2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART II - Income Taxes (§§ 30041 — 30622) › Chapter 1006 - Accounting Periods and Methods of Accounting (§§ 30171 — 30182) › § 30182 - Accelerated cost recovery depreciation method

(a) Election to use the accelerated depreciation method.—
(1) The election to use the accelerated depreciation method shall be made with the corresponding income tax return for the first taxable year in which the deduction is claimed, in the form and manner established by regulations. The election to use the accelerated method shall be made only with respect to property acquired by “purchase” (as defined in § 30127 of this title) during taxable years beginning after June 30, 1995.
(2) If the taxpayer makes an election under this subsection with respect to any class of property for any taxable year, the accelerated depreciation method under this section shall apply to all property in such class placed in service during such taxable year. In the case of real property devoted to residential rental purposes and nonresidential real property, such election may be made separately with respect to each property.
(3) Election irrevocable.— An election under this subsection, once made, shall be irrevocable.
(4) A taxpayer may not make an election to use the accelerated depreciation method with respect to property:
(A) Covered under § 30127(a)(3) of this title;
(B) used predominantly outside of Puerto Rico;
(C) used by entities exempt under § 30471 of this title;
(D) used totally or partially in activities covered by §§ 10641 et seq. of this title or any similar preceding or subsequent law, or
(E) intangible property.
(b) Depreciation method, recovery period and applicable convention period.— The depreciation deduction under the accelerated depreciation method shall be determined by using:
(1) The applicable depreciation method;
(2) the applicable recovery period, and
(3) the applicable depreciation period to commence depreciation.
(c) Applicable depreciation method.— For purposes of this section:
(1) The applicable depreciation method shall be:
(A) The two hundred percent (200%) declining balance method in the case of three (3), five (5), seven (7), and ten (10)-year property; and
(B) the one hundred fifty percent (150%) declining balance method in the case of real property devoted to residential rental purposes, nonresidential real property and fifteen (15) and twenty (20) year property.
(C) Notwithstanding the above, the taxpayer may switch to the straight line depreciation method when the use of this method when applied to the adjusted basis of the assets being depreciated under the accelerated method yields a larger allowance.
(2) Salvage value.— No salvage value shall be considered for purpose of this section.
(d) Applicable recovery period.— For purposes of this section, the applicable recovery period shall be determined in accordance with the following table:
In the case of: The recovery period shall be: 3-year property 3 years 5-year property 5 years 7-year property 7 years 10-year property 10 years 15-year property 15 years 20-year property 20 years Residential rental real property 30 years Nonresidential real property 35 years
(e) Applicable acquisition period.—
(1) In general.— Except as provided in clause (2) of this subsection with respect to real property, the applicable acquisition period shall be half-year.
(2) Real property.— In the case of:
(A) Residential rental real property, and
(B) nonresidential real property, the applicable acquisition period shall be mid-month.
(3) Definitions.—
(A) Half-year acquisition period.— All property placed in service during the taxable year (or disposed of during any taxable year) shall be treated as placed in service (or disposed of) on the mid-point of such taxable year.
(B) Mid-month acquisition period.— All property placed in service during any month of the taxable year (or disposed of during any month of the taxable year) shall be treated as placed in service (or disposed of) on the mid-point of such month.
(f) Classification of property.—
(1) In general.— Except as otherwise provided in this subsection, property shall be classified as provided in subsection (d).
(2) Residential rental and nonresidential real property.—
(A) Residential rental real property.— The term “residential rental real property” means any building or structure if eighty percent (80%) of the gross rental income from such building or structure for the taxable year is rental income from dwelling units.
(i) Definition.— For purposes of this paragraph:
(I) The term “dwelling unit” means a house or apartment used to provide living accommodations in a building or structure, but does not include a unit in a hotel, motel, or other establishment more than fifty percent (50%) of such units in which are used on a transient basis, and
(II) if any portion of the building or structure is occupied by the taxpayer, the gross rental income from such building or structure shall include the rental value of the portion so occupied.
(B) Nonresidential real property.— The term “nonresidential real property” means real property which is not residential real property.
(3) Other property.—
(A) Three (3)-year property.— The term “three (3)-year property” includes any electronic equipment such as computers and related equipment and any other similar asset that qualifies for a three (3)-year recovery period.
