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• The IRC Section 168(k) relating to the 50%

Complete the Tangible Property Expense

Business Income – The total cost the

bonus depreciation deduction for certain

Worksheet to figure IRC Section 179 expense

S corporation can deduct is limited to the

assets.

for California purposes. Include all assets

S corporation’s business income. For the

• The enhanced IRC Section 179 expensing

qualifying for the deduction because the

purpose of the IRC Section 179 election,

election.

limit applies to all qualifying assets as a

business income is the net income derived

• The federal changes regarding treatment

group rather than to each asset individually.

from the S corporation’s active trade or

of distribution costs and treatment of

Get federal Form 4562, Depreciation and

business. Net income is from Form 100S,

participations and residuals for purpose of

Amortization, for more information.

Side 2, line 14, before the IRC Section 179

computing depreciation under the income

expense deduction and excludes items not

IRC Section 195 Start-up Expenditures

forecast method.

derived from a trade or business actively

California conforms to the federal deduction for

• For years prior to 1987, California did

conducted by the S corporation.

business start-up and organizational costs.

not allow depreciation under the federal

Part II – Amortization

Definitions

accelerated cost recovery system (ACRS).

California conforms to the IRC Section 197

Listed Property – Use a format similar to federal

California also does not allow depreciation

amortization of intangibles. Generally, assets

under modified accelerated cost recovery

Form 4562, Part V, line 26 to determine the

that meet the definition under IRC Section 197

elected IRC Section 179 cost of listed property.

system (MACRS) for assets placed in

are amortized on a straight-line basis over 15

Listed property generally includes the following:

service while the S corporation was taxed

years. There may be differences in the federal

• Passenger automobiles weighing 6,000

as a C corporation. This is a change of

and California amounts for intangible assets

accounting method for which the taxpayer

pounds or less.

acquired in taxable years beginning prior to

• Any other property used for transportation

must request the Franchise Tax Board’s

January 1, 1994. Refer to R&TC Section 17279

if the nature of the property lends itself to

consent.

pursuant to R&TC Section 23802(f)(1) for

personal use, such as motorcycles, pick-up

• The additional first-year depreciation of

more information.

certain qualified property placed in service

trucks, SUVs, etc.

• Any property used for entertainment

after October 3, 2008, and the election to

Part III – Depreciation and Amortization

or recreational purposes (such

claim additional research and minimum

Adjustment

as photographic, phonographic,

tax credits in lieu of claiming the bonus

If the S corporation has direct ownership

depreciation.

communication, and video recording

of a passive activity, complete a separate

equipment).

• The accelerated recovery period for

Schedule B (100S), write “Passive Activity”

• Computers or peripheral equipment.

depreciation of smart meters and smart

on the top of Schedule B (100S), and enter

grid systems.

Exception. Listed property generally does not

the current year depreciation adjustment on

• The ten-year useful life for grapevines

include:

Part III. Also, enter the current year depreciation

planted as replacements for vines subject

• Photographic, phonographic,

adjustment on form FTB 3801, Passive Activity

to Phylloxera or Pierce’s disease. California

communication, or video equipment used

Loss Limitations, Side 2, California Passive

law allows a useful life of five years.

exclusively in the S corporation’s trade or

Activity Worksheet, column (e). Make sure to

See R&TC Section 17250 for additional

business.

label “Schedule B (100S)” in column (c) of

information.

• Any computer or peripheral equipment

the California Passive Activity Worksheet. Do

used exclusively at a regular business.

not enter the current taxable year depreciation

Specific Instructions

• An ambulance, hearse, or vehicle used for

adjustment for passive activity on Form 100S,

transporting persons or property for hire.

Side 1, line 5.

Part I – Depreciation

Listed property used 50% or less in

The S corporation does not need to complete

Election to Expense Certain Property Under

business activity does not qualify for the IRC

Schedule B (100S) for pass-through entities

IRC Section 179

Section 179 expense deduction. For more

except to include IRC Section 179 expense.

The S corporation may elect to expense part

information regarding listed property, get the

of the cost of depreciable personal property

instructions for federal Form 4562.

used in the trade or business and certain other

property described in federal Publication 946,

How to Depreciate Property. To do so, the

S corporation must have purchased property,

as defined in the IRC Section 179(d)(2), and

placed it in service during the taxable year, or

have a carryover of unused cost from prior

Tangible Property Expense Worksheet

year. If the S corporation elects this deduction,

1 Maximum deduction under IRC Section 179 for California . . . . . . . . . . . . . . . . . . . . . .

25,000

it must reduce the California depreciable basis

2 Total cost of IRC Section 179 property placed in service . . . . . . . . . . . . . . . . . . . . . . .

by the IRC Section 179 expense. The total IRC

3 Threshold cost of IRC Section 179 property before reduction in limitation. . . . . . . . . .

200,000

Section 179 expense deduction cannot exceed

4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- . . . . . . . .

the S corporation’s business income.

5 Dollar limitation for taxable year. Subtract line 4 from line 1.

If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

California law does not conform to the

(a) Description of property

(b) Cost

federal limitation amounts under IRC

Section 179(b)(1) and (2). For California

purposes, the maximum IRC Section 179

7 Listed property (elected IRC Section 179 cost). . . . . . . . . . . . . . 7

expense deduction allowed is $25,000. This

8 Total elected cost of IRC Section 179 property. Add line 6, column (c) and line 7 . . . .

amount is reduced if the cost of all IRC

9 Tentative deduction. Enter the smaller of line 5 or line 8 . . . . . . . . . . . . . . . . . . . . . . .

Section 179 property placed in service during

10 Carryover of disallowed deduction from 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

the taxable year is more than $200,000.

11 Enter the smaller of business income (not less than -0-) or line 5 . . . . . . . . . . . . . . . . 11

12 IRC Section 179 expense deduction for California. Add line 9 and line 10, but do not

enter more than line 11. Also enter the result here and on Schedule B (100S),

Part I, line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

13 Carryover of disallowed deduction to 2017.

Add line 9 and line 10. Subtract line 12 from the result . . . . . . . 13

Page 2 Schedule B (100S) Instructions 2016

Advance Draft For Form 100s Schedule B And C - S Corporation Depreciation And Amortization And Tax Credits - 2016 Page 2

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