Form 3885 - California Corporation Depreciation And Amortization - 2015 Page 3
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3Specific Line Instructions
The Class Life ADR System of depreciation may
Exception. Listed property generally does not
be used for designated classes of assets placed in
include:
For properties placed in service during the taxable
service after 1970.
• Photographic, phonographic, communication,
year, the corporation may complete Part I if the
The Guideline Class Life System of depreciation
or video equipment used exclusively in the
corporation elects to expense qualified property
may be used for certain classes of assets placed in
corporation’s trade or business.
under IRC Section 179, or Part II if the corporation
service before 1971.
• Any computer or peripheral equipment used
elects additional first year depreciation deduction
exclusively at a regular business.
F Election To Expense
for qualified property under R&TC Section 24356.
• An ambulance, hearse, or vehicle used for
The corporation may only elect IRC Section 179 or
Certain Property Under IRC
transporting persons or property for hire.
the additional first year depreciation deduction for
the same taxable year. The election must be made
Listed property used 50% or less in business activity
Section 179
does not qualify for the IRC Section 179 expense
on a timely filed tax return (including extension).
For taxable years beginning on or after
The election may not be revoked except with the
deduction. For more information regarding listed
January 1, 2005, corporations may elect IRC
Franchise Tax Board‘s consent.
property, get the instructions for federal Form 4562.
Section 179 to expense part or all of the cost of
Line 11
Part II is also used to calculate depreciation for
depreciable tangible property used in the trade or
property (with or without the above elections).
The total cost the corporation can deduct is limited to
business and certain other property described in
the corporation’s business income. For the purpose
federal Publication 946, How to Depreciate Property.
Part I Election To Expense Certain Property
of the IRC Section 179 election, business income is
To elect IRC Section 179, the corporation must have
Under IRC Section 179
the net income derived from the corporation’s active
purchased property, as defined in IRC Section 179(d)
Complete Part I if the corporation elects IRC
trade or business, Form 100 or Form 100W, line 17,
(2), and placed it in service during the taxable year. If
Section 179 expense. Include all assets qualifying
before the IRC Section 179 expense deduction
the corporation elects this deduction, the corporation
for the deduction since the limit applies to all
(excluding items not derived from a trade or
must reduce the California depreciable basis by the
qualifying assets as a group rather than to each asset
business actively conducted by the corporation).
IRC Section 179 expense. The total IRC Section 179
individually. The total IRC Section 179 expense for
expense deduction cannot exceed the corporation’s
Part II Depreciation and Election of
property, for which the election may be made, is
business income. See the instructions for federal
Additional First Year Depreciation
figured on line 5. The amount of IRC Section 179
Form 4562, Depreciation and Amortization, for more
expense deductions for the taxable year cannot
Deduction Under R&TC
information.
exceed the corporation’s business income on line 11.
Section 24356
California does not allow IRC Section 179 expense
See the instructions for federal Form 4562 for more
Line 14
election for off-the-shelf computer software.
information.
Corporations may enter each asset separately or
California conforms to the federal changes made to
Line 2
group assets into depreciation accounts. Figure the
the deduction of business start-up and organizational
depreciation separately for each asset or group of
Enter the cost of all IRC Section 179 qualified
costs paid or incurred on or after January 1, 2005.
property placed in service during the taxable year
assets. The basis for depreciation is the cost or other
Exceptions: California does not conform to the
including the cost of any listed property. See General
basis reduced by a reasonable salvage value (except
federal increase in the deduction for start-up
when using the declining balance method), additional
Information F, Election To Expense Certain Property
expenses in 2010 taxable year.
Under IRC Section 179, for information regarding
first-year depreciation (if applicable), and tax credits
qualified property. See line 7 instructions for
claimed on depreciable property (where specified).
California law does not conform to the federal
This may cause the California basis to be different
information regarding listed property.
limitation amounts under IRC Section 179(b) (1)
from the federal basis.
& (2). For California purposes, the maximum IRC
Line 5
Section 179 expense deduction allowed is $25,000.
If line 5 is zero, the corporation cannot elect to
If the Guideline Class Life System or Class Life ADR
This amount is reduced if the cost of all IRC
expense any IRC Section 179 property. Skip line 6
System is used, enter the total amount from the
Section 179 property placed in service during the
corporation’s schedule showing the computation on
through line 11, enter zero on line 12.
taxable year is more than $200,000.
form FTB 3885, column (g), and identify as such.
Line 6
G Amortization
Do not include any listed property on line 6. Enter
Line 14, Column (h), Additional first-year
depreciation.
the elected IRC Section 179 cost of listed property
California conforms to the IRC Section 197
on line 7.
Corporations may elect to deduct up to 20% of the
amortization of intangibles for taxable years
cost of “qualifying property” in the year acquired
Column (a) – Description of property. Enter a brief
beginning on or after January 1, 1994. Generally,
in addition to the regular depreciation deduction.
assets that meet the definition under IRC Section 197
description of the property the corporation elects to
The maximum additional first-year depreciation
are amortized on a straight-line basis over 15 years.
expense.
deduction is $2,000. Corporations must reduce the
There may be differences in the federal and California
Column (b) – Cost (business use only). Enter the
basis used for regular depreciation by the amount of
amounts for intangible assets acquired in taxable
cost of the property. If the corporation acquired
additional first-year depreciation claimed.
years beginning prior to January 1, 1994. See R&TC
the property through a trade-in, do not include any
“Qualifying property” is tangible personal property
Section 24355.5 for more information.
carryover basis of the property traded in. Include
used in business and having a useful life of at
only the excess of the cost of the property over the
Amortization of the following assets is governed by
least six years. Land, buildings, and structural
California law:
value of the property traded in.
components do not qualify. Property converted from
Column (c) – Elected cost. Enter the amount the
Bond premiums
R&TC 24360 – 24363.5
personal use, acquired by gift, inheritance, or from
corporation elects to expense. The corporation does
Research expenditures
R&TC 24365
related parties also does not qualify.
not have to expense the entire cost of the property.
Reforestation expenses
R&TC 24372.5
See R&TC Section 24356 and the applicable
The corporation can depreciate the amount it does
Organizational expenditures
R&TC 24407 – 24409
regulations for more information.
not expense.
Start-up expenses
R&TC 24414
Amortization
Part IV
Line 7
Other intangible assets may be amortized if it is
Line 19, Column (e) – R&TC section.
approved with reasonable accuracy that the asset
Use a format similar to federal Form 4562, Part V,
Enter the correct R&TC section for the type
line 26 to determine the elected IRC Section 179 cost
has an ascertainable value that diminishes over time
of amortization. See General Information G,
of listed property. Listed property generally includes
and has a limited useful life.
Amortization, for a list of the R&TC sections.
the following:
• Passenger automobiles weighing 6,000 pounds or
less.
• Any other property used for transportation if the
nature of the property lends itself to personal use,
such as motorcycles, pick-up trucks, SUVs, etc.
• Any property used for entertainment or
recreational purposes (such as photographic,
phonographic, communication, and video
recording equipment).
• Cellular telephones (and other similar
telecommunications equipment).
• Computers or peripheral equipment.
Page 2 FTB 3885 Instructions 2015
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