(B) Five (5)-year property.— The term “five(5)-year property” shall include automobiles and trucks not covered by the provisions of § 30127 of this title, qualified high-technology equipment, cargo vans and trailers, tools, milk and breeding cattle and any other similar assets that qualify for a five (5)-year recovery period.
(C) Seven (7)-year property.— The term “seven (7)-year property” shall include assets used in the business of wholesale and retail sales, personal and professional services, furniture and appliances, equipment used in certain agricultural activities, assets (except helicopters) used in the business of air transportation, equipment used in the manufacture of furniture and wood products, assets used in recreation or entertainment facilities, any other similar assets that qualify for a seven (7)-year recovery period.
(D) Ten (10)-year property.— The term “ten (10)-year property” shall include assets such as manufacturing equipment used, among others, for making textiles, textile products, medical and dental products, chemical products, electrical machinery and aero-space products, in satellite, telegraph and undersea cable communications, waste reduction and resource recovery plants, assets used in the printing industry and any other similar assets that qualify for a ten (10)-year recovery period.
(E) Fifteen (15) year property.— The term “fifteen-year property” shall include assets used in air transportation, theme and recreation parks, satellite communications, natural gas production plants, structures for use in agricultural and horticultural activities, manufacturing equipment used, among others, for making jewelry, musical instruments, managing pulp and paper materials, glass products, tobacco products and any other similar assets that qualify for a fifteen (15)-year recovery period.
(F) Twenty (20) year property.— The term “twenty-year property” shall include ships, maritime transportation equipment, electric power generators in satellite communications, land improvements, electricity and steam generation systems, manufacturing equipment used, among others, for manufacturing natural gas with methanol, assets used in the production of sugar, vegetable oil, cement and any other similar assets that qualify for a twenty (20)-year recovery period.
(g) Treatment of gain or loss in the transfer of property depreciated under accelerated depreciation method.—
(1) General rule.— A taxpayer who transfers property that has been depreciated under the accelerated depreciation method shall recognize ordinary gain or loss, as the case may be, in addition to any amount of gain or loss recognized under § 30143 of this title, in an amount equal to the difference between the depreciation otherwise allowable under § 30127 of this title and the depreciation determined under this section.
(2) Exceptions and limitations.—
(A) Gifts.— Clause (1) of this subsection shall not apply to transfers of property by gift.
(B) Transfers by reason of death.— Except as provided in § 30113 of this title (relating to income with respect to a decedent), clause (1) shall not apply to a transfer by reason of death.
(C) Certain tax-free transactions.— If the base of the property in the hands of the assignee is determined with reference to the base in the hands of the transferor by reason of the application of §§ 30142(a)(7), 30142(a)(8), 30142(a)(13)(B), 30576, or 30577 of this title, the gain to be recognized by the transferor under clause (1) shall not exceed the amount of the gain to be recognized to the transferor in the transfer of said property (determined without considering this subsection). This subparagraph shall not apply to a transfer to an organization that is tax exempt.
(D) Exchanges of similar property and involuntary conversions.— If property is transferred and gain (determined without taking into consideration this subsection) is not totally or partially recognized under § 30144(b)(1) or § 30144(f) of this title, then the amount of the gain to be recognized by the transferor under clause (1) of this subsection shall not exceed the sum of:
(i) The amount of the gain recognized in such transfer (determined without taking into consideration this subsection), plus
(ii) the market value of property acquired other than personal property subject to depreciation under § 30127 of this title.
(E) Property distributed by a partnership or special partnership to a partner.—
(i) In general.— For purposes of this subsection, the basis of personal property distributed to a partner by a partnership or special partnership shall be presumed as determined by reference to the adjusted basis of such property in the hands of the partnership or special partnership as prescribed in § 30577 of this title.
(ii) Adjustments to property distributed to a partner.— The Secretary shall prescribe by regulations any adjustment, if any, that may be necessary for purposes of redetermining the basis of the personal property distributed to a partner by a partnership or special partnership under paragraph (E)(i) of this clause.
(h) Administrative determinations.— The Secretary shall issue public administrative determinations, circular letters and other similar pronouncements establishing the recovery periods, applicable convention methods and the classification of other properties under subsections (d), (e) and (f) not otherwise included in clauses (2) and (3) of subsection (f).
(i) Regulations.— The Secretary shall issue the necessary regulations for the implementation of this section.
History —Jan. 31, 2011, No. 1, § 1040.12, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 48.