California Form Ftb 3885 - Corporation Depreciation And Amortization - 2012 Page 3
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3Specific Line Instructions
items from being treated as listed property for
Commercial and industrial:
New (useful life 3 yrs. or more) . . . . 150% Declining balance
taxable years beginning on or after January 1,
For properties placed in service during the taxable
Used . . . . . . . . . . . . . . . . . . . . . . . . . Straight-line
2010.
Personal property
year, the corporation may complete Part I if the
• Computers or peripheral equipment.
New (useful life 3 yrs. or more) . . . . . 200% Declining balance
corporation elects to expense qualified property
Exception. Listed property generally does not
Used (useful life 3 yrs. or more) . . . . . 150% Declining balance
under IRC Section 179, or Part II if the corporation
include:
See “Other Consistent Methods” information on
elects additional first year expense deduction for
page 1.
qualified property under R&TC Section 24356. The
• Photographic, phonographic, communication,
or video equipment used exclusively in the
corporation may only elect IRC Section 179 or the
The Class Life ADR System of depreciation may
additional first year expense deduction for the same
corporation’s trade or business.
be used for designated classes of assets placed in
taxable year. The election must be made on a timely
• Any computer or peripheral equipment used
service after 1970.
exclusively at a regular business.
filed tax return (including extension). The election
The Guideline Class Life System of depreciation
may not be revoked except with the Franchise Tax
• An ambulance, hearse, or vehicle used for
may be used for certain classes of assets placed in
Board‘s consent.
transporting persons or property for hire.
service before 1971.
Listed property used 50% or less in business activity
Part II is also used to calculate depreciation for
F Election To Expense
property (with or without the above elections).
does not qualify for the IRC Section 179 expense
deduction. For more information regarding listed
Certain Property Under IRC
Part I Election To Expense Certain Property
property, see the instructions for federal Form 4562.
Under IRC Section 179
Section 179
Line 11
Complete Part I if the corporation elects IRC
For taxable years beginning on or after
The total cost the corporation can deduct is limited to
Section 179 expense. Include all assets qualifying
January 1, 2005, corporations may elect IRC
the corporation’s business income. For the purpose
for the deduction since the limit applies to all
Section 179 to expense part or all of the cost of
of IRC Section 179 election, business income is the
qualifying assets as a group rather than to each asset
depreciable tangible property used in the trade
net income derived from the corporation’s active
individually. The total IRC Section 179 expense for
or business and certain other property described
trade or business, Form 100 or Form 100W, line 18,
property, which the election may be made, is figured
in federal Publication 946, How to Depreciate
before the IRC Section 179 expense deduction
on line 5. The amount of IRC Section 179 expense
Property. To elect IRC Section 179, the corporation
(excluding items not derived from a trade or
deductions for the taxable year cannot exceed the
must have purchased property, as defined in the
business actively conducted by the corporation).
corporation’s business income on line 11. See
IRC Section 179(d)(2), and placed it in service
the instructions for federal Form 4562 for more
Part II Depreciation and Election of
during the taxable year. If the corporation elects
information.
Additional First Year Expense
this deduction, the corporation must reduce the
Line 2
Deduction Under R&TC
California depreciable basis by the IRC Section 179
Enter the cost of all IRC Section 179 qualified
expense. See the instructions for federal Form 4562,
Section 24356
property placed in service during the taxable year
Depreciation and Amortization, for more information.
Line 14
including the cost of any listed property. See General
Corporations may enter each asset separately or
California does not allow IRC Section 179 expense
Information F, Election To Expense Certain Property
group assets into depreciation accounts. Figure the
election for off-the-shelf computer software.
Under IRC Section 179, for information regarding
depreciation separately for each asset or group of
California conforms to the federal changes made to
qualified property. See line 7 instructions for
assets. The basis for depreciation is the cost or other
the deduction of business start-up and organizational
information regarding listed property.
basis reduced by a reasonable salvage value (except
costs paid or incurred on or after January 1,
when using the declining balance method), additional
Line 5
2005. Exceptions: California does not conform to
If line 5 is zero, the corporation cannot elect to
first-year depreciation (if applicable), and tax credits
the federal increase in the deduction for start-up
expense any IRC Section 179 property. Skip line 6
claimed on depreciable property (where specified).
expenses in 2010 taxable year.
