Instructions For Form 3468 - 2009


2 0 09
Department of the Treasury
Internal Revenue Service
Instructions for Form 3468
Investment Credit
Section references are to the Internal Revenue Code unless
At-Risk Limit for Individuals and Closely
otherwise noted.
Held Corporations
General Instructions
The cost or basis of property for investment credit purposes
may be limited if you borrowed against the property and are
Purpose of Form
protected against loss, or if you borrowed money from a person
who is related or who has an interest (other than as a creditor)
Use Form 3468 to claim the investment credit. The investment
in the business activity. The cost or basis must be reduced by
credit consists of the rehabilitation, energy, qualifying advanced
the amount of the nonqualified nonrecourse financing related to
coal project, qualifying gasification project, and qualifying
the property as of the close of the tax year in which the property
advanced energy project credits. If you file electronically, you
is placed in service. If, at the close of a tax year following the
must send in a paper Form 8453, U.S. Individual Income Tax
year property was placed in service, the nonqualified
Transmittal for an IRS e-file Return, if attachments are required
nonrecourse financing for any property has increased or
to Form 3468.
decreased, then the credit base for the property changes
Investment Credit Property
accordingly. The changes may result in an increased credit or a
recapture of the credit in the year of the change. See sections
Investment credit property is any depreciable or amortizable
49 and 465 for details.
property that qualifies for the rehabilitation credit, energy credit,
qualifying advanced coal project credit, qualifying gasification
Recapture of Credit
project credit, or qualifying advanced energy project credit.
You may have to refigure the investment credit and recapture
You cannot claim a credit for property that is:
all or a portion of it if:
Used mainly outside the United States (except for property
You dispose of investment credit property before the end of 5
described in section 168(g)(4));
full years after the property was placed in service (recapture
Used by a governmental unit or foreign person or entity
(except for a qualified rehabilitated building leased to that unit,
You change the use of the property before the end of the
person, or entity; and property used under a lease with a term
recapture period so that it no longer qualifies as investment
of less than 6 months);
credit property;
Used by a tax-exempt organization (other than a section 521
The business use of the property decreases before the end
farmers’ cooperative) unless the property is used mainly in an
of the recapture period so that it no longer qualifies (in whole or
unrelated trade or business or is a qualified rehabilitated
in part) as investment credit property;
building leased by the organization;
Any building to which section 47(d) applies will no longer be a
Used for lodging or in the furnishing of lodging (see section
qualified rehabilitated building when placed in service;
50(b)(2) for exceptions); or
Any property to which section 48(b) applies will no longer
Certain MACRS business property to the extent it has been
qualify as investment credit property when placed in service;
expensed under section 179 of the Internal Revenue Code.
Before the end of the recapture period, your proportionate
interest is reduced by more than one-third in an S corporation,
Qualified Progress Expenditures
partnership (other than an electing large partnership), estate, or
Qualified progress expenditures are those expenditures made
trust that allocated the cost or basis of property to you for which
before the property is placed in service and for which the
you claimed a credit;
taxpayer has made an election to treat the expenditures as
You return leased property (on which you claimed a credit) to
progress expenditures. Qualified progress expenditure property
the lessor before the end of the recapture period;
is any property that is being constructed by or for the taxpayer
A net increase in the amount of nonqualified nonrecourse
and which (a) has a normal construction period of two years or
financing occurs for any property to which section 49(a)(1)
more, and (b) it is reasonable to believe that the property will be
applied; or
new investment credit property in the hands of the taxpayer
A grant under section 1603 of the American Recovery and
when it is placed in service. The placed in service requirement
Reinvestment Tax Act of 2009 was made for section 48
does not apply to qualified progress expenditures.
property for which a credit was allowed for progress
expenditures before the grant was made.
Qualified progress expenditures for:
Exceptions to recapture. Recapture of the investment credit
Self-constructed property means the amount that is properly
does not apply to any of the following.
chargeable (during the tax year) to capital account with respect
to that property; or
1. A transfer due to the death of the taxpayer.
Non-self-constructed property means the lesser of: (a) the
2. A transfer between spouses or incident to divorce under
amount paid (during the tax year) to another person for the
section 1041. However, a later disposition by the transferee is
construction of the property, or (b) the amount that represents
subject to recapture to the same extent as if the transferor had
the proportion of the overall cost to the taxpayer of the
disposed of the property at the later date.
construction by the other person which is properly attributable
3. A transaction to which section 381(a) applies (relating to
to that portion of the construction which is completed during the
certain acquisitions of the assets of one corporation by another
tax year.
4. A mere change in the form of conducting a trade or
For more information on qualified progress expenditures,
business if:
see section 46(d) (as in effect on November 4, 1990). For
details on qualified progress expenditures for the rehabilitation
a. The property is retained as investment credit property in
credit, see section 47(d).
that trade or business, and
Cat. No. 12277P


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