vom B468

Department of the Treasury
Internal Revenue Service

Computation of Investment Credit

Attach to your tax return
For the calendar year 1970 or other taxable year beginning

21970, and ending

1970

or 19...

The investment credit has been repealed for property ac-
quired after 4-18-69, and property whose construction, re-
construction, or erection began after that date.

Exceptions are provided, however, for certain property built
or acquired under a binding contract entered into before 4—19—
69, or built or acquired in certain transitional situations de-

scribed in section 49 of the Internal Revenue Code. In any
event, the credit will not be available for any property placed in
service after 1975.

The amount of unused credits that may be carried over and
claimed as a cret subject to a special 20% limitation, See
instruction for line 4.

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 in property by a ‘tnership, estate, trust, small business corporati: or lessor.
~ : 7 _ @) 7 nn)
Type of i i) | @ i
property Line Life years Cost or basis percentage Solamn 2 x column)
@ 4 or more but less than 6 33,
New
Property (b) 6 or more but less than 8 66%,
© 8 or more 100
(| 4 or more but less than 6 33,
P, Used |
roperty
(See instructions for | © 6 or more but less than 8 66%
dollar limitation) -—
@ 8 or more 100
2 Total qualified investment—Add lines 1(a) throughl(f). . . . - we ee
3 Tentative investment credit—7% of line 2 (3% for public utility property) . So ee ee

4 Carryback and carryover of unused credit(s) (See instruction 4 for special limitation—attach

computation). © 6 6 ee ee ee ee
5 Total—Addlines3and4.. . . . . .

Limitation

a

7 Individuals, estates, and trusts: (a) Foreign tax credit. . .
(b) Retirement income credit
8 Total—Add lines 7(a) and(b). . - . ee eee

©

Line 6 less line 8.
10 (a) Enter amount on line 9 or $25,000, whichever is lesser .
(b) If line 9 exceeds $25,000, enter 50% of the excess. .

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

(a) Individuais—Enter amount from line 21, page1,Form1040. . . ... 2...
(b) Estates and trusts—Enter amount from line 27, page 1, Form 1041. . . . . «fe + =
(c) Corporations—Enter amount from line 7, Tax Computation Schedule, Form 1120

(Married persons filing separately, Controlled corporate groups, estates and trusts, see instruction 10)

12 Investment credit—Enter amount on line 5 orline 11, whicheverislesser . . . . . ~

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

(Partnership, estate, trust, etc.) Address

Property
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 required
to file this form because the credit is claimed by the partners and
shareholders.

However, partnerships must complete the information required by
Schedule K of Form 1065. Small business corporations must attach a
statement to their returns showing the allocation of investment to the
shareholders by amount, type and life of property as shown in item 1
of this form.

Estates and trusts that 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
among the beneficiaries.

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

C. Property Defined.—Except as provided below, the investment
credit is applicable to (a) tangible personal property, (b) elevators and
escalators, and (c) real property (except for buildings and their struc-
tural components) if used as an integral part of manufacturing, pro-
duction or extraction, etc., or used as a research or storage faci
in connection with these activities.

The investment credit is not applicable to property whose con-
struction, reconstruction or erection began after 4-18-69, or which
was acquired by the taxpayer after that date. Exceptions are provided,
however, for certain property constructed (reconstructed or erected)
or acquired under a binding contract entered into before 4-19-69,
and property constructed or acquired in certain transitional situations
described in section 49 of the Code.

The investment credit is also not applicable to (1) certain property
used predominantly outside the United States; (2) property used for
lodging or in connection with furnishing lodging, except (a) property
used in certain commercial facilities located therein (such as a
restaurant) or (b) property used by a hotel or motel; (3) property used
by a tax-exempt organization (except where the unrelated business
income tax applies); (4) property used by governmental units; (5)
livestock (including racehorses); and (6) that portion of a pollution

Specific

Line 1. New Property.—Enter the basis of property as described in
instructions C and G 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 G.

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 regard to the applicable percentages based on
useful life).

