Instructions for IRS Form 4255 - Recapture of Investment Credit

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Instructions for Form 4255
Department of the Treasury
Internal Revenue Service
(Rev. December 2018)
(Use with the December 2016 revision of Form 4255.)
Recapture of Investment Credit
Any property to which section 48(b),
Section references are to the Internal Revenue
Exceptions to recapture. Recapture of
Code unless otherwise noted.
48A(b)(3), 48B(b)(3), or 48C(b)(2) applies
the investment credit does not apply to the
will no longer qualify as investment credit
following.
Future Developments
property when placed in service.
A transfer because of the death of the
Before the end of the recapture period,
taxpayer.
For the latest information about
your proportionate interest was reduced
A transfer between spouses or incident
developments related to Form 4255 and
by more than one-third in a partnership, S
to divorce under section 1041. However, a
its instructions, such as legislation
corporation, estate, or trust that allocated
later disposition by the transferee is
enacted after they were published, go to
the cost or other basis of property to you
subject to recapture to the same extent as
IRS.gov/Form4255.
for which you claimed a credit.
if the transferor had disposed of the
You received a grant under section
property at the later date.
Reminder
1603 of the American Recovery and
A transaction to which section 381(a)
Reinvestment Tax Act of 2009 for property
applies (relating to certain acquisitions of
Form 4255 has been revised to reflect the
for which you were previously allowed an
the assets of one corporation by another
computational steps required under
investment credit for qualified progress
corporation).
section 50(a)(1) and to provide additional
expenditures under section 48(d), and the
A mere change in the form of
instructions on how to adjust the unused
amounts constituting the qualified basis
conducting a trade or business if:
portion (i.e., carryover) of a recaptured
for the credit are also the basis for the
1. The property is retained as
credit.
grant.
investment credit property in that trade or
You returned leased property (on which
business, and
An electing large partnership (under
you claimed a credit) to the lessor before
repealed section 775) with a fiscal taxable
2. The taxpayer retains a substantial
the end of the recapture period.
year that began in 2017 must use Form
interest in that trade or business.
In the case of a project under the Phase
4255 (revised December 2016) and its
II or Phase III gasification program, failure
A mere change in the form of
related instructions (revised December
at any time during the applicable recovery
conducting a trade or business includes a
2016).
period (as defined in section 168(c)) to
corporation that elects to be an S
attain and maintain the separation and
corporation and a corporation whose S
General Instructions
sequestration requirements in section
election is revoked or terminated.
48B(d)(1)(B). For more information, see
For more details on the recapture rules,
Notice 2009-23, 2009-16 I.R.B. 802,
Purpose of Form
see section 50(a).
available at
IRS.gov/irb/
Use Form 4255 to figure the increase in
See section 46(g)(4) (as in effect
2009-16_IRB#NOT-2009-23; as modified
tax for the recapture of investment credit
by Notice 2011-24, 2011-14 I.R.B. 603
on November 4, 1990) to figure
!
claimed and for the recapture of a
available at
IRS.gov/irb/
the recapture tax if you made a
CAUTION
qualifying therapeutic discovery project
withdrawal from a capital construction
2011-14_IRB#NOT-2011-24; and
grant.
fund set up under the Merchant Marine
amplified by Notice 2014-81, 2014-53
Act of 1936 to pay the principal of any
I.R.B. 1001, available at
IRS.gov/irb/
Credit Recapture Requirements
debt incurred in connection with a vessel
2014-53_IRB#NOT-2014-81.
and Special Rules
In the case of a project under the Phase
on which you claimed investment credit.
Generally, you must refigure the
II or Phase III qualifying advanced coal
Recapture of Qualifying
investment credit and may have to
project program, failure during the
recapture all or part of it if any of the
applicable recovery period (as defined in
Therapeutic Discovery Project
following apply.
section 168(c)) to attain and maintain the
Grant
You disposed of investment credit
separation and sequestration
If you received a grant under section 9023
property before the end of 5 full years after
requirements in section 48A(e)(1)(G). For
of the Affordable Care Act (ACA), you may
the property was placed in service (the
more information, see Notice 2009-24,
have to recapture it if the project for which
recapture period).
