REVISED IN ACCORDANCE WITH NEW LAW RESTORING THE INVESTMENT CREDIT

(2D REVISION) TO BE ATTACHED TO YOUR TAX RETURN

com 0468 | Computation of Investment Credit
P 1966

US. Treasury Department For calendar year 1966 or other taxable year beginning
Internal Revenue Service cecseccense 1966, ending

Name and address

1 Investment in new and used property including investment in suspension period property
NOTE: Include your share of investment in property by

artnership, estate, trust, small business corporation, or lessor.

4)

. i 1 | 2 | @
pepeety Line Lite Sears | ost Sr basis | Applicable percentage (Column Se eehmn 3)
(a) 4-or more but less than 6 | 33%
NEW | * ; : 331
PROPERTY () ‘or more but less than 66% 7
©) 8 or more 100
USED (@)_|_4ormore but less than6 | __ 5 33%
(500 Rerators for | (©) | _6.0r more but less than 8 | 66%
dollar limitation) | (f) 8 or more 100

2 Total investment—Add lines 1(a) through (f) . woe
3 (a) Amount of investment on line 2 which is attributable tos suspension n period property sone

(b) Amount of exemption from suspension period property (cost of suspension period property
in column 2, line 1, which is selected to be treated as qualified property—not to exceed

$20,000) . ... .
(c) Enter in column 2 below the amount ‘of investment 0 on line 3b) according to life years:

3) a
tite Sears __ | ‘ost basis Applicable percentage (Column 2ycolumn 3)
4 or more but less than 6 3345
6 or more but less than 8 _ 66%
8 or more 100
(d) Totalofcolumn4 . . . . 1 1 we eee ee oa

4 Line 3(a)lessline3(d). . 2. ww wee
5 Total qualified investment—Line 2 less line 4 .

6 Tentative investment credit—7% of line 5 (3% for public utility property) .

7 Carryback and carryover of unused credit(s) (attach computation) .
8 TOTAL—Addlines6and7 . . . . . ee ee

LIMITATION
9 (a) Individuals—Enter amount from line 12, page 1, Form 1040 . . .
(b) Estates and trusts—Enter amount from line 25 or 26, page 1, Form 1041 .
(©) Corporations—Enter amount from line 7, Tax Computation Schedule, Form 1120
10 Individuals, estates and trusts: (a) Foreigntaxcredit. . . . . . . .
(b) Retirement income credit . . . . . .
11 Total—Add lines 10(a) and (b) «© 6 we we ee ee ee ee ee

12 LineQtesslinell . . . . -
(Married persons filing separately, affliated groups, estates and trusts, see instruction 13)
13 (a) Enter amount on line 12 or $25,000, whichever is lesser . . .
(b) If line 12 exceeds $25,000, calendar year taxpayers enter 25% of the excess. Fiscal year
taxpayers see instruction 13. So
14 Total—Add lines 13(a) and (b) . . . a
15 Less 7% of line 4 (3% for public ety propery)
16 Line 14 less line 15 :

17_Investment credit—Enter amount on line 8 or line 16, 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:

Property

Name
(Partnership, estate, trust, etc.) Address New

Used Life years



GENERAL INSTRUCTIONS

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 re-
quired to file this form but must attach a statement to their returns
showing the allocation of investment (including investment in suspen-
sion period property) to the partners or shareholders by amount, type
and life of property as shown in item 1 of this form. In addition,
partnerships must show those investments in suspension period prop-
erty which the partnership selects to be exempt from suspension period
property. Estates and trusts which apportion the investment between
the estate or trust and the beneficiaries should in addition to filing
this form attach a statement showing the allocation of the investment
(including investment in suspension period property) among the
beneficiaries.

B. When Allowed.—A credit is allowed against your tax for
investment in certain depreciable property having an estimated useful
life of 4 years or more for the first year such property is placed in
service.

C. Property Defined.—The investment credit is applicable to
(a) tangible personal property, (b) real property (except for build-
ings and their structural components) if used as an integral part of
manufacturing, production or extraction, etc, or used as a research
or storage facility in connection with these activities, and (c) eleva-
tors and escalators.

‘The investment credit is not applicable to (1) suspension period
property; (2) certain property which is used predominantly outside
the United States; (3) property used for lodging or in connection
with furnishing lodging, except (a) property used in certain com-
mercial facilities located therein (such as a restaurant) or (b) prop-
erty used by a hotel or motel; (4) property used by a tax-exempt
organization (other than in a business to which the unrelated business
income tax applies); (5) property used by governmental units; (6)
livestock (including racehorses).

D. Election for Leased Property.—A lessor may elect to treat
an investment in new property as if made by the lessee instead of
the lessor. See section 48(d)

E. Replacement Property.—Where insured property is damaged
or destroyed as a result of a casualty or is stolen, reinvestment of the
insurance proceeds in replacement property may not be eligible for
the investment credit.

F. Recomputed Tax on Early Disposition of Property.—Where
property is disposed of prior to the life used in computing the invest-
ment credit, the tax for the year in which the property is so disposed
of must be increased by the difference between the credit taken on
such property and the credit which would have been allowed had the
actual life been used. Such increase should be reported on the line
provided on your tax return.

