The following items will be allowed as special deductions in determining Commonwealth taxable income if supported by a detailed schedule:
Example: Taxpayer, a calendar year company, purchases a plant, which is a section 1250 of the IRC property, on January 1, 1976, having a depreciable value of $900,000 and a 20-year useful life. Taxpayer depreciates the property on a double-declining (accelerated) basis. Straight-line depreciation would be $45,000 per year. Taxpayer's depreciation on its Federal return for 1984 would be $43,047. Taxpayer's 1984 taxable income to be apportioned on its Commonwealth report would be adjusted by permitting a deduction for the amount of depreciation below straight-line or $1,953 ($45,000 minus $43,047).
Example: Taxpayer purchases a building in 1971 and elects to depreciate the building on an accelerated depreciation basis. The following amounts were included as tax preference items for the years listed:
Year | Tax Preference Amount |
1971 | $10,000 |
1972 | 7,500 |
1973 | 5,000 |
1974 | 2,500 |
_____ | ______ |
Total | $25,000 |
The building was sold on January 1, 1975. Each of the years listed in this example produced taxable income and the tax preference amounts listed in this example were included in income to be apportioned. The Department will permit the taxpayer a special deduction of $25,000.
Example: Taxpayer's, a calendar year company, rapid amortization period of a certified pollution control facility constructed in late December 1971, begins January 1972 and expires December 1976. No other depreciation has been taken and the depreciable value is $1 million and the useful life is 20 years. Straight-line depreciation would be $50,000 per year. Since the useful life is greater than 15 years, taxpayer's Federal rapid amortization deduction is available only for the portion of the property's depreciable value attributable to the first 15 years of its useful life or 75% (15/20) of its depreciable value (75% of $1 million or $750,000) over the 60 months rapid amortization period. The remaining 25% of its depreciable value (25% of $1 million or $250,000) is depreciated by the straight-line method over the 20-year useful life period. Taxpayer's depreciation on its Federal return for 1977 would be $12,500. Taxpayer's 1977 taxable income to be apportioned on its Commonwealth report would be adjusted by permitting a deduction for the amount of depreciation below straight-line or $37,500 ($50,000 minus $12,500).
61 Pa. Code § 153.14