Instructions For Form 3468 - Department Of The Treasury printable pdf download

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Department of the Treasury

Internal Revenue Service

Instructions for Form 3468

Investment Credit

Section references are to the Internal Revenue Code unless otherwise noted.

At-Risk Limit for Individuals and Closely

General Instructions

Held Corporations

The cost or basis of property for investment credit purposes

Purpose of Form

may be limited if you borrowed against the property and are

Use Form 3468 to claim the investment credit. The investment

protected against loss, or if you borrowed money from a person

credit consists of the rehabilitation, energy, and reforestation

who is related or who has other than a creditor interest in the

credits. Also use Form 3468 to claim a regular investment credit

business activity. The cost or basis must be reduced by the

for transition property.

amount of this “nonqualified nonrecourse financing” related to

the property as of the close of the tax year in which it is placed

Investment Credit Property

in service. If, at the close of a tax year following the year

property was placed in service, the nonqualified nonrecourse

Investment credit property is any depreciable or amortizable

financing for any property has increased or decreased, then the

property that qualifies for the rehabilitation, energy, or

credit base for the property changes accordingly. The changes

reforestation credit. For details on the rehabilitation credit, see

may result in an increased credit or a recapture of the credit in

the instructions for lines 1a through 1e. For details on the

the year of the change. See sections 49 and 465 for details.

energy credit, see the instructions for line 2. For details on the

reforestation credit, see the instructions for line 3.

Recapture of Credit

You cannot claim a credit for property that is:

1. Used mainly outside the United States (except for

You may have to refigure the investment credit and may have

property described in section 168(g)(4)),

to recapture all or a portion of it if:

•

2. Used by a governmental unit or foreign person or entity

You dispose of investment credit property before the end of 5

(except for a qualified rehabilitated building leased to that unit,

full years after the property was placed in service (recapture

person, or entity; and property used under a lease with a term

period),

•

of less than 6 months),

You change the use of the property before the end of the

3. Used by a tax-exempt organization (other than a section

recapture period so that it no longer qualifies as investment

521 farmers’ cooperative) unless the property is used mainly in

credit property,

•

an unrelated trade or business or is a qualified rehabilitated

The business use of the property decreases before the end

building leased by the organization, or

of the recapture period so that it no longer qualifies (in whole or

4. Used for lodging or in the furnishing of the lodging (see

in part) as investment credit property,

section 50(b)(2) for exceptions).

•

Any building to which section 47(d) applies will no longer be a

qualified rehabilitated building when placed in service,

•

Transition Property

Any property to which section 48(a)(5) applies will no longer

qualify as investment credit property when placed in service,

Property of certain taxpayers specified in sections 204(a)(8),

•

Before the end of the recapture period, your proportionate

204(a)(12), and 204(c)(4) of the Tax Reform Act of 1986 (TRA)

interest is reduced by more than one-third in an S corporation,

may be eligible for the regular investment credit under the

partnership (other than an electing large partnership), estate, or

transitional rules of section 49 (as in effect on November 4,

trust that allocated the cost or basis of property to you for which

1990). Also, certain projects specified in TRA sections 251(d)(3)

you claimed a credit,

and (4) may be eligible for the rehabilitation credit under the

•

You return leased property (on which you claimed a credit) to

transitional rules of TRA section 251(d)(5). For property that

the lessor before the end of the recapture period,

qualifies under the transitional rules, do not use lines 1 through

•

A net increase in the amount of nonqualified nonrecourse

4. Instead, attach a statement that shows how you figured the

financing occurs for any property to which section 49(a)(1)

allowable credit. Include the credit on line 5 of Form 3468 and

applied.

write on the dotted line to the left of line 5 “TRA” and the section

number that lists your property as qualifying for the credit. If you

Exceptions to recapture. Recapture of the investment credit

are claiming the rehabilitation credit, see the instructions for

does not apply to any of the following.

•

lines 1a through 1e for other information that must be attached.

A transfer because of the death of the taxpayer.

•

A transfer between spouses or incident to divorce under

Election for Certain Leased Property

section 1041. However, a later disposition by the transferee is

subject to recapture to the same extent as if the transferor had

If you lease property to someone else, you may elect to treat all

disposed of the property at the later date.

or part of your investment in new property as if it were made by

•

A transaction to which section 381(a) applies (relating to

the person who is leasing it from you. Lessors and lessees

certain acquisitions of the assets of one corporation by another

should see section 48(d) (as in effect on November 4, 1990)

corporation).

and related regulations for rules on making this election. For

•

limitations, see sections 46(e)(3) and 48(d) (as in effect on

A mere change in the form of conducting a trade or business

if:

November 4, 1990).

Cat. No. 12277P

Instructions For Form 3468 - Department Of The Treasury

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