N.Y. Comp. Codes R. & Regs. tit. 20 § 112.7

Current through Register Vol. 46, No. 45, November 2, 2024

Section 112.7 - Optional modifications for depreciation

Tax Law, § 612(g)

(a)General.

(1) For taxable years beginning on or after January 1, 1964, a taxpayer is provided an option to subtract from Federal adjusted gross income an amount not to exceed twice the amount of Federal depreciation on certain newly acquired depreciable property (optional depreciation). See section 112.3(k) of this section for the applicable subtraction modification.

(2) Property which qualifies for the modification with respect to optional depreciation is described in section 612 (g)(3) and (4) of the Tax Law. This modification is allowed only upon condition that any depreciation or amortization allowed with respect to the same property in determining Federal adjusted gross income for a taxable year is added to Federal adjusted gross income (see section 112.2[f] of this Part) for such taxable year. The total of all modifications under this section in any taxable year or years with respect to any property described in section 612 (g)(3) of the Tax Law must not exceed its cost or other basis and, with respect to property described in section 612 (g)(4) of the Tax Law which is used in a business carried on both within and without New York State, must not exceed its cost or other basis multiplied by a percentage of the excess of the taxpayer's business income over its business deductions which is allocated to New York State for the first year such modification is made. Such percentage shall be determined in accordance with the rules provided in section 132.15 of this Title.

(b)Adjustment of basis upon sale or other disposition.

(1) In any taxable year when property, with respect to which an optional modification for depreciation has been allowed, is sold or otherwise disposed of, the basis of such property must be adjusted to reflect such modification and, if the basis as so adjusted is lower than the adjusted basis of the same property for Federal income tax purposes, there must be added to the taxpayer's Federal adjusted gross income the amount of the difference between such adjusted bases (see section 112.2[f] of this Part). For purposes of this subdivision, the New York State basis of property is the Federal original cost or other basis less the aggregate of the amounts allowed as optional depreciation of qualifying for all taxable years from the year of acquisition to and including the year of sale or other disposition.

(2) A sale or disposition of qualifying property includes any transfer or exchange without regard to whether gain or loss from the transaction is recognized for Federal income taxes purposes.

(c)Carryover of unused modifications.

If the optional modification for depreciation allowable for any taxable year exceeds the taxpayer's New York adjusted gross income, determined without the allowance of such modification, the excess may be carried over to the following taxable year or years, and may be subtracted from such taxpayer's Federal adjusted gross income (see section 112.3[k] of this Part) for such year or years. Where a carryover under this provision is claimed, complete details of the computation of the carryover must be submitted with the taxpayer' s New York State personal income tax return.

(d)Rules for making election.

(1) An election to modify Federal adjusted gross income for optional depreciation must be made by filing with the New York State personal income tax return or returns in which such modification is claimed, a statement evidencing such election and containing complete details of the qualifying property involved and the computation of the related modification. (Such statement and information must be submitted on form IT-211, New York State Special Depreciation Schedule.)

(2) An election made with respect to a specific item of property is binding for all subsequent taxable years unless the Department of Taxation and Finance consents to a change with respect thereto upon such terms and conditions as it may fix.

(3) An election with respect to qualifying property of a partnership must be made by the partnership and will apply to all partnership members. An election with respect to qualifying property of an estate or trust must be made by the fiduciary and will be binding on all beneficiaries of the estate and trust.

(4) Where a taxpayer elects to claim the investment credit or the retail enterprise credit allowable under section 606 (a) of the Tax Law (see section 106.1 of this Title), such taxpayer may not make the subtraction modification referred to in this subdivision (see section 606[a][3] of the Tax Law).

N.Y. Comp. Codes R. & Regs. Tit. 20 § 112.7