2009-16 I.R.B. 817, available at
IRS.gov/
the grant was awarded ceases to be a
You changed the use of the property
irb/2009-16_IRB#NOT-2009-24; as
qualifying therapeutic discovery project. If
before the end of the recapture period so
modified by Notice 2011-24, and amplified
the amount of the grant is more than the
that it no longer qualifies as investment
by Notice 2012-51, 2012-33 I.R.B. 150,
amount allowable as a grant, the excess
credit property.
available at
IRS.gov/irb/
must be recaptured as if the investment to
The business use of the property
2012-33_IRB#NOT-2012-51, and Notice
which the excess portion of the grant
decreased before the end of the recapture
2015-14, 2015-10 I.R.B. 722, available at
related had ceased to be a qualified
period so that it no longer qualifies (in
IRS.gov/irb/2015-10_IRB#NOT-2015-14.
investment immediately after the grant
whole or in part) as investment credit
A net increase in the amount of
was made.
property.
nonqualified nonrecourse financing
Any building to which section 47(d)
occurred for any property to which section
The increase in tax for any recapture of
applies will no longer be a qualified
49(a)(1) applied. For more details, see the
the grant is imposed on the person to
rehabilitated building when placed in
instructions for
Part
II, later.
whom the grant was made. In the case of
service.
Nov 13, 2018
Cat. No. 68759M
Instructions for Form 4255
Department of the Treasury
Internal Revenue Service
(Rev. December 2018)
(Use with the December 2016 revision of Form 4255.)
Recapture of Investment Credit
Any property to which section 48(b),
Section references are to the Internal Revenue
Exceptions to recapture. Recapture of
Code unless otherwise noted.
48A(b)(3), 48B(b)(3), or 48C(b)(2) applies
the investment credit does not apply to the
will no longer qualify as investment credit
following.
Future Developments
property when placed in service.
A transfer because of the death of the
Before the end of the recapture period,
taxpayer.
For the latest information about
your proportionate interest was reduced
A transfer between spouses or incident
developments related to Form 4255 and
by more than one-third in a partnership, S
to divorce under section 1041. However, a
its instructions, such as legislation
corporation, estate, or trust that allocated
later disposition by the transferee is
enacted after they were published, go to
the cost or other basis of property to you
subject to recapture to the same extent as
IRS.gov/Form4255.
for which you claimed a credit.
if the transferor had disposed of the
You received a grant under section
property at the later date.
Reminder
1603 of the American Recovery and
A transaction to which section 381(a)
Reinvestment Tax Act of 2009 for property
applies (relating to certain acquisitions of
Form 4255 has been revised to reflect the
for which you were previously allowed an
the assets of one corporation by another
computational steps required under
investment credit for qualified progress
corporation).
section 50(a)(1) and to provide additional
expenditures under section 48(d), and the
A mere change in the form of
instructions on how to adjust the unused
amounts constituting the qualified basis
conducting a trade or business if:
portion (i.e., carryover) of a recaptured
for the credit are also the basis for the
1. The property is retained as
credit.
grant.
investment credit property in that trade or
You returned leased property (on which
business, and
An electing large partnership (under
you claimed a credit) to the lessor before
repealed section 775) with a fiscal taxable
2. The taxpayer retains a substantial
the end of the recapture period.
year that began in 2017 must use Form
interest in that trade or business.
In the case of a project under the Phase
4255 (revised December 2016) and its
II or Phase III gasification program, failure
A mere change in the form of
related instructions (revised December
at any time during the applicable recovery
conducting a trade or business includes a
2016).
period (as defined in section 168(c)) to
corporation that elects to be an S
attain and maintain the separation and
corporation and a corporation whose S
General Instructions
sequestration requirements in section
election is revoked or terminated.
48B(d)(1)(B). For more information, see
For more details on the recapture rules,
Notice 2009-23, 2009-16 I.R.B. 802,
Purpose of Form
see section 50(a).
available at
IRS.gov/irb/
Use Form 4255 to figure the increase in
See section 46(g)(4) (as in effect
2009-16_IRB#NOT-2009-23; as modified
tax for the recapture of investment credit
by Notice 2011-24, 2011-14 I.R.B. 603
on November 4, 1990) to figure
!
claimed and for the recapture of a
available at
IRS.gov/irb/
the recapture tax if you made a
CAUTION
qualifying therapeutic discovery project
withdrawal from a capital construction
2011-14_IRB#NOT-2011-24; and
grant.
fund set up under the Merchant Marine
amplified by Notice 2014-81, 2014-53
Act of 1936 to pay the principal of any
I.R.B. 1001, available at
IRS.gov/irb/
Credit Recapture Requirements
debt incurred in connection with a vessel
2014-53_IRB#NOT-2014-81.
and Special Rules
In the case of a project under the Phase
on which you claimed investment credit.
