Instructions 2012 Kentucky Corporation Income Tax And Llet Return - 2012 Page 3
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20IMPORTANT
Corporations must create a Kentucky Form 4562,
Schedule D and Form 4797 by converting federal forms.
reduced dollar–for–dollar by the amount by which the cost
Depreciation, Section 179 Deduction and Gains/Losses From
of qualifying Section 179 property placed in service during
Disposition of Assets—For taxable years beginning after
December 31, 2001, Kentucky depreciation and Section 179
the year exceeds $200,000. In determining the Section
deduction are determined in accordance with the Internal
179 deduction for Kentucky, the income limitation on Line
Revenue Code in effect on December 31, 2001. For calendar
11 should be determined by using Kentucky net income
year 2012 returns and fiscal year returns that begin in 2012,
before the Section 179 deduction instead of federal taxable
income.
any corporation that for federal purposes elects in the current
taxable year or has elected in past taxable years any of the
following will have a different depreciation and Section 179
3. The corporation must attach the Kentucky Form 4562
expense deduction for Kentucky:
to Form 720, and the amount from Kentucky Form 4562,
Line 22 must be included on Form 720, Part III, Line 15.
•
MACRS bonus depreciation; or
A Kentucky Form 4562 must be filed for each year even
•
Section 179 expense deduction in excess of $25,000.
though a federal Form 4562 may not be required.
If a corporation has taken MACRS bonus depreciation or Section
Determining and Reporting Differences in Gain or Loss From
179 expense deduction in excess of $25,000 for any year, federal
Disposition of Assets—If during the year the corporation
and Kentucky differences will exist, and the differences will
disposes of assets on which it has taken the special
continue through the life of the assets.
depreciation allowance or the additional Section 179 deduction
for federal income tax purposes, the corporation will need to
Important: If a corporation has not taken MACRS bonus
determine and report the difference in the amount of gain or
depreciation or the Section 179 expense deduction in excess
loss on such assets as follows:
of $25,000 for any taxable year, then no adjustment will be
needed for Kentucky income tax purposes. If federal Form
1. If a capital gain is reported on federal Form 1120, Line
4562 is required to be filed for federal income tax purposes, a
8 ; enter this amount on Schedule O–720, Part II, Line
copy must be submitted with Form 720 to substantiate that
1. Convert federal Schedule D (Form 1120) and other
no adjustment is required.
applicable federal forms to Kentucky forms by entering
Kentucky at the top center of the form, and compute the
Determining and Reporting Depreciation and Section 179
Kentucky capital gain from the disposal of assets using
Deduction Differences—Federal/Kentucky depreciation
Kentucky basis. Enter the capital gain from Kentucky
or Section 179 deduction differences shall be reported as
Schedule D, Line 18 on Schedule O–720, Part I, Line 1.
follows:
Federal Schedule D (Form 1120) filed with the federal return
and the Kentucky Schedule D must be attached to Form
1. The depreciation from federal Form 1120, Line 20 and
720.
depreciation claimed on federal Form 1125-A or elsewhere
on Form 1120 must be included on Form 720, Part III, Line
4. If federal Form 4562 is required to be filed for federal
2. If the amount reported on federal Form 1120, Line 9
income tax purposes, a copy must be attached to Form
(from Form 4797, Line 17) is a gain; enter this amount on
720.
Schedule O–720, Part II, Line 2. If the amount reported on
Form 1120, Line 9 (from Form 4797, Line 17) is a loss; enter
2. Convert federal Form 4562 to a Kentucky form by entering
this amount on Schedule O–720, Part I, Line 2. Convert
Kentucky at the top center of the form above Depreciation
federal Form 4797 and other applicable federal forms to
and Amortization. Compute Kentucky depreciation and
Kentucky forms by entering Kentucky at the top center of
Section 179 deduction in accordance with the IRC in effect
the form, and compute the Kentucky gain or (loss) from
on December 31, 2001, by ignoring the lines and instructions
the sale of business property listing Kentucky basis. If the
regarding the special depreciation allowance and the
amount on Kentucky Form 4797, Line 17 is a gain; enter this
additional Section 179 deduction. NOTE: For Kentucky
amount on Schedule O–720, Part I, Line 3. If the amount on
purposes, the maximum Section 179 deduction amount
Kentucky Form 4797, Line 17 is a loss; enter this amount
on Line 1 is $25,000 and the threshold cost of Section 179
on Schedule O–720, Part II, Line 3. Federal Form 4797 filed
property on Line 3 is $200,000. The $25,000 maximum
with the federal return and the Kentucky Form 4797 must
allowable Section 179 deduction for Kentucky purposes is
be attached to Form 720.
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