Form It-398 - New York State Depreciation Schedule For Irc Section 168(K) Property - New York State Department Of Taxation And Finance - New York Page 2
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2IT-398 (2006) (back)
Instructions
This form may be e-filed as an attachment to an e-filed
showing each spouse’s separate amounts, as if separate federal returns
return; you cannot e-file this form by itself.
were filed, and explain any differences.
General instructions
Filling in your tax forms
For complete information on how to fill in New York State scannable
For tax years beginning after December 31, 2002, New York State (NYS)
income tax forms, see the instructions for:
does not allow the federal 30%/50% special depreciation deduction for
Internal Revenue Code (IRC) section 168(k) property (except for resurgence
• resident return (Form IT-201),
zone property and New York liberty zone property described in IRC
• nonresident and part-year resident return (Form IT-203),
section 1400L(b)(2)), placed in service inside or outside NYS after May 31,
• partnership return (Form IT-204), or
2003. Instead, you are allowed a NYS depreciation deduction determined
• fiduciary return (Form IT-205).
under IRC section 167, as that section would have applied to the property if
it had been acquired on September 10, 2001. You may take the deduction for
Also see the instructions for the above returns for the Privacy notification
NYS depreciation until the property is disposed of or fully depreciated.
or if you need help contacting the Tax Department.
If you claimed ACRS depreciation on your federal return for property
Specific instructions
placed in service beginning after May 31, 2003 (except for resurgence
zone property and New York liberty zone property described in IRC
Enter your name and identifying number (your social security number or
section 1400L(b)(2)), complete Part 1.
employer identification number) in the spaces provided on the front of this
form. Mark an X in the box that indicates which NYS income tax return you
Use this form to compute your NYS adjustments for NYS depreciation
are filing and attach this form to that return.
and federal depreciation deductions.
If you use a delivery service other than the U.S. Postal Service, see
As described in IRC section 168(k)(2), resurgence zone property is
Private delivery services in the instructions for the return you are filing.
defined as qualified property if all of the following apply:
• substantially all use of the property is in the resurgence zone; and
Part 1 Depreciation
• the use is in the active conduct of a trade or business by the taxpayer
Depreciation is the annual deduction allowed to recover the cost or other
in the resurgence zone; and
basis of business or investment property having a useful life substantially
beyond the tax year. However, land is never depreciable. Depreciation
• the original use by the taxpayer commences after December 31, 2002.
starts when you first use the property in your business or for the
The resurgence zone is defined as the area of New York County
production of income. It ends when you take the property out of service,
bounded on the south by a line running from the intersection of the
deduct all your depreciable cost or other basis, or no longer use the
Hudson River with the Holland Tunnel, running east to Canal Street, then
property in your business or for the production of income. (See Part 2 for
running along the centerline of Canal Street to the intersection of Bowery
the deduction to be taken in the year you dispose of the property.)
and Canal Street. It then runs in a southeasterly direction diagonally
Column C — Enter the depreciable basis of the assets you place in
across the Manhattan Bridge Plaza to the Manhattan Bridge, along the
service in the same year. Depreciable basis is the cost or other basis
centerline of the Manhattan Bridge to the point where the centerline
reduced by the part of the basis you elected to amortize or expense
would intersect with the east bank of the East River. It is bounded on the
under IRC section 179, and any federal investment credit subtracted
north by a line running from the intersection of the Hudson River with the
when computing the federal unadjusted basis of the asset.
Holland Tunnel, running north along West Avenue to the intersection of
Clarkson Street. It then runs east along the centerline of Clarkson Street
Column D — The applicable convention determines the portion of the
to the intersection of Washington Avenue, then running south along the
tax year for which the depreciation is allowable during a year property is
centerline of Washington Avenue to the intersection of West Houston
either disposed of or placed in service. Enter in column D the convention
Street. It continues east along the centerline of West Houston Street,
you used from federal Form 4562, column E.
then at the intersection of Avenue of the Americas, continues east along
Column E — Indicate the depreciation method selected for the
the centerline of East Houston Street to the east bank of the East River.
computation of the NYS allowable depreciation deduction. Any
If you have an interest in a passive activity, the modifications required
consistent depreciation method that would have been allowed under IRC
under Tax Law sections 612(b)(8) and (c)(16) for federal depreciation
section 167, as that section would have applied to the property if it had
and NYS depreciation must be made for the full amounts allowable as
been acquired on September 10, 2001, without regard to section 168(k),
a federal depreciation deduction (100%), even though the activity may
is acceptable.
be subject to federal loss deduction limitations. It is only under IRC
Column F — Enter your NYS depreciation deduction in column F, based
section 469 (Passive Activity Losses and Credits Limited) that there is a
on the method you elected in column E.
limitation on passive loss deductions.
Column G — Enter the depreciation deduction you took on your federal
In the case of a partnership using IRC section 168 to determine
return.
depreciation, the individual partners should make the adjustments
to income on their personal income tax returns. The adjustments for
Part 2 Year-of-disposition adjustment
partners are their distributive share of NYS depreciation and federal
If you dispose of IRC section 168(k) property (except for resurgence
depreciation, determined by the partnership as of the end of the
zone property and New York liberty zone property described in IRC
partnership year ending within the partner’s tax year. Form IT-398 should
section 1400L(b)(2)) that you placed in service inside or outside NYS
be completed only by the partnership, and not by each individual partner.
after May 31, 2003, you must adjust your NYS income by the difference
This treatment is the same for a beneficiary of an estate or trust that is
between the total NYS depreciation deduction and the total federal
on a fiscal-year basis.
depreciation deduction claimed on that property.
If you are a shareholder of an electing New York State S corporation,
Column C — Enter the method used to dispose of the property.
the S corporation should provide your proportionate share of the
Disposition includes, but is not limited to, sale, exchange, transfer, and
S corporation’s depreciation deduction.
obsolescence.
If you are a nonresident or part-year resident, you must complete
Column D — Enter the total NYS depreciation deduction you claimed on
Form IT-398 as if you were a NYS resident for the entire year. Transfer
the property you disposed of.
the amounts from Part 1 and Part 2 to Form IT-203, Nonresident and
Part-Year Resident Income Tax Return. For more information on the
Column E — Enter the total federal depreciation deduction you claimed
addition and subtraction modifications for federal and NYS depreciation,
on your federal return for the disposition of your property.
see Form IT-203-I, Instructions for Form IT-203.
If you are married and file a joint federal return but are required to file
separate NYS returns, complete only one Form IT-398 showing the
amounts from your joint federal return. Attach a schedule to each return
Please file this original scannable attachment with the Tax Department.
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