Generally, you must refigure the
II or Phase III qualifying advanced coal
Recapture of Qualifying
investment credit and may have to
project program, failure during the
recapture all or part of it if any of the
applicable recovery period (as defined in
Therapeutic Discovery Project
following apply.
section 168(c)) to attain and maintain the
Grant
You disposed of investment credit
separation and sequestration
If you received a grant under section 9023
property before the end of 5 full years after
requirements in section 48A(e)(1)(G). For
of the Affordable Care Act (ACA), you may
the property was placed in service (the
more information, see Notice 2009-24,
have to recapture it if the project for which
recapture period).
2009-16 I.R.B. 817, available at
IRS.gov/
the grant was awarded ceases to be a
You changed the use of the property
irb/2009-16_IRB#NOT-2009-24; as
qualifying therapeutic discovery project. If
before the end of the recapture period so
modified by Notice 2011-24, and amplified
the amount of the grant is more than the
that it no longer qualifies as investment
by Notice 2012-51, 2012-33 I.R.B. 150,
amount allowable as a grant, the excess
credit property.
available at
IRS.gov/irb/
must be recaptured as if the investment to
The business use of the property
2012-33_IRB#NOT-2012-51, and Notice
which the excess portion of the grant
decreased before the end of the recapture
2015-14, 2015-10 I.R.B. 722, available at
related had ceased to be a qualified
period so that it no longer qualifies (in
IRS.gov/irb/2015-10_IRB#NOT-2015-14.
investment immediately after the grant
whole or in part) as investment credit
A net increase in the amount of
was made.
property.
nonqualified nonrecourse financing
Any building to which section 47(d)
occurred for any property to which section
The increase in tax for any recapture of
applies will no longer be a qualified
49(a)(1) applied. For more details, see the
the grant is imposed on the person to
rehabilitated building when placed in
instructions for
Part
II, later.
whom the grant was made. In the case of
service.
Nov 13, 2018
Cat. No. 68759M
Partners, Shareholders, and
pass-through entities (including
Line 5. Multiply line 1 by line 4. If the
partnerships, S corporations, estates, and
Beneficiaries
credit for the property for which you must
trusts), the tax is determined at the entity
refigure the credit was limited to a dollar
If you are a partner, shareholder, or
level and allocated to the entity owners as
amount (for example, by the kilowatt limit
beneficiary and your Schedule K-1 shows
a credit recapture.
in section 48(c)(1)(B)), do not enter more
recapture of investment credit claimed in
than the amount of the applicable limit on
an earlier year, you will need your copy of
To recapture a qualifying therapeutic
line 5.
the original Form 3468 to complete this
discovery project grant, skip lines 1–18
form.
Line 6. Enter the total of all credits taken
and complete line 19. For more
for the property on Form 3800 in prior
information, see Notice 2010-45, 2010-23
years. But do not include the amount of
I.R.B. 734, available at
IRS.gov/irb/
Specific Instructions
any credit previously recaptured due to an
2010-23_IRB#NOT-2010-45.
increase in nonqualified nonrecourse
Lines A through D. Describe the
Carryover Adjustment on
financing.
property for which you must refigure the
Recapture
credit. Use the corresponding column for
Part II. Recapture From
For property subject to investment credit
each property in Parts I, II, and III. If you
Increase in Nonqualified
recapture, reduce any remaining
need more property columns, use
Nonrecourse Financing
carryforwards and carrybacks from the
additional Forms 4255 or other statements
property by the recapture percentage
that include all the information shown on
Use Part II to figure any increase in tax for
used for the property on line 15.
Form 4255. Enter the total from all the
the recapture of an investment tax credit
separate statements on lines 17 and 18.
under section 49.
Basis Adjustment on Recapture
Part I. Original Investment
Generally, section 49(a)(1) applies to
For property subject to investment credit
Credit
property:
or qualifying therapeutic discovery project
Placed in service by individuals or
grant recapture, increase the property’s
Use Part I to refigure the original credit.
certain closely held corporations during a
basis as follows.
