Tax Preparer®

Addendum 2002

Special Addendum to HowardSoft’sTax Forms Guide 2002 Edition to reflect the

Job Creation and Worker Assistance Act of 2002,signed into law on March 9, 2002 and reflected in

revised forms released by the IRS in late March, 2002,which apply retroactively to tax year 2001.

The Law / 2001 and BeyondThe Software / How and When to Use

Form 2106 / Employee Business ExpensesForm 4562 / Depreciation and Amortization

This document is an addendum to the Tax Forms Guide 2002 Edition (forHowardSoft's Form 1040 software), and relies on that guide as the mainsource of instructions for the forms described here. This document and theassociated software are based on information compiled and interpreted byHowardSoft late in March 2002, including the latest information from theIRS, but their complete accuracy cannot be guaranteed. Neither HowardSoftnor Dr. J. E. Howard assumes any responsibility for any consequential dam-ages resulting from their use.

This document and the associated software are copyrighted by HowardSoftand all rights are reserved. All customers are bound by the Customer Agree-ments that are printed at the beginning of the Tax Forms Guide 2002 Edition.This document may not, in whole or in part, be copied, photocopied, repro-duced, translated, or reduced to any electronic medium or machine-readableform without prior written consent from Dr. J. E. Howard, President ofHowardSoft.

Copyright 2002 by HowardSoftP. O. Box 8432, La Jolla, CA 92038

(HowardSoft and Tax Preparer are registered trademarks of HowardSoft.)

Addendum 2002

Table of Contents

ContentsThe Law / 2001 and Beyond ................................................................... 1The Software / How and When to Use.................................................. 5Form 2106 / Employee Business Expenses .......................................... 7Form 4562 / Depreciation and Amortization ..................................... 12

List of Revised TablesTable 2-11. Limitations on Cars (Revised)

List of Revised FiguresFigure 2-19. Vehicle Expense Worksheet, Screen 2 (Revised)Figure 2-23. Section 179 & Special Allowance Worksheet (Revised)Figure 2-27. Listed Property Worksheet (Revised)

(This page intentionally blank.)

Addendum 2002

The Law

1

The Law / 2001 and BeyondMarch 2002 tax law affects 2001 returns. The Job Creation and Worker Assis-tance Act of 2002, which was signed into law by the President on March 9,2002, stems from a tax bill originally proposed immediately after September11, 2001. As a result, some of its provisions are retroactive to that date andtherefore affect returns for tax year 2001. The fact that the IRS was not ex-pected to fully implement the changes until April 8th did not deter Congress orthe President. The IRS therefore has had to revise Forms 2106 and 4562and their instructions for 2001, and has instructed taxpayers to file anamended return if they are affected by the changes. These changes surelywill create a great deal of confusion among taxpayers, most of whom willnever be aware of the changes in the forms. The IRS did not release theirchanges until the second half of March, and planned to accept e-file returnsthat reflect these changes no earlier than April 8!

Overview of the tax bill. The bill that was finally passed and signed containsfew of the benefits publicized most widely in the press. Nevertheless, signifi-cant changes remain:• Addition of a 1st-year depreciation “bonus” of 30% for most new property

placed in service after September 10, 2001 and before September 11,2004, excluding real property.

• $4,600 increase in allowed 1st-year depreciation for vehicles, in conjunctionwith the new 30% “bonus” ($13,800 increase for qualified OEM electricvehicles).

• Increase in Net Operating Loss (NOL) carryback period from two years tofive years for net operating losses arising in tax year 2001 or 2002.

• Full allowance against AMT income for NOL carryback and carryforwardinto 2001 and 2002 (vs. 90% allowance normally).

• Additional benefits for activities in the IRS-defined New York Liberty Zone(lower Manhattan), including:! Extension of the 30% “bonus” depreciation to real property (nonresi-dential real and residential rental property)! raising from $24,000 to $59,000 the limitation on section 179 deduc-tions, and! using only half of the cost of such property in applying the $200,000limit on total cost of all sec. 179 property for which a deduction is taken.

