Page 87 - Small Business Taxes

16:31 - 2-Feb-2023
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Fileid: … tions/p535/2022/a/xml/cycle01/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
For additional information on reforestation that the partner was able to deduct the distribu- 3. The barrier must be removed without cre-
costs, see chapter 8. tive share of the partnership's costs in full. ating any new barrier that significantly im-
pairs access to or use of the facility or ve-
Recapture. This deduction may have to be re- Example. Emilio Azul's distributive share of hicle by a major group of persons who
captured as ordinary income under section ABC partnership's deductible expenses for the have a disability or are elderly.
1245 when you sell or otherwise dispose of the removal of architectural barriers was $14,000.
property that would have received an addition Emilio had $12,000 of similar expenses in his How to make the election. If you elect to de-
to basis if you had not elected to deduct the ex- sole proprietorship. He elected to deduct duct your costs for removing barriers to the dis-
penditure. For more information on recapturing $7,000 of them. Emilio allocated the remaining abled or the elderly, claim the deduction on
the deduction, see Depreciation Recapture in $8,000 of the $15,000 limit to his share of your income tax return (partnership return for
Pub. 544. ABC's expenses. Emilio can add the excess partnerships) for the tax year the expenses
$5,000 of his own expenses to the basis of the were paid or incurred. Identify the deduction as
Retired Asset Removal property used in his business. Also, if ABC can a separate item. The election applies to all the
show that Emilio could not deduct $6,000
qualifying costs you have during the year, up to
Costs ($14,000 – $8,000) of his share of the partner- the $15,000 limit. If you make this election, you
must maintain adequate records to support your
ship's expenses because of how Emilio applied
the limit, ABC can add $6,000 to the basis of its deduction.
If you retire and remove a depreciable asset in property. For your election to be valid, you must gen-
connection with the installation or production of erally file your return by its due date, including
a replacement asset, you can deduct the costs Qualification standards. You can deduct extensions. However, if you timely filed your re-
of removing the retired asset. However, if you your costs as a current expense only if the bar- turn for the year without making the election,
replace a component (part) of a depreciable as- rier removal meets the guidelines and require- you can still make the election by filing an
set, capitalize the removal costs if the replace- ments issued by the Architectural and Trans- amended return within 6 months of the due date
ment is an improvement and deduct the costs if portation Barriers Compliance Board under the of the return (excluding extensions). Clearly in-
the replacement is a repair. Americans with Disabilities Act (ADA) of 1990. dicate the election on your amended return and
You can view the ADA at ADA.gov/pubs/ write “Filed pursuant to section 301.9100-2.”
Barrier Removal Costs ada.htm. File the amended return at the same address
The following is a list of some architectural
you filed the original return. Your election is ir-
barrier removal costs that can be deducted. revocable after the due date, including exten-
The cost of an improvement to a business asset • Ground and floor surfaces. sions, of your return.
is normally a capital expense. However, you • Walks.
can elect to deduct the costs of making a facility • Parking lots. Disabled access credit. If you make your
or public transportation vehicle more accessible • Ramps. business accessible to persons with disabilities
to and usable by those who are disabled or eld- • Entrances. and your business is an eligible small business,
erly. You must own or lease the facility or vehi- • Doors and doorways. you may be able to claim the disabled access
cle for use in connection with your trade or busi- • Stairs. credit. If you choose to claim the credit, you
ness. • Floors. must reduce the amount you deduct or capital-
ize by the amount of the credit.
A facility is all or any part of buildings, struc- • Toilet rooms. For more information, see Form 8826.
• Water fountains.
tures, equipment, roads, walks, parking lots, or • Public telephones.
similar real or personal property. A public trans- • Elevators.
portation vehicle is a vehicle, such as a bus or • Controls. Film, Television, and
railroad car, that provides transportation service • Signage.
to the public (including service for your custom- • Alarms. Live Theatrical
ers, even if you are not in the business of pro- • Protruding objects. Production Costs
viding transportation services). • Symbols of accessibility.
You cannot deduct any costs that you paid You can find the ADA guidelines and require- Film, television, and theatrical production costs
or incurred to completely renovate or build a fa- ments for architectural barrier removal at are generally capital expenses. However, you
cility or public transportation vehicle or to re- USDOJ.gov/crt/ada/reg3a.html. can elect to deduct certain costs of a qualified
place depreciable property in the normal course The costs for removal of transportation barri- film, television, or live theatrical production
of business. ers from rail facilities, buses, and rapid and light commencing before January 1, 2026 (after De-
rail vehicles are deductible. You can find the cember 31, 2015, and before January 1, 2026,
Deduction limit. The most you can deduct as guidelines and requirements for transportation for a live theatrical production), if the aggregate
a cost of removing barriers to the disabled and barrier removal at transit.dot.gov. cost of the production doesn't exceed $15 mil-
the elderly for any tax year is $15,000. How- Also, you can access the ADA website at lion. There is a higher dollar limitation for pro-
ever, you can add any costs over this limit to the ADA.gov for additional information. ductions in certain areas. The deduction is sub-
basis of the property and depreciate these ex- ject to recapture under section 1245 if the
cess costs. Other barrier removals. To be deductible, election is voluntarily revoked or the production
expenses of removing any barrier not covered
Partners and partnerships. The $15,000 limit by the above standards must meet all three of fails to meet the requirements for the deduction.
For more information, see section 181 and the
applies to a partnership and also to each part- the following tests. related regulations.
ner in the partnership. A partner can allocate 1. The removed barrier must be a substantial
the $15,000 limit in any manner among the part- barrier to access or use of a facility or pub- Certain qualified film, television, or live the-
ner's individually incurred costs and the part- lic transportation vehicle by persons who atrical productions acquired and placed in serv-
ner's distributive share of partnership costs. If have a disability or are elderly. ice after September 27, 2017, may be eligible
the partner cannot deduct the entire share of for the special depreciation allowance under
partnership costs, the partnership can add any 2. The removed barrier must have been a section 168(k). For more information, see Pub.
costs not deducted to the basis of the improved barrier for at least one major group of per- 946, How To Depreciate Property.
property. sons who have a disability or are elderly
A partnership must be able to show that any (such as people who are blind, deaf, or Note. No other depreciation or amortization
amount added to basis was not deducted by wheelchair users). deduction is allowed for costs of qualified film or
the partner and that it was over a partner's television production or any qualified live theat-
$15,000 limit (as determined by the partner). If rical production if an election is made to deduct
the partnership cannot show this, it is presumed such costs.
Page 28 Chapter 7 Costs You Can Deduct or Capitalize