Line 1. Enter the rate you used to figure
tax year in which they were engaged in
For rehabilitation credit property,
the original credit from the Form 3468 that
activities described in section 465, and
qualifying advanced coal project property,
you filed. For combined heat and power
Used in connection with an activity
qualifying gasification project property,
system property, enter the effective rate
subject to the at-risk limitations under
qualifying advanced energy project
used to figure the original credit, taking
section 465.
property, or depreciable qualifying
into account the limit under section 48(c)
therapeutic discovery project property,
The credit base of this property for
(3)(B).
increase the basis by 100% of the amount,
investment credit purposes may be limited
attributable to each such property, of the
Line 2. Enter the credit base (cost or
if you borrowed against the property and
recapture tax, adjustments to carrybacks
other basis) that you used to figure the
are protected against loss, or if you
and carryforwards under section 39, or
original credit.
borrowed money from a person who is
adjustments to disallowed passive activity
related or who has an interest (other than
If section 49(a)(1) applied to the
credits.
as a creditor) in the business activity. The
property and there was a net increase in
For energy property, increase the basis
credit base must be reduced by the
nonqualified nonrecourse financing with
by 50% of the amount, attributable to each
amount of any nonqualified nonrecourse
respect to the property in previous tax
such property, of the recapture tax,
financing related to the property at the end
years, enter the credit base you used to
adjustments to carrybacks and
of the tax year.
figure the original credit, reduced by the
carryforwards under section 39, or
amount of that net increase. If there was a
adjustments to disallowed passive activity
If, at the close of a tax year following
net decrease in nonqualified nonrecourse
credits. If the reason for recapture is due
the year property described in section
financing with respect to the property in
to receipt of a grant under section 1603 of
49(a)(1) was placed in service, the
previous tax years, enter the credit base
the American Recovery and Reinvestment
nonqualified nonrecourse financing for the
you used to figure the original credit,
Act of 2009, the basis of the energy
property has increased or decreased, then
increased by the amount of that net
property is reduced by 50% of the grant
the credit base for the property changes
decrease. For more details, see the
received.
accordingly. The changes may result in an
instructions for Part II.
increased credit or a recapture of the
If you are a partner or S corporation
Line 3. If section 49(a)(1) did not apply to
credit in the year of the change. See
shareholder, adjust the basis of your
the property, enter -0-. If section 49(a)(1)
sections 49 and 465 for details.
interest in the partnership or stock in the S
applied to the property, enter the net
Line 8. If the original credit had been
corporation to take into account the
change in nonqualified nonrecourse
figured using the current-year tax base in
adjustment made to the basis of property
financing related to the property during the
the year the property was first placed in
held by the partnership or S corporation.
tax year. Enter a net increase in
service, you may have been able to use
nonqualified nonrecourse financing as a
other general business credits instead.
For more information, see section 50(c)
positive number. Enter a net decrease in
Use
Worksheet 1
to calculate the amount
and Regulations section 1.469-3(f).
nonqualified nonrecourse financing as a
of unused general business credits that
Partnerships, S Corporations,
negative number. For more information
would have been allowed under section
about section 49, see the instructions for
Estates, and Trusts
38.
Part II.
A partnership, S corporation, estate, or
When making this calculation,
Line 4. Subtract line 3 from line 2.
trust that allocated any or all of a qualified
include any general business
TIP
investment to its partners, shareholders,
If line 3 is negative, then the entry
credits that could have been
or beneficiaries, must provide the
carried forward or carried back to a year
on line 4 will be larger than the
TIP
information they need to refigure the
entry on line 2.
affected by the recapture of the original
credit. See Regulations sections 1.46-3(f),
credit. Do not include any credits that were
1.47-4(a) and (c), 1.47-5, and 1.47-6.
previously recaptured. If you previously
Instructions for Form 4255 (Rev. 12-2018)
-2-
Worksheet 1
Use Worksheet 1 to calculate the amount of unused general business credits that would have been allowed instead of the credit from
the recapture property. If you need to account for more than five years, complete Steps 4 through 6 for those years on additional
copies of the worksheet. Include the total for all years on Step 7.
First
Year
Year
Year
Year
Year
Steps
______
______
______
______
______
Total
Step 1. Identify the first year that the aggregate amount of credit
allowed for the property was more than the amount on line 5.
Enter the excess as a positive number
______
. . . . . . . . . . . . . . . . .
Step 2. Figure the amount of other general business credits that
could have been used in that year had the amount in Step 1 not
been allowed. Enter the result as a positive number
______
. . . . . . . .