• Extension to Dec. 31, 2003 the expiration of several business credits thatwere set to expire Dec. 31, 2001, including:! Work Opportunity Credit,! Welfare-to-Work Credit,! credit for purchase of electric vehicles,! credit for production of electricity from qualified sources (wind, bio-mass, poulty waste), and! clean-fuel vehicle deduction.

• Extension to Dec. 31, 2003 the expiration of Archer Medical Savings Ac-counts.

HowardSoft

The Law

2

• Extension to Dec. 31, 2004 the expiration of Indian employment credit andspecial accelerated depreciation for Indian reservation property.

• Extension to tax year 2003 the full allowance against AMT income of per-sonal nonrefundable credits.

• Addition of a deduction for up to $250 for expenses paid by teachers (Kthrough 12) for books, supplies, and other supplementary materials, for taxyears 2002 and 2003.

Additional benefits for New York Liberty Zone. Additional benefits are avail-able for property and activities in the New York Liberty Zone, which is de-fined in the tax bill as “the area located on or south of Canal Street, EastBroadway (east of its intersection with Canal Street), or Grand Street (east ofits intersection with East Broadway) in the Borough of Manhattan in the Cityof New York, New York.” These include.• Expansion of the Work Opportunity Credit to target employees of busi-

nesses in the New York Liberty Zone. Qualified wages are the first $6,000of wages of such employees in calendar years 2002 and 2003.

• Expansion of the new 30% “bonus” depreciation to the rehabilitation or re-placement of real property (nonresidential real and residential rental prop-erty) that was damaged, destroyed, or condemned, as a result of the Sep-tember 11, 2001, terrorist attack.

• Classification of qualifying leasehold improvement property as 5-year prop-erty if it’s improvement is placed in service after Sept. 10, 2001 but before2007. Straight-line depreciation is required for this property. If the alterna-tive system is elected, the class life shall be 9 years.

• Provision for tax-exempt bond financing. Qualifying bonds are designatedas New York Liberty Bonds.

• Increase in maximum allowed section 179 deduction by $35,000, but nomore than the cost of qualifying New York Liberty Zone property. The newsec. 179 limitation on a return can therefore be as high as $59,000. Fur-thermore, in determining the $200,000 limitation on total cost of sec. 179property, only half of the cost of New York Liberty Zone property is in-cluded.

Details of the 30% bonus depreciation. The tax incentive with the most im-mediate impact is the special “bonus” 30% depreciation for the first year inbusiness service for new property acquired from September 11, 2001through September 10, 2004. This special first-year depreciation is availablein addition to the traditional first-year depreciation that is provided by sec.179 deductions.

To qualify, the property must be one of the following:• tangible property depreciated under MACRS with a recovery period of 20

years or less,• water utility property (25-year property),• computer software depreciated under sec. 167(f)(1),• qualified leasehold improvement property (defined in sec. 168(k)(3), or• qualified New York Liberty Zone property.

Addendum 2002

The Law

3

In addition, the property must NOT be any of the following:• listed property used 50% or less for business,• any property required to be depreciated under the alternative depreciation

system (ADS), as detailed on page 2-230 of our Tax Forms Guide 2002Edition, or

• qualified New York Liberty Zone leasehold improvement property (whichqualifies as 5-year property under a separate provision of the law).

Furthermore, the acquisition and original use of the property must be no ear-lier than Sept. 11, 2001, with no binding contract in effect before that dateto acquire the property. (Special rules apply to property sold and leased backor self-constructed property. See IRS Sec. 168(k)(2)(D) for details.)

For property that qualifies, there are now three types of depreciation availablein the first tax year in which it is used. The law specifies the order in whicheach type is taken, and the basis for each successive type is reduced by thededuction taken for the preceding type. For most taxpayers the computationis straightforward, as follows:• Compute the sec. 179 deduction first, deducting no more than the business

portion of the cost.• Recompute the basis of the property as the business/investment portion of

the cost less the sec. 179 deduction taken. Compute the “bonus” depre-ciation as 30% of this adjusted basis.

