California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 7 - Net Income › Article 1 - Deductions › Section 24356(a) - Additional First-Year Depreciation Allowance

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(1) In General. For income years ending after
					 December 31, 1958, in the case of "Section
					 24356 property" acquired by
					 purchase after December 31, 1958, a taxpayer may elect for the first income
					 year for which a deduction with respect to such property is allowable under
					 Sections 24349 through
					 24354 to the taxpayer to include
					 as part of the "reasonable allowance" allowable under Section
					 24349(a) an
					 additional allowance of 20 percent of the cost or of a portion of the cost of
					 such property. The allowance under Section
					 24356 is in addition to the
					 depreciation allowable under Sections
					 24349 through
					 24354 computed on the balance of
					 the unrecovered cost of the property after adjustment for the allowance under
					 this regulation. For application of the dollar limitations of Section
					 24356(b) see Reg.
					 24356(b). For a definition of the term "Section
					 24356 property" and for special
					 rules, see Reg. 24356(c). For the time and manner of making the election under
					 this regulation, see Reg. 24356(d).
(2) Proration Not Required. The allowance
					 under Section
					 24356 is determined without any
					 proration based on the period of time the Section
					 24356 property has been in service
					 during the income year. For example, taxpayer A, which makes its tax returns on
					 the calendar year basis, purchased and placed in service on August 7, 1959,
					 Section 24356 property costing $8,000. A
					 elects to claim the additional first-year depreciation on the total cost of
					 $8,000. A is entitled to a deduction of $1,600 (20 percent of $8,000) under
					 this section for 1959, without proration for the number of days in 1959 during
					 which the property was in service.
(3) Amount Subject to Allowance. The
					 allowance under Section
					 24356 is equal to 20 percent of
					 the cost, or portion of the cost, of Section
					 24356 property selected by the
					 taxpayer. Thus, all or a part of the cost of one item of property, or all or
					 parts of the cost of several items of property, may be selected, subject to the
					 dollar limitations of Section
					 24356(b) and Reg.
					 24356(b). For example, Corporation B, which makes its tax returns on the basis
					 of the calendar year, purchased Section
					 24356 property costing $9,000 in
					 March 1959. B elects to claim the additional first-year depreciation allowance,
					 but only with respect to $3,000 of the cost of the property. B's allowance
					 under Section
					 24356 for 1959 is $600 (20 percent
					 of $3,000).
(4) Salvage. The
					 allowance under Section
					 24356 is computed without regard
					 to any salvage value which is estimated will be realizable upon the sale or
					 other disposition of the Section
					 24356 property when it is no
					 longer useful in the taxpayer's trade or business or in the production of its
					 income and is to be retired from service by the taxpayer.
(5) When Allowance Is Available.
(A)
(i) The
					 term "the first income year for which a deduction is allowable under Sections
					 24349 through
					 24354 to the taxpayer with respect
					 to such property" means the first income year for which depreciation is
					 allowable under Section
					 24349 on such property. See
					 subsection (2) of Reg. 24349(j). The provisions of this subparagraph may be
					 illustrated by the following examples:
EXAMPLE (1).
Corporation M, which makes its tax returns on the
						calendar year basis, purchases Section
						24356 property costing $10,000 on
						December 27, 1960, places it in service on the same date, and does not use an
						averaging convention in determining the depreciation allowance. Since
						depreciation is allowable for the December 27-31, 1960, period, Corporation M
						may elect to claim the additional first-year depreciation allowance of $2,000
						(20 percent of $10,000) for 1960.
EXAMPLE (2).
Corporation N, which files its tax returns on the
						calendar year basis, purchases Section
						24356 property costing $10,000 on
						August 10, 1960, and places it in service on the same date. Corporation N
						places the Section
						24356 property in a multiple asset
						account under which it is assumed, for purposes of computing depreciation, that
						all additions and retirements during the first half of the income year were
						made on the first day of that year, and that all additions and retirements
						during the second half of the income year were made on the first day of the
						following year. Under these circumstances, Corporation N is entitled to elect
						the additional first-year depreciation allowance under Section
						24356 on such property only for
						1961, since that is the first year for which a deduction is allowable under
						Section 24349 on such
						property.
(ii) In the case
					 of an emergency facility which the taxpayer elects to amortize under the
					 provisions of Section
					 24355, and which facility also
					 qualifies as Section
					 24356 property, the additional
					 first-year depreciation allowance is not available (except as hereafter
					 provided) unless the taxpayer elects under Reg. 24355(b) to begin the
					 amortization deductions under Section
					 24355 with the succeeding income
					 year. If the taxpayer elects under Reg. 24355(b) to begin the amortization
					 deductions under Section
					 24355 with the month following the
					 month in which the facility was completed or acquired, and the facility
					 qualifies as Section
					 24356 property, the additional
					 first-year allowance is available only with respect to the portion of the
					 facility which is not certified in accordance with Section
					 24355 and the regulations
					 thereunder. If 100 percent of the facility is certified in accordance with
					 Section 24355 and the regulations
					 thereunder and the taxpayer elects under Reg. 24355(b) to begin the
					 amortization deductions under Section
					 24355 with such following month,
					 no additional first-year allowance is available with respect to any portion of
					 the facility.