Step 3. Subtract any general business credits that were actually
allowed in any previous tax year from the result of Step 2
______
______
. . . .
Step 4. For the following year, figure the reduction in general business
credits that would have been allowed for that year if:
1. No amount on line 7 had been allowed as a credit, and
2. Any other credits were used as calculated in Step 2 above
______
______
______
______
. . . . . . . . .
Step 5. Figure the amount of other general business credits that would have
been allowed to offset the reduction figured in Step 4
______
______
______
______
. . . . . . . . . . . . . . .
Step 6. Subtract any general business credits that were actually allowed in
any previous tax year from the result of Step 5
______
______
______
______
______
. . . . . . . . . . . . . . . . . . . .
Step 7. Repeat Steps 4 through 6 above for each of the following tax years. Then add the amount from Step 3 to the
amount from each iteration of Step 6. Enter the result on line 8
______
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
used the credit to offset the recapture of a
Unused credits other than “specified
Line 13. If you had never taken the
credit on another property, treat it as a
credits” (as defined in section 38(c)(4)(B))
recaptured credit, you may have been
credit allowed in a previous tax year.
and eligible small business credits
able to use other general business credits
(ESBCs) can be used in the calculation of
instead. Use
Worksheet 2
to calculate the
Multiple recapture properties. If you
line 8 taking into account the limitation
amount of unused general business
under section 38(c)(1)(A).
are recapturing investment credits from
credits that would have been allowed
multiple properties in Part II, complete
under section 38.
Part III. Recapture From
Form 4255, line 7, for each property
Disposition of Property or
When making this calculation,
before using Worksheet 1. Then fill out
include any general business
Cessation of Use as Investment
Worksheet 1, reapplying any allowable
TIP
credits that could have been
investment credits as if no credit had been
Credit Property
carried forward or carried back to a year
allowed for any of the properties in excess
Use Part III to figure any increase in tax for
affected by the recapture of the original
of the refigured credit for that property on
the recapture of an investment tax credit
credit. Do not include any credits that were
line 5. As you complete the worksheet,
or qualified therapeutic discovery grant
previously recaptured. If you previously
separately identify the amount of unused
under section 50.
used the credit to offset the recapture of a
general business credits that could have
credit on another property, treat it as a
been used instead of the excess credit
Line 10. Enter the date (month/day/year)
credit allowed in a previous tax year.
from each property. If an unused general
on which the property was placed in
business credit could have been used
service, using the first day of the month in
Multiple recapture properties. If you
instead of the excess credit from more
which the property was placed in service.
are recapturing investment credits from
than one property (for example, the
For example, if the property was placed in
multiple properties in Part III, complete
amount figured in Step 1 or Step 3 for a
service on February 20, 2016, enter
Form 4255, line 6, for each property
single year is attributable to more than one
02/01/2016 on line 10. See Regulations
before using Worksheet 2. Then fill out
property), apply the unused credit to the
section 1.47-1(c) for more information.
Worksheet 2, reapplying any allowable
property with the highest original credit
Line 11. Generally, this will be the date
investment credits as if no credit had been
rate on line 1. When completing Step 7,
you disposed of the property. For more
allowed for any of the properties. As you
add the amounts from Steps 3 and 6
details, see Regulations section 1.47-1(c).
complete the worksheet, separately
separately by property and enter the
identify the amount of unused general
results in the corresponding property
Line 12. Do not enter partial years. If the
business credits that could have been
column of line 8.
property was held less than 12 months,
used instead of the recaptured credit from
enter -0-. In case of failure to attain or
Disallowed passive activity credits
each property. If an unused general
maintain the separation and sequestration
(as defined in section 469(d)(2))
!
business credit could have been used
requirements applicable to a Phase II or III
can be used in the calculation of
instead of a recaptured credit from more
CAUTION
gasification program or a Phase II or III
line 8 only to the extent that credits from
than one property (for example, the
advanced coal program, enter -0-. If a
passive activities are included in the
amount figured in Step 1 or Step 3 for a
grant was received under section 1603 of
credits subject to recapture.
single year is attributable to more than one
the American Recovery and Reinvestment
property), apply the unused credit first to
Act of 2009, enter -0-.
Instructions for Form 4255 (Rev. 12-2018)
-3-
Worksheet 2
Use Worksheet 2 to calculate the amount of unused general business credits that would have been allowed under section 38 had
there been no credit from the recapture property. If you need to account for more than five years, complete Steps 4 through 6 for those
years on additional copies of the worksheet. Include the total for all years on Step 7.