• Recompute the basis again as the preceding adjusted basis less the “bonus”depreciation taken. Compute MACRS depreciation on this new adjustedbasis.

Note that the limitation on cars is revised for those cars for which the “bo-nus” depreciation is claimed. Whereas the normal limitation on first-year de-preciation of cars is $3,060 for tax year 2001 ($9,280 for OEM electric vehi-cles), the limitation for cars for which the “bonus” depreciation is claimed is$7,660 ($23,080 for OEM electric vehicles).

Finally, you must take the bonus depreciation when it applies unless you spe-cifically elect not to for that class of property. You make this election merelyby attaching a statement to your return identifying which classes of propertyyou elect not to claim the bonus depreciation. Clearly this provision of thelaw will cause a great deal of confusion for taxpayers and the IRS becausetoo many taxpayers have already filed their returns.

When an amended return for 2001 is required. The way the law is written thenew bonus depreciation is mandatory when you qualify unless you specifi-cally elect not to for that class of property. Since the law is retroactive toSept. 11, 2001 and most taxpayers have already filed their returns, a strictadherence to this rule means that all taxpayers who qualify must file anamended return for the purpose of either• revising Form 2106 or 4562 to claim the new bonus depreciation, or• supplying a statement to elect out of the new bonus depreciation.

HowardSoft

The Law

4

It is not clear how strictly the IRS will enforce this new rule. Strict adherenceto the rule would require the IRS to send notices to a huge number of tax-payers who have already filed their returns. However, it is easy to prepare anamended return using Tax Preparer if the IRS takes this strict approach.

How it impacts IRS Forms 2106 and 4562. The IRS has revised both Form2106 and Form 4562 in response to the new law, but the approaches takenfor the two forms are miles apart. For Form 2106 the IRS has handled thechanges almost exclusively in the instructions by expanding the meaning ofline 31 of Form 2106 to include the new bonus depreciation. By contrast,for Form 4562 the IRS has redesigned the form in a complex way by rear-ranging several lines. They have added two new lines for the bonus deprecia-tion, redefined Sections II and III, and moved several lines to new sections ofthe form, some of them in a different order. As a result, the changes willsurely lead to a great deal of confusion among taxpayers since not only aretwo new numbered lines added but also the order of old lines is changed!Tax Preparer Releases 2002.03 and later are based on these new forms andinstructions, and allow you to file a return under the new rules even thoughyou may have started the return with a prior release, as detailed in the nextsection.

Addendum 2002

The Software

5

The Software / How and When to UseRelease 2002.03 handles the new law. Special end-of-season releases of allTax Preparer products are provided to handle the new law. Support is pro-vided for both the new 30% bonus depreciation and raised ceilings for NewYork Liberty Zone property. Only Forms 2106 and 4562 are affected, and re-vised instructions are provided here for the relevant sections of those forms.

Compatibility with prior data. The new release is fully compatible with priordata. If you print or modify a return prepared with a prior release, the soft-ware will recognize that fact and automatically put the data in the proper newformat before printing the return or displaying it for you to modify. In addi-tion, the translate feature built into Tax Preparer for the next filing season willhandle both data formats automatically.

Special care required for Professional e-file. While you can use the new re-lease any time for filing paper returns, and can even file paper returns usingthe old releases if you are not claiming any of the new benefits, e-file returnsare more restrictive. The IRS will change its e-file system late Sunday, April7, in time for the first transmissions on Monday, April 8, 2002. The IRS willnot be able to handle data using the new forms before that date, and will notbe able to handle data using the old forms from that date forward. Nelco willcoordinate its updates with the IRS actions, making new software updatesavailable late Sunday as well. It is therefore important that you do not at-tempt any pre-transmission checks or actual transmissions with e-file outputgenerated by our new releases until you have updated your Nelco software,which can be no earlier than April 8, 2002.

CAUTION: Use only release 2002.03 (or later) hereafter to avoid damage toyour data. It is important that you use only release 2002.03 (or later) onceyou have used it on a return because, while the new releases are fully com-patible with data created from prior releases, the converse is not true. Thatis, releases prior to release 2002.03 cannot properly read data created ormodified by release 2002.03 for any return with a Form 4562. Therefore, theuse of a release prior to 2002.03 on data created or modified by release2002.03 could irretrievably damage your data.

