years . . 334%
5 or more but less than 7 years . 1 66%4%
7 or more years. De 100%

Line 6.—Multiply line 3 by line 5 to
get the original qualified investment.

Line 7.—Multiply line 6 by the rate on
line 1 to get the original investment credit.

Line 8.—Enter the date the property
ceased to be qualified property. See regu-
lation section 1.47-1(c) for more informa-
tion.

Line 9.—Enter the number of years
you actually used the property as regular
or energy investment property.

Line 10.—Enter the percentage of
the cost or basis you will use to refigure
the qualified investment:

Actual Useful Li Percentage
Lessthan3 years. . . . . + 0%
3 or more but less than 5 years . + 334%
5 or more but less than 7 years. . + 664%

Line 11.—Multiply line 3 by the per-
centage on line 10 to get the refigured
qualified investment.

Line 12.—Multiply line 11 by the rate
on line 1 to get the refigured investment
credit.

Line 13.—Subtract the credit on line 12
from the original credit on line 7. This is
the maximum credit to be recaptured.

Line 14.—Add line 13, columns A
through E. If you have more than one
Form 4255, or have used separate sheets
to list additional items on which you fig-
ured an increase in tax, write on the dotted
line “Tax from attached, §.... "Ine
clude the amount in the total for line 14.

‘US. GOVERNMENT PRINTING OFFICE : 1980—O-313-232

Line 15.—If you did not use all the
credit you originally figured, either in the
year you figured the credit or in a carry-
back or carryover year, you have an un-
used credit. You must also take into ac-
count the current year’s unused credit in
figuring the increase in tax. See regula-
tions section 1.47—1(d), Revenue Ruling
72-221, and Publication 572 for more in-
formation.

Figure the unused credit on a separate
sheet and enter the total unused credit on
this line. Do not enter more than the tenta-
tive recapture on line 14.

Line 17.—See section 47(a)(3)_ for
information on recapturing investment
credit on the disposal of qualified progress
expenditure property. Attach a separate
computation and enter the total increase in
tax on this line.

Line 18.—Add lines 16 and 17. This is
the total increase in tax. Enter it on the
proper line of your tax return. Do not use
this amount to reduce your current year’s
investment credit from Form 3468, Com-
putation of Investment Credit.

Examples

(1) All of the credit is recaptured.—On
January 1, 1978, D put in use $9,000 of
qualified property with a useful life of 8
years. D took a credit of $900 ($9,000 x
100% x 10% investment credit). All_of
the Credit was used in 1978 to reduce D’s
tax liability. D has no unused investment
credit for the current year. On November 1,
1980, D sold the property. Because D held
the property less than 3 years, no invest-
ment credit is allowable. Therefore, D
must add all of the $900 to his tax for
1980. This is the difference between the
$900 credit D took in 1978 and the $0
credit allowable.

(2) Part of the credit is recaptured.—As-
sumé the same facts as (1) above, except
that D put the property into use in Septem-
ber, 1977. D would add $600 to his tax for
1980, figured as follows:

Original Investment Credit

Line:

LRate . we ee ee ee 10%

3 Cost or other basis + + « $9,000

4 Estimated life . 8 years

5 Applicable percentage 100%

6 Qualified investment . . $9,000

7 Original credit . $900
Refigured Investment Credit

9 Period actually used . 3 years

10 Applicable percentage . 3314%

11 Qualified investment . $3,000

12 Refigured credit . . . $300
Increase in Tax

13 Tentative recapture . $600
($900-$300)

15 Unused credit . $0

16 Increase in tax . $600

(3) Unused credit—Assume the same
facts as in (2) above, except that D only
used $200 of the credit in 1977, $300 in
1978, and zero in 1979. This leaves $400
of unused credit ($900 original credit,
minus $200 in 1977 and $300 in 1978). D
would add only $200 to his tax for 1980,
figured as follows:

Increase in Tax

13 Tentative recapture $600
15 Unused credit . $400
16 Increase in tax . $200

D would no longer have an investment
credit carryover, since it was all used to
reduce the credit to be recaptured.

313-232-1