Form It-398 - New York State Depreciation Schedule For Irc Section 168(K) Property - 2014 Page 2
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2IT-398 (2014) (back)
Instructions
If you are married and file a joint federal return but are required to file
General instructions
separate NYS returns, complete only one Form IT-398 showing the
For tax years beginning after December 31, 2002, New York State (NYS)
amounts from your joint federal return. Submit a schedule with each
does not allow the federal 30%/50% special depreciation deduction for
return showing each spouse’s separate amounts, as if separate federal
Internal Revenue Code (IRC) section 168(k) property (except for resurgence
returns were filed, and explain any differences.
zone property and New York liberty zone property described in IRC
section 1400L(b)(2)), placed in service inside or outside NYS after May 31,
Specific instructions
2003. Instead, you are allowed a NYS depreciation deduction determined
See the instructions for your tax return for the Privacy notification or if
under IRC section 167, as that section would have applied to the property if
you need help contacting the Tax Department.
it had been acquired on September 10, 2001. You may take the deduction
for NYS depreciation until the property is disposed of or fully depreciated.
Enter your name and identifying number (your social security number or
employer identification number) in the spaces provided on the front of this
If you claimed ACRS depreciation on your federal return for property
placed in service beginning after May 31, 2003 (except for resurgence
form. Mark an X in the box that indicates which NYS income tax return
you are filing and submit this form with that return.
zone property and New York liberty zone property described in
IRC section 1400L(b)(2)), complete Part 1.
Part 1 – Depreciation
Use this form to compute your NYS adjustments for NYS depreciation
Depreciation is the annual deduction allowed to recover the cost or other
and federal depreciation deductions.
basis of business or investment property having a useful life substantially
beyond the tax year. However, land is never depreciable. Depreciation
As described in IRC section 1400L(b)(2), New York liberty zone property
starts when you first use the property in your business or for the
must have been placed in service on or before December 31, 2006, or
production of income. It ends when you take the property out of service,
in the case of nonresidential real property and residential rental property,
deduct all your depreciable cost or other basis, or no longer use the
on or before December 31, 2009.
property in your business or for the production of income. (See Part 2 for
As described in IRC section 168(k)(2), resurgence zone property is
the deduction to be taken in the year you dispose of the property.)
defined as qualified property if all of the following apply:
Column C – Enter the depreciable basis of the assets you place in
• substantially all use of the property is in the resurgence zone; and
service in the same year. Depreciable basis is the cost or other basis
• the use is in the active conduct of a trade or business by the taxpayer
reduced by the part of the basis you elected to amortize or expense
in the resurgence zone; and
under IRC section 179, and any federal investment credit subtracted
• the original use by the taxpayer commences after December 31, 2002.
when computing the federal unadjusted basis of the asset.
The resurgence zone is defined as the area of New York County
Column D – The applicable convention determines the portion of the
bounded on the south by a line running from the intersection of the
tax year for which the depreciation is allowable during a year property is
Hudson River with the Holland Tunnel, running east to Canal Street, then
either disposed of or placed in service. Enter in column D the convention
running along the centerline of Canal Street to the intersection of Bowery
you used from federal Form 4562, column E.
and Canal Street. It then runs in a southeasterly direction diagonally
Column E – Indicate the depreciation method selected for the
across the Manhattan Bridge Plaza to the Manhattan Bridge, along the
computation of the NYS allowable depreciation deduction. Any
centerline of the Manhattan Bridge to the point where the centerline
consistent depreciation method that would have been allowed under
would intersect with the east bank of the East River. It is bounded on the
IRC section 167, as that section would have applied to the property
north by a line running from the intersection of the Hudson River with the
if it had been acquired on September 10, 2001, without regard to
Holland Tunnel, running north along West Avenue to the intersection of
section 168(k), is acceptable.
Clarkson Street. It then runs east along the centerline of Clarkson Street
to the intersection of Washington Avenue, then running south along the
Column F – Enter your NYS depreciation deduction in column F, based
centerline of Washington Avenue to the intersection of West Houston
on the method you elected in column E.
Street. It continues east along the centerline of West Houston Street,
Column G – Enter the depreciation deduction you took on your federal
then at the intersection of Avenue of the Americas, continues east along
return.
the centerline of East Houston Street to the east bank of the East River.
If you have an interest in a passive activity, the modifications required
Part 2 – Year-of-disposition adjustment
under Tax Law sections 612(b)(8) and (c)(16) for federal depreciation
If you dispose of IRC section 168(k) property (except for resurgence
and NYS depreciation must be made for the full amounts allowable
zone property and New York liberty zone property described in IRC
as a federal depreciation deduction (100%), even though the activity
section 1400L(b)(2)) that you placed in service inside or outside NYS
may be subject to federal loss deduction limitations. It is only under
after May 31, 2003, you must adjust your NYS income by the difference
IRC section 469 (Passive Activity Losses and Credits Limited) that there
between the total NYS depreciation deduction and the total federal
is a limitation on passive loss deductions.
depreciation deduction claimed on that property.
In the case of a partnership using IRC section 168 to determine
Column C – Enter the method used to dispose of the property.
depreciation, the individual partners should make the adjustments
Disposition includes, but is not limited to, sale, exchange, transfer, and
to income on their personal income tax returns. The adjustments for
obsolescence.
partners are their distributive share of NYS depreciation and federal
Column D – Enter the total NYS depreciation deduction you claimed on
depreciation, determined by the partnership as of the end of the
the property you disposed of.
partnership year ending within the partner’s tax year. Form IT-398 should
be completed only by the partnership, and not by each individual partner.
Column E – Enter the total federal depreciation deduction you claimed
This treatment is the same for a beneficiary of an estate or trust that is
on your federal return for the disposition of your property.
on a fiscal-year basis.
If you are a shareholder of an electing New York State S corporation,
the S corporation should provide your proportionate share of the
S corporation’s depreciation deduction.
If you are a nonresident or part-year resident, you must complete
Form IT-398 as if you were a NYS resident for the entire year.
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