If a husband and wife file separate returns, 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 (or
corporation electing not to be taxed) that may be taken into account
by the partners (or shareholders) may not exceed $50,000. The
$50,000 limitation also applies to each partner and shareholder.

A controlled group of corporations (see section 48(c)(3)(C) of the
Code) 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 apportionment is made without
regard to both the $50,000 limitation and the applicable percentages
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 bene
ficiaries on the basis of the income of the estate or trust allocable
to each.

Line 4.—The amount of unused credits that may be carried over
and claimed as a credit in the taxable year is subject to a special
limitation. This limitation provides that the amount of available
investment credit carrybacks and carryovers that may be claimed as
a credit may not exceed 20% of the higher of (1) the aggregate
amount of investment credit carrybacks and carryovers to the taxable
year, or (2) the highest total amount of carrybacks and carryovers to
any preceding taxable year (prior to the current taxable year) that

control facility that the taxpayer has elected under section 169 to
amortize over a 5-year period.

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

E. Recomputed Tax on Early Disposition of Property.—If property
is disposed of prior to the life-years category used in computing the
investment credit, the tax for the year of disposition must be increased
by the difference between the credit taken (including carrybacks and
carryovers) on such property and the credit that would have been
allowed had the actual life been used. Form 4255 may be used to
compute the increase in tax. This additional tax does not apply to prop-
erty stolen or destroyed by casuaity after 4-18-69. Moreover, it does
not apply to agy other disposition of property to the extent the tax-
payer replaces the property within 6 months after the disposition with
property that would be section 38 property but for section 49 of the
Code.

F. Carryback and Carryover of Unused Credits.—Any part of an in-
vestment credit that may not be used because it exceeds the amount
allowable (including an unused credit created by the carryback of a
net capital loss sustained in taxable years beginning after 12-31-69
or by the carryback of a net operating 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. Unused credits that can’t be used
solely because of the special 20% limitation may be carried forward
10 years instead of 7.

A claim for refund based upon the carryback of an unused invest.
ment credit may be made on Form 843 or by filing Form 1040X (indi-
viduals), 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 (individuals) 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 re-
duction of an investment credit carryback or carryover.

No adjustment for additional first-year depreciation or salvage value
is required.

Instructions

began after 1968. In no event may the amount claimed on line 4
exceed the available amount of investment credit carrybacks and
carryovers to the taxable year.

For example, if a taxpayer has $500 of unused credits from years
prior to 1970 available as a carryover to 1970, the amount of the
carryover that may be claimed as a credit in 1970 may not exceed
$100 (20% of $500). If, in 1973, a $300 unused credit arose from
investment in 1973, the amount of unused credits that could be car-
ried to 1970 would be increased to $800 ($500 carryforward plus
$300 carryback). Accordingly, the limitation for 1970 would be retro-
actively increased to $160 (20% of $800). This new $160 limitation
applies to each of the years after 1970 unless the aggregate amount
of unused credit carryovers and carrybacks otherwise available to one
of those years exceeded $800 (the amount used in determining the
$160 limitation). In such a case, a new limitation based on the higher
amount of carryovers and carrybacks would be determined which then
would be applicable in that year and in subsequent years.

The special 20% limitation referred to above is in addition to the
general limitation based on the amount of tax liability. Unused credit
carryovers to a taxable year from 2 or more other years are to be
used up in the order in which they occur.

Line 10. Limitation.—If the tax liability (line 9) is $25,000 or
less, the investment 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 returns and both are entitled
to an investment credit, the limitation is computed by substituting
$12,500 for the $25,000 shown in lines 10(a) and (b).

Controlled corporate groups (see section 46(a)(5) of the Code) must
apportion the $25,000 among all component members.

In the case of an estate or trust, the $25,000 amount must be re-
duced to (a) $25,000 multiplied by (b) the qualified investment appor.
tioned to the estate or trust, divided by (c) the aggregate qualified
investment apportioned among the estate or trust and its beneficiaries.

‘fe U.S, GOVERNMENT PRINTING OFFICE:1970~O-398-237 §8-0709359