This may cause the California basis to be different
through line 11, enter zero on line 12.
Limitations. Federal limitation amounts are different
from the federal basis.
Line 6
than California limitation amounts. For California
Do not include any listed property on line 6. Enter
If the Guideline Class Life System or Class Life ADR
purposes, the maximum IRC Section 179 expense
System is used, enter the total amount from the
the elected IRC Section 179 cost of listed property
deduction allowed is $25,000. This amount is
on line 7.
corporation’s schedule showing the computation on
reduced if the cost of all IRC Section 179 property
form FTB 3885, column (g), and identify as such.
Column (a) – Description of property. Enter a brief
placed in service during the taxable year is more
description of the property the corporation elects to
Line 14, Column (h), Additional first-year
than $200,000. The total IRC Section 179 expense
depreciation.
expense.
deduction cannot exceed the corporation’s business
Corporations may elect to deduct up to 20% of the
income.
Column (b) – Cost (business use only). Enter the
cost of “qualifying property” in the year acquired
cost of the property. If the corporation acquired
G Amortization
in addition to the regular depreciation deduction.
the property through a trade-in, do not include any
California conforms to the IRC Section 197
The maximum additional first-year depreciation
carryover basis of the property traded in. Include
deduction is $2,000. Corporations must reduce the
amortization of intangibles for taxable years
only the excess of the cost of the property over the
basis used for regular depreciation by the amount of
beginning on or after January 1, 1994. Generally,
value of the property traded in.
assets that meet the definition under IRC Section 197
additional first-year depreciation claimed.
Column (c) – Elected cost. Enter the amount the
are amortized on a straight-line basis over 15 years.
“Qualifying property” is tangible personal property
corporation elects to expense. The corporation does
There may be differences in the federal and California
used in business and having a useful life of at
not have to expense the entire cost of the property.
amounts for intangible assets acquired in taxable
least six years. Land, buildings, and structural
The corporation can depreciate the amount it does
years beginning prior to January 1, 1994. See R&TC
components do not qualify. Property converted from
not expense.
Section 24355.5 for more information.
personal use, acquired by gift, inheritance, or from
Line 7
related parties also does not qualify.
Amortization of the following assets is governed by
Use a format similar to federal Form 4562, Part V,
California law:
See R&TC Section 24356 and the applicable
line 26 to determine the elected IRC Section 179 cost
regulations for more information.
Bond premiums
R&TC 24360 – 24363.5
of listed property. Listed property generally includes
Research expenditures
R&TC 24365
An election may be made to expense up to
the following:
Reforestation expenses
R&TC 24372.5
40% of the cost of property described in
• Passenger automobiles weighing 6,000 pounds or
Organizational expenditures
R&TC 24407 – 24409
R&TC Sections 24356.6, 24356.7, and 24356.8.
less.
Start-up expenses
R&TC 24414
For more information, get form FTB 3809, Targeted
• Any other property used for transportation if the
Tax Area Deduction and Credit Summary; form
Other intangible assets may be amortized if it is
nature of the property lends itself to personal use,
approved with reasonable accuracy that the asset
FTB 3805Z, Enterprise Zone Deduction and Credit
such as motorcycles, pick-up trucks, SUVs, etc.
Summary; or form FTB 3807, Local Agency Military
has an ascertainable value that diminishes over time
• Any property used for entertainment or
and has a limited useful life.
Base Recovery Area Deduction and Credit Summary.
recreational purposes (such as photographic,
phonographic, communication, and video
Amortization
Part IV
recording equipment).
Line 19, Column (e) – R&TC section.
• Cellular telephones (and other similar
Enter the correct R&TC section for the type
telecommunications equipment). Note: California
of amortization. See General Information G,
does not conform to the federal exclusion of these
Amortization, for a list of the R&TC sections.
Page 2 FTB 3885 Instructions 2012
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