G. Carryback and Carryover of Unused Credits.—If the amount
of the investment credit exceeds the limitation, the excess shall be an
investment credit carryback to each of the 3 preceding taxable years
and an investment credit carryover to each of the 7 succeeding taxable
years (or to each of the 5 succeeding taxable years if the fifth taxable
year after the unused credit year ends before January 1, 1967).
A claim for refund based upon the carryback of an unused investment
credit may be made on Form 843 or by filing an amended return for
the year to which the unused credit is carried. ‘Faxpayers who desire
a tentative (quick) refund may file Form 1045 (individuals) or
Form 1139 (corporations).

H. 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 ail or any portion of an investment credit previously
allowed or in a reduction of an investment credit carryback or carry-
over. No adjustment for additional first-year depreciation or salvage
value is required.

1. Suspension Period Property.—The suspension period is the
period beginning on October 10, 1966, and ending on March 9, 1967.

Suspension period property is property which would otherwise
qualify for the investment credit but does not qualify for the credit
because it is property—

(1) whose construction, etc., began during the suspension period
or began, pursuant to an order placed during such period, before May
24, 1967, oF

(2)' which was acquired by the taxpayer during the suspension
period or acquired by the taxpayer, pursuant to an order placed during
such period, before May 24, 1967.

Property referred to in (1) above will be suspension period prop-
erty only to the extent of that portion attributable to construction, etc.,
before May 24, 1967.

J. Exemption from Suspension of $20,000 of Investment.—
A taxpayer may select to exempt from suspension of the investment
credit up to $20,000 of the cost of investment in suspension period
property purchased for use in his trade or business. Thus, up to
$20,000 of the cost of such investments which would otherwise be
ineligible for the credit may be selected to be treated as qualified prop-
erty. This exemption applies to property used in a trade or business
but not to property used for the production of income.

The $20,000 exemption trom suspension is not an annual exemption
but is the total amount of suspension period property which may
be selected to be treated as qualified property for all taxable years.

In determining the amount selected to be exempt from suspension
period property, the following rules apply:

(1) The cost of used property is determined under the same rules
set forth in instruction H. Property inherited, received as a gift, or
acquired from certain related parties does not qualify.

(2) Affiliated groups must apportion the $20,000 exemption
among all members.

(3) The $20,000 limitation applies to a partnership and to each
partner.

(4) If a husband and wife file separate returns and if each placed
suspension period property in service during the taxable year, the
exemption for each may not exceed $10,000.

K. Exceptions to Suspension Period Property.—Section 48(h)
(3) through (13) ptovides exceptions to the definition of suspension
period property. In general, if the following type of property is
otherwise qualified it will continue to be eligible for the investment
credit: (1) Certain water and air pollution control facilities; (2)
certain replacement property; (3) property received in certain trans-
fers; (4) property acquired or constructed, etc., pursuant to a binding
contract in existence on and after October 9, 1966; (5) property con-
structed, etc.. if such construction, etc., was begun before October 10,
1966; and (6) property acquired, or constructed, etc,, pursuant to cer-
tain other legal and economic commitments of the taxpayer.

SPECIFIC INSTRUCTIONS

Line 1. Suspension Period Property—Although suspension period
property is not eligible for the investment credit, the basis of invest-
ment in such property placed in service during the taxable year
must be entered in line 1 since it must be taken into account in
lines 3, 4, and 15 in determining the credit allowable with respect
to investment in qualified property. Used property, whether or not
suspension period property, must be entered in line 1 to the extent
of the dollar limitation on used property.

New Property——Enter the basis of property as described in instruc-
tions C and H 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. Property
inherited, received as a gift, or acquired from certain related parties
does not qualify for the investment credit. See instruction H above.

Dollar Limitation on Used Property.—In general, the amount of
used property (whether or not suspension period property) taken
into account may not exceed $50,000. In the case of a husband and
wife filing separate returns, and each has used property taken into
account, the amount may not exceed $25,000. In the case of a part-
nership the $50,000 limitation applies to the partnership and to each
partner. In the case of affiliated groups, the $50,000 limitation
shall be reduced for each member of the group by apportioning
$50,000 among the members of such group in accordance with their
respective amounts of used property which may be taken into account.

Estates and Trusts—In the case of an estate or trust the amount
of the investment is apportioned between the estate or trust and the

beneficiaries on the basis of the income of the estate or trust allocable
to each.

Line 13. Limitation Based on Amount of Tax.—The amount on
line 13 may not exceed the amount of tax liability if the tax liability is
$25,000 or less. For calendar years and other taxable years ending
before March 10, 1967, if the tax liability exceeds $25,000, the limita-
tion is $25,000 plus 25% of the excess.

For taxable years ending after March 9, 1967, if the tax liabil-
ity exceeds $25,000, the applicable percentage to be used in line 13(b)
is computed as follows: Number of days in the taxable year after
March 9, 1967, divided by total number of days in the taxable year,

d
multiplied by 25%, plus 25%; or (= x 25%) + 25% = appli-

365

cable percentage.

In the case of a husband and wife filing separate returns and both
have qualified investments, the amount specified on lines 13(a) and
(b) shall be $12,500 instead of $25,000. In the case of affiliated
groups, the $25,000 specified on lines 13(a) and (b) shall be reduced
for each member of the group by apportioning the $25,000 among all
members. In the case of an estate or trust, the $25,000 limitation
specified on lines 13(a) and (b) shall be reduced to an amount
which bears the same ratio to $25,000 as the amount of qualified
investment allocated to the estate or trust bears to the entire qualified
investment.

U.S. GOVERNMENT PRINTING OFFICE : 1957-~O-260-103