First
Year
Year
Year
Year
Year
Steps
______
______
______
______
______
Total
Step 1. Identify the first year that an amount from line 6 was
allowed as a credit. Enter that amount as a positive number
______
. .
Step 2. Figure the amount of other general business credits that
could have been used in that year had the amount in Step 1 not
been allowed. Enter the result as a positive number
______
. . . . . . . .
Step 3. Subtract any general business credits that were actually
allowed in any previous tax year from the result of Step 2
______
______
. . . .
Step 4. For the following year, figure the reduction in general business
credits that would have been allowed for that year if:
1. No amount on line 6 had been allowed as a credit, and
2. Any other credits were used as calculated in Step 2 above
______
______
______
______
. . . . . . . . .
Step 5. Figure the amount of other general business credits that would have
been allowed to offset the reduction figured in Step 4
______
______
______
______
. . . . . . . . . . . . . . .
Step 6. Subtract any general business credits that were actually allowed in
any previous tax year from the result of Step 5
______
______
______
______
______
. . . . . . . . . . . . . . . . . . . .
Step 7. Repeat Steps 4 through 6 above for each of the following tax years. Then add the amount from Step 3 to the
amount from each iteration of Step 6. Enter the result on line 13
______
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the property with the highest recapture
Kumar increases his basis for property A
IF the number of full
THEN the recapture
percentage on line 15. When completing
by $60,000 ($21,600 + $38,400).
years on line 12 of
percentage is . . .
Step 7, add the amounts from Steps 3 and
Form 4255 is . . .
Example 2. The facts are the same as
6 separately by property and enter the
in Example 1, except that Kumar also
0
100
results in the corresponding property
earned a rehabilitation credit on property
1
80
column of line 13.
B in 2016 of $12,000, which he did not use
2
60
Disallowed passive activity credits
to offset his tax. As before, he disposed of
3
40
(as defined in section 469(d)(2))
property A in June of 2018. He enters
!
4
20
can be used in the calculation of
$36,000 on line 6 (the credit from property
5 or more
0
CAUTION
line 13 only to the extent that credits from
A used in 2016 and 2017). However,
passive activities are included in the
Kumar could have used his $12,000 of
credits subject to recapture.
unused credit from property B for 2016
Line 16. Multiply the amount on line 14 by
against his 2016 tax had no credit been
the percentage on line 15 to calculate the
Unused credits other than “specified
available from property A. Therefore, he
recapture tax due to disposition or
credits” (as defined in section 38(c)(4)(B))
enters $12,000 on line 13 and $24,000
cessation of use as an investment credit
and eligible small business credits
($36,000 - $12,000) on line 14. Kumar’s
property.
(ESBCs) can be used in the calculation of
total increase in tax for 2018 is $14,400
line 13 taking into account the limitation
Example 1. In 2016, Kumar earned a
(60% of $24,000). His remaining credit
under section 38(c)(1)(A).
rehabilitation credit of $100,000 on
carryforward for property A also is
property A. Kumar used $20,000 of the
reduced by the recapture percentage of
Line 14. Subtract line 13 from line 6 to
credit to offset tax in 2016 and used
60%. Kumar’s remaining carryforward is
calculate the aggregate decrease in
$16,000 as a carryforward to offset tax in
$25,600 (40% of $64,000). Kumar
general business credits that would have
2017. He had $64,000 remaining
increases his basis for property A by
been allowed under section 38 had there
carryforward for property A at the end of
$52,800 ($14,400 + $38,400).
been no credit from this property.
2017. Kumar has no other tax credits for
Example 3. In January of 2016,
Line 15. Enter the recapture percentage
other properties for any other years.
Maayan earned a rehabilitation credit of
from the following table. Enter 100 if you
Kumar disposed of the property in June
$100,000 from property A. She used all of
received a grant under section 1603 of the
of 2018. His recapture percentage is 60%.
the credit to offset $100,000 of tax in
American Recovery and Reinvestment Act
Because Kumar has no other credits for
2016. In 2017, Maayan earned a
of 2009.
properties for other years, he enters -0- on
rehabilitation credit of $75,000 from
line 13. He enters $36,000 on line 6 (the
property B and used none of the credit to
credit from property A used in 2016 and
offset tax. In June of 2018, property A
2017). Kumar’s total increase in tax for
ceased to be investment credit property
2018 is $21,600 (60% of $36,000). His
and Maayan must refigure the credit from
remaining credit carryforward for property
property A. Her recapture percentage is
A also is reduced by the recapture
60%. She enters $100,000 on line 6.
