Section 24356(a) - Additional First-Year Depreciation Allowance(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.(B) The additional first-year depreciation allowance on Section 24356 property is not available if the cost of such property is to be recovered through amortization deductions under Section 24343 and the regulations thereunder instead of through depreciation allowances under Section 24349Cal. Code Regs. Tit. 18, § 24356(a)
1. New section filed 3-31-70; effective thirtieth day thereafter (Register 70, No. 14).[FN*]
This regulation is based on Section 26 CFR 1.179-1 Note: Authority cited: Section 26422, Revenue and Taxation Code.
1. New section filed 3-31-70; effective thirtieth day thereafter (Register 70, No. 14).