Claiming the Special Depreciation Allowance(p42)

For qualified property (defined below) placed in service in 2012, you can take an additional 50% (or 100%, if applicable) special depreciation allowance. The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under MACRS. Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50% (or 100%, if applicable).

For farmers, qualified property generally is certain qualified property acquired after September 8, 2010, and certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2013.

Certain qualified property acquired after September 8, 2010, is eligible for a 100% special depreciation allowance.

Qualified property includes the following:

• Certain property with a long production period.
• Certain aircraft.

Qualified property must also meet the following requirements.

• The property must be acquired by purchase after September 8, 2010. If a binding contract to acquire the property existed before September 9, 2010, the property does not qualify.
• The property must be placed in service before January 1, 2013.
• The original use of the property must begin with you after September 8, 2010.

For more information, see chapter 3 of Publication 946 and Revenue Procedure 2011-26, 2011-16 I.R.B. 664, available at
www.irs.gov/irb/2011-16_IRB/ar10.html.

Certain qualified property (defined below) acquired after December 31, 2007, and before January 1, 2013, is eligible for a 50% special depreciation allowance.

Qualified property includes the following:

• Tangible property depreciated under the Modified Accelerated Cost Recovery System (MACRS) with a recovery period of 20 years or less.
• Water utility property.
• Off-the-shelf computer software.
• Qualified leasehold improvement property.

Qualified property must also meet all of the following tests:

• You must have acquired qualified property by purchase after December 31, 2007. If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify.
• Qualified property must be placed in service after December 31, 2007 and placed in service before January 1, 2013 (before January 1, 2014 for certain property with a long production period and for certain aircraft).
• The original use of the property must begin with you after December 31, 2007.

You can elect, for any class of property, not to deduct the special depreciation allowance for all property in such class placed in service during the tax year. To make the election, attach a statement to your return indicating the class of property for which you are making the election.

Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Attach the election statement to the amended return. On the amended return, write "Filed pursuant to section 301.9100-2."

Once made, the election may not be revoked without IRS consent.

When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. For more information, see chapter 3 of Publication 946.