Form An 2008 - Special Instructions For Stimulus Depreciation (Page 2 of 4) in pdf

What must a corporation do if it claims the

For Connecticut corporation business tax purposes,

stimulus

depreciation

for

federal

tax

the corporation must:

purposes but cannot claim it for Connecticut

•

tax purposes? Since a corporation cannot claim

Add back to the corporation’s federal net

the stimulus depreciation for Connecticut tax

income

(loss)

the

$50,000

stimulus

purposes, certain modifications must be made for

depreciation;

purposes of calculating the Connecticut corporation

•

Calculate the first-year MACRS depreciation

business tax.

allowed for Connecticut corporation business

The modifications a corporation must make are:

tax purposes, using its Connecticut basis of

$100,000. This results in a Connecticut

•

Adding back the amount of the stimulus

MACRS depreciation deduction in the

depreciation to the amount of federal net

amount of $20,000 ($100,000 x 20%);

income (loss) reported for Connecticut

corporation business tax purposes for the

•

Calculate the difference ($10,000) between

income year that the stimulus depreciation is

the

Connecticut

MACRS

depreciation

claimed; and

($20,000)

and

the

federal

MACRS

depreciation ($10,000) ($20,000 - $10,000

•

Subtracting the difference between the

= $10,000); and

amount of MACRS depreciation allowed for

Connecticut

corporation

business

tax

•

Subtract the difference ($10,000) from the

purposes and the amount allowed for federal

corporation’s federal net income (loss).

tax purposes for the initial year that the

In subsequent years, the corporation will subtract

bonus depreciation is claimed and in each

from federal net income (loss) the difference between

subsequent year in which the property is

the Connecticut MACRS depreciation and the federal

depreciated.

MACRS depreciation, until the property is fully

depreciated. Ultimately, if the property is held until it

Thus, the corporation must calculate MACRS

depreciation twice: first, reflecting the stimulus

is fully depreciated, the taxpayer will be able to

claim, albeit in different years, the same amount of

depreciation; and second, reflecting the MACRS

depreciation without the stimulus depreciation. A

depreciation for Connecticut corporation business tax

purposes and federal tax purposes.

corporation that claims the stimulus depreciation

must keep a separate depreciation schedule for

Connecticut corporation business tax purposes.

How is the adjustment for the stimulus

Example: A non–calendar year corporation acquires

depreciation to be reported on the 2007

and places in service qualified property after

Corporation

Business

Tax

Return?

The

December 31, 2007, but before January 1, 2009.

corporation should follow the steps provided below

Assume that the equipment is MACRS 5-year

to make the necessary adjustments to the computation

property, that the half-year convention applies, that

of net income:

the purchase price is $100,000, and that no amount is

expensed under I.R.C. §179. For federal tax

1. Include the amount of stimulus depreciation

purposes,

the

corporation

claims

the

bonus

reported on federal Form 4562-FY, Depreciation

depreciation under I.R.C. §168(k) in the amount of

and Amortization, Line 14 and Line 25 as follows:

$50,000 ($100,000 x 50%). It then reduces its basis

•

in the equipment to $50,000 and uses that reduced

On 2007 Form CT-1120, Corporation

basis to calculate its federal MACRS depreciation of

Business Tax Return, Schedule D, Line 3.

$10,000, ($50,000 x 20%) for a total deduction of

(This is the same line used to report taxes

$60,000 in the first year.

that must be added back to income from

Schedule F, Line 8 of Form CT-1120).

Page 2 of 4

Form An 2008 - Special Instructions For Stimulus Depreciation Page 2

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