percentage of 60%. Kumar’s remaining
However, Maayan could have carried the
carryforward is $25,600 (40% of $64,000).
rehabilitation credit of $75,000 from
Instructions for Form 4255 (Rev. 12-2018)
-4-
property B back to 2016 had no credit
grant required to be recaptured under
control number. Books or records relating
been available from property A. Therefore,
section 9023(e) of the ACA.
to a form or its instructions must be
she enters $75,000 on line 13 and
retained as long as their contents may
Do not complete lines 1 through 18 to
$25,000 ($100,000 - $75,000) on line 14.
become material in the administration of
figure this increase in tax. Attach a
Maayan’s total increase in tax for 2018 is
any Internal Revenue law. Generally, tax
statement showing how you figured the
$15,000 (60% of $25,000). She increases
returns and return information are
increase in tax. Do not adjust the increase
her basis in property A by $15,000.
confidential, as required by section 6103.
in tax for any unused investment credit.
Example 4. In 2016, Ian earned a
Partnerships, S corporations, estates,
The time needed to complete and file
rehabilitation credit of $100,000 from
and trusts, determine the increase in tax at
this form will vary depending on individual
property A. Ian used $1,000 of the credit
the entity level. This amount will be
circumstances. The estimated burden for
to offset tax in 2016 and used $99,000 as
allocated to the entity owners as a credit
individual and business taxpayers filing
a carryforward to offset tax in 2017. In
recapture.
this form is approved under OMB control
2018, he earned a rehabilitation credit of
number 1545-0074 and 1545-0123 and is
Line 20. Enter the line 20 amount on the
$75,000 from property B and used none of
included in the estimates shown in the
appropriate line of your tax return (for
the credit to offset tax.
instructions for their individual and
example, 2018 Form 1120, Schedule J,
business income tax returns. The
On February 1, 2018, property A
line 9a). Partnerships, enter the amount
estimated burden for all other taxpayers
ceased to be investment credit property
from line 20 on Form 1065, Schedule K,
who file this form is shown below.
and Ian must refigure the credit from
line 20c, using code H. See the
property A. His recapture percentage is
Instructions for Form 1065 for more
80%. He enters $100,000 on line 6. No
information on how to allocate this amount
Recordkeeping
6 hr., 27 min.
. . . . . .
carryback or carryforward credits are
to the partners. S corporations, enter the
Learning about the
available for 2016 to offset the $1,000
amount from line 20 on Form 1120S,
law or the form
1 hr., 35 min.
credit used for property A. However, Ian
. . . . . .
Schedule K, line 17d, using code G. See
could have carried the rehabilitation credit
the Instructions for Form 1120S for more
Preparing and
of $75,000 from property B back to 2017
information. Estates and trusts, enter the
sending the form to
had no credit been available from property
amount from line 20 on Form 1041,
the IRS
1 hr., 46 min.
. . . . . . . . . . . .
A that year. Therefore, he enters $75,000
Schedule G, line 5. See the Instructions
on line 13 and $25,000 ($100,000 -
for Form 1041 for more information.
$75,000) on line 14. Ian’s total increase in
tax for 2018 is $20,000 (80% of $25,000).
If you have comments concerning the
Paperwork Reduction Act Notice. We
He increases his basis in property A by
ask for the information on this form to carry
accuracy of these time estimates or
$20,000.
suggestions for making this form simpler,
out the Internal Revenue laws of the
we would be happy to hear from you. See
United States. You are required to give us
Lines 17 and 18. If you used separate
the instructions for the tax return with
the information. We need it to ensure that
statements to list additional properties,
which this form is filed.
you are complying with these laws and to
write to the left of the entry space “Tax
allow us to figure and collect the right
from attached” and the total tax from the
amount of tax.
separate statements. Include the amounts
from these statements in the totals for
You are not required to provide the
lines 17 and 18, respectively.
information requested on a form that is
Line 19. Enter the amount of any
subject to the Paperwork Reduction Act
qualifying therapeutic discovery project
unless the form displays a valid OMB
Instructions for Form 4255 (Rev. 12-2018)
-5-

Download Instructions for IRS Form 4255 - Recapture of Investment Credit

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