Filing amended returns (Form 1040X). Since the new law is retroactive toSept. 11, 2001, if any of the new benefits apply to a return you have alreadyfiled, you must file an amended return to claim the benefits. The softwaremakes this easy because the form for doing this (Form 1040X) is built intoTax Preparer. However, you must carefully follow the instructions for Form1040X in the Tax Forms Guide 2002 Edition. In brief, the procedure is:Step 1. Make a copy of the return actually filed with the IRS using our file

manager (choice 1 on the Main Menu).Step 2. Using the copy just made, access Form 1040X from the Forms Menu

before you do anything else with this copy.

HowardSoft

The Software

6

Step 3. Access the form(s) you need to revise and access the proper work-sheets to make the new claims in accordance with revised instruc-tions for Form 2106 and 4562, which follow.

Step 4. Return to Form 1040X and explain your reason for the amended re-turn in a supporting statement for the relevant line in Part II of Form1040X (on the last screen of the form).

Step 5. Exit the return and print the official return for filing with the IRS. Youneed send to the IRS only Form 1040X and forms with amounts thatdiffer from the return you originally filed.

Note that you cannot e-file an amended return. You must file a paper Form1040X along with all forms affected by the revisions you make.

CAUTION: Release 2002.03 of California Supplement required to translatenew federal data format. Because our data format for Form 4562 had to bechanged with release 2002.03 in order to accommodate the new law, for anyForm 1040 return with a Form 4562 prepared or modified using release2002.03 a new release of our California Supplement is required in order toproperly translate the return into a California Form 540 return. Failure to doso could result in an unusable Form 3885A for the California return. The newrelease ca2002.03 (ec2002.03 for professional e-file) can handle both thenew and old Form 4562 formats, so it is the only release you should usehereafter.

Addendum 2002

Form 2106

7

Form 2106 / Employee Business ExpensesVehicle Expense Worksheet modified. The only change in the software forForm 2106 is the expansion of the depreciation section of the Vehicle Ex-pense Worksheet to include the new 30% bonus depreciation. Therefore, ifyou use only the Standard Mileage Rate method for deducting car expenses,there is no change and you need not revise any prior data. However, if youuse the Actual Expenses method the change provides you with the potentialfor a substantially higher first-year depreciation for a new car purchased afterSept. 10, 2001. You are allowed to deduct as much as an additional 30% ofthe cost of the vehicle, and the limitation on depreciation for cars is raisedsubstantially as well. The following paragraphs replace the details for SectionD of the worksheet, starting at the bottom of page 2-181 and ending at thetop of page 2-184 of the Tax Forms Guide 2002 Edition. In addition, Table 2-11 on page 2-185 is replaced by the revised table at the end of this section,reflecting substantially raised ceilings on first-year depreciation for cars pur-chased after Sept. 10, 2001.

SEC D-VEHICLE DEPRECIATION. Depreciation is available for the Actual Ex-penses Method, and is computed in lines 30 through 38. See Figure 2-19.

Claim special 30% depreciation allowance? (New line for release2002.03 and later.) If you acquired a new (not used) car during thetax year, you may qualify for a bonus first-year depreciationamounting to 30% of the depreciable basis (but subject to the limi-tations in Table 2-11). To claim this special first-year depreciationyou must answer Yes here. However, the software will allow youto answer Yes ONLY if all of the following conditions are met:* percent of business use is more than 50%,* business use start date is no earlier than 9/11/2001,* business use start date is no later than 9/10/2004, and* business use start date is within the tax year of the return.If you can answer Yes, the allowed deduction will be reflected inthe automatically calculated line 31, as detailed in our instructionsfor that line. CAUTION: If you elect not to make this claim eventhough you are eligible for it, the IRS instructs you to attach astatement to the return to that effect. You may use the line on Form2106 labeled “Additional notes (itemize)” for this purpose (betweenlines 26 and 27 of Form 2106, not this worksheet).

