rom 4255 Recapture of Investment Credit eae
Rev, June 1986) -—
Ge ae sumer e Treasury (Including Energy Investment Credit) Attachment
Internal Revenue Service > Attach to your income tax return. Sequence No. 65,
Name(s) as shown on return Identifying number
Kind of property—State whether recovery or nonrecovery (see the Instructions for Form 3468 for definitions).
Properties aan praaaes .
If energy property, show type. Also indicate if rehabilitation expenditure property.
A
B
c
D
E
Computation Steps: Properties
(see Specific Instructions) A B c D E
1 Original rate of credit .
2 Date property was placed in
2 service
3
2
| 3 Cost or other basis . an
&| 4 Original estimated useful life or
£ class of property .
$
£| 5 Applicable percentage
73| 6 Original qualified investment
3 (line 3 times line 5) oo
S| 7 Original credit (line 1 times line
) ry
8 Date property ceased to be qualified
investment credit property
9 Number of full years between the
date on line 2 and the date on line 8
10 Recapture percentage _ rom
x instructions) .
(£11 Tentative recapture tax (line 7
2 times line 10)
2
§§/12 Add line 11, columns A through E sees oo
& 13 Enter tax from property ceasing to be at risk, or for which there was an increase in in nonqualified nonrecourse
Ss financing (attach separate computation) . tone
§
| 14 Total—Add lines 12 and 13. rs :
3 15 Portion of original credit (line 7) not used to offset tax in any year, plus any carryback and carryforward of
€ credits you can now apply to the original credit year because you have freed up tax lability in the amount of
8 the tax recaptured (Do not enter more than line 14—see instructions) . woe oe :
16 Total increase in tax—Subtract line 15 from line 14. Enter here and on the proper line of your tax return.
f] Purpose of Form.—Use Form 4255 to figure the You must refigure the credit if you changed the
General Instructions increase in tax for the recapture of investment use of property so that it no longer qualifies as
(Section references are to the Internal Revenue credit for regular and energy property. You must _regular or energy investment credit property. For
Code, unless otherwise noted.) refigure the credit if you took it in an earlier year, example, you must refigure the credit if you
Paperwork Reduction Act Notice. —We ask for but disposed of the property before the end of the _ change the use of property from business use to
this information to carry out the Internal Revenue _—‘recapture period or the useful life you used to personal use, or if there is any decrease in the
laws of the United States. We need it to ensure that _ figure the original credit. You must also refigure percentage of business use of investment credit
taxpayers are complying with these laws and to the credit if you returned leased property (on property. See sections 47(a)(3) and 47(a)(5\(C)
allow us to figure and collect the right amount of which you had taken a credit) to the lessor before —_ for information on recapture for progress
tax. You are required to give us this information. the end of the recapture period or useful life. expenditure property. Also, see the instructions

Form 4255 (Rev. 6-86)


Form 4255 (Rev. 6-86)

Page 2

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., transportation
property, entertainment, recreation or amusement
property, or certain home computer equipment)
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 $ 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
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 the beneficiaries, you must
give your shareholders, partners, or beneficiaries
the information they need to refigure the credit.
See regulations sections 1.47-4, 1.47-5 and
1.47-

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 4255.
Special Rules.—It 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 2. ~ 46(@)(4)
Commuter fughway vee 47(@)(8)

If you 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.

For more information, see Publication 572,
Investment Credit.

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 E.—Describe the property for
which you must refigure the credit

Fill n 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
Qualtne property acquired or constructed and
placed in service
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
Alternative energy property, specially defined energy
property, recycling equipment, shale oil equipment,
equipment for producing natural gas from
eeapesured bone, cogenesation equpment, and
intercity buses. «10%
Qualified hydroelectne generating equipment 11%

Solar and wind eaupment acquired or constructed
before 1980, :
Solar and wind equipment, ocean thermal equpment,
and geothermal equipment acquired or constructed
after 1979. :

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

10%

15%

Original estimated Applicable
‘useful life percentage
3 or more but less than 5 years 33%4%
5 or more but less than 7 years 6674%
7 or more years Lok 100%
Recovery Property
Class of Applicable
property percentage
3-year 60%
Other - 100%

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

Class of Applicable
property percentage
3-year 40%
Other 80%

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:

if number of full | motor maebut Tor
years online 9of | jessthan less thon more
Form 4255s: | Syears's —7yearsis——_yearsis
0 100 100 100
1 100 100 100
2 100 100 100
3 0 50 66.6
3 0 50 66.6
. 0 0 33.3
é 0 0 33.3

¥ US. Government Printing Office: 1986—493-907 23-0916750

Recovery Property
The recapture percentage for

\f number of full Other than

years on line 9 of 3year 3:year

Form 4255 1s: property is property 1s
0 100 100
1 66 80
2 33 60
3 0 40
4 (o} 20

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

For example, if you are a calendar-year
taxpayer who bought a $21,000 automobile in
August 1984 and used it 90% for business, your
investment credit for 1984 would have been
$900 (90% of the $1,000 limit for automobiles
placed in service from June 19, 1984, through
April 2, 1985). If business use in 1985 fell to
60%, you are treated as having disposed of one-
third ((90 - 60) + 90) of the automobile on
January 1, 1985 (since business use is computed
on a tax-year basis and a decrease in business
use Is deemed to take place on the first day of the
tax year). Multiply the recapture percentage from
the table above (100%) by one-third and enter
the result (33.3%) on line 10 of the form

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

Line 13.—For certain taxpayers, the basis or
cost of property piaced 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 47(d) 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),
Revenue Ruling 72-221, and Publication 572
for more information

Figure the unused portion on a separate
sheet and enter it on this line. Do not enter
more than the recapture tax on line 14.
Reminder: Be sure to adjust your current
unused credit to reflect any unused portion of
the original credit that was recaptured on this
jorm