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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
each qualified vehicle by certain amounts repor- For information on figuring depreciation, see qualified child care facility. You must reduce
ted. For more information on available credits, Pub. 946. your basis in that property by the credit claimed.
see Form 8834, Qualified Electric Vehicle For more information, see Form 8882, Credit for
Credit; Form 8910, Alternative Motor Vehicle If you're claiming depreciation on a business Employer-Provided Child Care Facilities and
Credit; Form 8936, Qualified Plug-in Electric vehicle, see Pub. 463. If the car isn't used more Services.
Drive Motor Vehicle Credit; and the related in- than 50% for business during the tax year, you
structions. may have to recapture excess depreciation. In- Disposition of a Portion of MACRS
clude the excess depreciation in your gross in- Property
Gas-Guzzler Tax come and add it to your basis in the property.
For information on the computation of excess If you sell a portion of MACRS property (a
Decrease the basis in your car by the gas-guz- depreciation, see chapter 4 in Pub. 463. MACRS asset), you must reduce the adjusted
zler (fuel economy) tax if you begin using the basis of the asset by the adjusted basis of the
car within 1 year of the date of its first sale for Canceled Debt Excluded portion sold. Use your records to determine
ultimate use. This rule also applies to someone From Income which portion of the asset was sold, the date
who later buys the car and begins using it not the asset was placed in service, the unadjusted
more than 1 year after the original sale for ulti- If a debt you owe is canceled or forgiven, other basis of the portion sold, and its adjusted basis.
mate use. If the car is imported, the 1-year pe- than as a gift or bequest, you must generally in- See the partial disposition rules in Regulations
riod begins on the date of entry or withdrawal of clude the canceled amount in your gross in- section 1.168(i)-8 for more detail. The adjusted
the car from the warehouse if that date is later come for tax purposes. A debt includes any in- basis of the portion sold is used to determine
than the date of the first sale for ultimate use. debtedness for which you're liable or which the gain or loss realized on the sale. Also see
attaches to property you hold. Pub. 544.
Section 179 Deduction You can exclude canceled debt from in-
come in the following situations. If you physically abandon a portion of
If you take the section 179 deduction for all or MACRS property (a MACRS asset) and you
part of the cost of qualifying business property, 1. Debt canceled in a bankruptcy case or elect to recognize the loss on the abandonment
decrease the basis of the property by the de- when you're insolvent. by reporting the loss on your tax return, you
duction. For more information about the section 2. Qualified farm debt. must reduce the adjusted basis of the MACRS
179 deduction, see Pub. 946. asset by the adjusted basis of the portion aban-
3. Qualified real property business debt (pro- doned. Use your records to determine which
Exclusion of Subsidies for Energy vided you're not a C corporation). portion of the asset was abandoned, the date
Conservation Measures If you exclude from income canceled debt un- the asset was placed in service, the unadjusted
der situation (1) or (2), you may have to reduce basis of the portion abandoned, and its adjus-
ted basis. See the partial disposition rules in
You can exclude from gross income any sub- the basis of your depreciable and nondeprecia- Regulations section 1.168(i)-8 for more detail.
sidy you received from a public utility company ble property. However, in situation (3), you must Also see Example 2 and Example 3 below.
for the purchase or installation of any energy reduce the basis of your depreciable property
conservation measure for a dwelling unit. Re- by the excluded amount.
duce the basis of the property for which you re- Adjustments to Basis
ceived the subsidy by the excluded amount. For For more information about canceled debt in Examples
more information on this subsidy, see Pub. 525. a bankruptcy case or during insolvency, see
Pub. 908, Bankruptcy Tax Guide. For more in- Example 1. In January 2017, you paid
Depreciation formation about canceled debt that is qualified $80,000 for real property to be used as a fac-
farm debt, see chapter 3 in Pub. 225. For more tory. You also paid commissions of $2,000 and
Decrease the basis of property by the deprecia- information about qualified real property busi- title search and legal fees of $600. You alloca-
ness debt, see chapter 5 in Pub. 334, Tax
tion you deducted, or could have deducted, on ted the total cost of $82,600 between the land
your tax returns under the method of deprecia- Guide for Small Business. and the building—$10,325 for the land and
tion you chose. If you took less depreciation $72,275 for the building. Immediately, you
than you could have under the method chosen, Postponed Gain From Sale of spent $20,000 in remodeling the building before
decrease the basis by the amount you could Home you placed it in service. You were allowed de-
have taken under that method. If you didn't take preciation of $14,526 for the years 2017
a depreciation deduction, reduce the basis by If you postponed gain from the sale of your through 2021. In 2020, you had a $5,000 casu-
the full amount of the depreciation you could main home before May 7, 1997, you must re- alty loss from a storm that wasn't covered by in-
have taken. duce the basis of your new home by the post- surance on the building. You claimed a deduc-
poned gain. For more information on the rules tion for this loss. You spent $5,500 to repair the
Unless a timely election is made not to de- for the sale of a home, see Pub. 523. damages and to otherwise improve the build-
duct the special depreciation allowance for ing. The adjusted basis of the building on Janu-
property placed in service after September 10, Adoption Tax Benefits ary 1, 2022, is figured as follows:
2001, decrease the property's basis by the spe-
cial depreciation allowance you deducted or If you claim an adoption credit for the cost of im- Original cost of building including fees and
could have deducted. provements you added to the basis of your commissions . . . . . . . . . . . . . . . . . . . . . . $72,275
home, decrease the basis of your home by the Adjustments to basis:
Add:
If you deducted more depreciation than you credit allowed. This also applies to amounts you Improvements . . . . . . . . . . . . . . . . . 20,000
should have, decrease your basis by the received under an employer's adoption assis- Repair of damages . . . . . . . . . . . . . . 5,500
amount equal to the depreciation you should tance program and excluded from income. For $97,775
have deducted plus the part of the excess de- more information, see Form 8839, Qualified Subtract:
preciation you deducted that actually reduced Adoption Expenses. Depreciation . . . . . . . . . . $14,526
your tax liability for the year. Deducted casualty 5,000 19,526
Employer-Provided Child Care loss . . . . . . . . . . . . . . . .
In decreasing your basis for depreciation, Adjusted basis on January 1, 2022 . . . . $78,249
take into account the amount deducted on your If you're an employer, you can claim the em-
tax returns as depreciation and any deprecia- ployer-provided child care credit on amounts The basis of the land, $10,325, remains un-
tion capitalized under the uniform capitalization you paid or incurred to acquire, construct, reha- changed. It's not affected by any of the above
rules. bilitate, or expand property used as part of your adjustments.
Page 6 Publication 551 (December 2022)