Vehicle type: 1=regular, 2=OEM electric. If the vehicle was producedby an original equipment manufacturer (OEM) and designed to runprimarily on electricity, enter 2. For OEM electric vehicles that wereplaced in service after August 5, 1997, the limits on luxury cars areapproximately tripled. (The amounts were precisely tripled in 1997,but the application of indexing in accordance with the law nowsometimes makes the amounts slightly more or less than tripled.)

HowardSoft

Form 2106

8

30 Cost or other basis. Enter the total cost (including sales tax paid af-ter 1986) BEFORE adjusting it for prior depreciation or reducing it toaccount for nonbusiness usage. However, reduce the basis by anydiesel fuel tax credit, electric vehicle credit or clean-fuel vehicle de-duction you claimed, and increase the basis by any recapture onForm 4797, line 35 that applies to this vehicle.

Section 179 deduction (2001 or prior). If the vehicle is new this year, en-ter the section 179 deduction to be taken. Your entry may be re-duced in accordance with Table 2-11. The reduced amount willalso be reflected in line 31, below, and the depreciable basis (line32) will be reduced by the deduction taken. On the other hand, ifthe vehicle was placed in service in a prior year, enter here the sec-tion 179 deduction actually taken in the past plus any basis reduc-tion required for the Investment Tax Credit (ITC) and any adjust-ment required for past years when you used the standard mileagemethod at 12 cents per mile since 1994 (plus any special 30% al-lowance taken in the past if the tax year for this return is 2002 orlater). For this case your entry will not be reduced and will not bereflected in line 31. Instead, it will be used only to properly com-pute the depreciable basis for line 32.

31 Section 179 andspecial allow-ance (2001).(auto-calc) Ifthe businessuse start datelies in the cur-rent tax yearand the busi-ness use per-centage on line14 exceeds50%, then thisline is com-puted as thepreceding sec.179 deductionplus the spe-cial 30% al-lowance, subject to the limitations in Table 2-11. Otherwise this lineis computed as zero. (Note that the special allowance is figured on areduced basis computed as line 30 times line 14 less the sec. 179deduction taken. The allowance is then 30% of that reduced basissubject to the limitations in Table 2-11.)

32 Multiply line 30 by line 14. (auto-calc) This is the basis for deprecia-tion. In spite of the label for this line, the line is computed as the

VEHICLE EXPENSE-Screen2of2VEHICLE EXPENSE-Screen2of2VEHICLE EXPENSE-Screen2of2VEHICLE EXPENSE-Screen2of2 Claim special 30% allowance..? No Claim special 30% allowance..? No Claim special 30% allowance..? No Claim special 30% allowance..? No Veh type:1=regular,2=OEM elec 0 Veh type:1=regular,2=OEM elec 0 Veh type:1=regular,2=OEM elec 0 Veh type:1=regular,2=OEM elec 0 30 Cost or other basis....... 0 30 Cost or other basis....... 0 30 Cost or other basis....... 0 30 Cost or other basis....... 0 Sec 179 deduc(2001orPrior) 0 Sec 179 deduc(2001orPrior) 0 Sec 179 deduc(2001orPrior) 0 Sec 179 deduc(2001orPrior) 0 31 Sec179 & spec allow.(2001) 31 Sec179 & spec allow.(2001) 31 Sec179 & spec allow.(2001) 31 Sec179 & spec allow.(2001)▒ 0▒ 0▒ 0▒ 0 32 Multiply ln30 by ln 14.... 32 Multiply ln30 by ln 14.... 32 Multiply ln30 by ln 14.... 32 Multiply ln30 by ln 14....▒ 0▒ 0▒ 0▒ 0 Deprec'n in past years 0 Deprec'n in past years 0 Deprec'n in past years 0 Deprec'n in past years 0 Recovery period(years) 0 Recovery period(years) 0 Recovery period(years) 0 Recovery period(years) 0 Farm or elect 150% DB.? No Farm or elect 150% DB.? No Farm or elect 150% DB.? No Farm or elect 150% DB.? No MUST use mid-qtr convn? No MUST use mid-qtr convn? No MUST use mid-qtr convn? No MUST use mid-qtr convn? No 33 Method (DB,ACRS,orSL)..... 33 Method (DB,ACRS,orSL)..... 33 Method (DB,ACRS,orSL)..... 33 Method (DB,ACRS,orSL)..... Month sold (if this year). 0 Month sold (if this year). 0 Month sold (if this year). 0 Month sold (if this year). 0 Percentage this year...... 0 Percentage this year...... 0 Percentage this year...... 0 Percentage this year...... 0 34 Multiply 32 by % on 33.... 34 Multiply 32 by % on 33.... 34 Multiply 32 by % on 33.... 34 Multiply 32 by % on 33....▒ 0▒ 0▒ 0▒ 0 35 Add lines 31 and 34....... 35 Add lines 31 and 34....... 35 Add lines 31 and 34....... 35 Add lines 31 and 34.......▒ 0▒ 0▒ 0▒ 0 36 Limitation amount......... 36 Limitation amount......... 36 Limitation amount......... 36 Limitation amount.........▒ 0▒ 0▒ 0▒ 0 37 Multiply 36 by % on 14.... 37 Multiply 36 by % on 14.... 37 Multiply 36 by % on 14.... 37 Multiply 36 by % on 14....▒ 0▒ 0▒ 0▒ 0 38 Smaller of ln 35 or 37.... 38 Smaller of ln 35 or 37.... 38 Smaller of ln 35 or 37.... 38 Smaller of ln 35 or 37....▒ 0▒ 0▒ 0▒ 0 [Press PgUp or < for ln 12-29] [Press PgUp or < for ln 12-29] [Press PgUp or < for ln 12-29] [Press PgUp or < for ln 12-29]

Figure 2-19. Vehicle Expense Worksheet,Screen 2 (Revised)

Addendum 2002

Form 2106

9

cost (line 30) times the percentage of business use (line 14), less ei-ther line 31 (if business use started this year) or the entry above line31 (if business use did not start this year).

Depreciation in past years. You must include all past depreciation al-lowed, whether taken or not. In other words, except for years youused the Standard Mileage Rate, you have to compute past depre-ciation as if you had used the Actual Expense method for all theother years. This entry is used to determine any additional deprecia-tion you can deduct now because prior depreciation was reduced bythe limitations on luxury cars, which are shown in Table 2-11.

Recovery period (years). This entry is checked against the law andchanged to the closest legal period if it is improper.

Farm or elect 150% DB method? Since 1990, property used in a farm-ing business cannot be depreciated at the 200% declining balancerate. If the declining balance method is chosen, property used in afarming business MUST be depreciated at a 150% rate instead. Inaddition, nonfarm property can be depreciated at 150% by election(in order to avoid the complications of the alternate minimum tax).In either case, answer Yes here to force 150% DB for classeswhere 200% DB would be used otherwise.

MUST use mid-quarter convention? Normally you must use the mid-quarter convention when more than 40% of the value of all propertyplaced in service in the same year is placed in service in the lastquarter of the year. You therefore cannot answer this questionproperly without considering ALL of the property (including otherproperty in addition to cars) you start depreciating this year on thetax return. However, for 2001 alone you are allowed to violate thisrule. See “Special Election for 2001” on the first page of these de-tails for Form 2106.

33 Method (DB, ACRS, or SL). The method is restricted for cars: if thevehicle is placed in service after June 18, 1984 and used 50% orless for business, the method should be SL, and the software en-sures this. The IRS prefers standard entries like MACRS, ACRS, andSL, but the software will accept any entry starting with MA, AC, orDB as a MACRS/ACRS type, and any entry starting with SL or S/ asan SL type. Everything else is taken as manual entry, for which youcan enter any percentage, below.

Month sold (if this year). Enter month from 1 to 12 to indicate a sale.Percentage this year. (auto-calc) This line normally shows the percent-

age deduction resulting from the automatic calculations. But if youentered an unrecognized method above, you can make any manualentry here yourself.

34 Multiply line 32 by the percentage on line 33. (auto-calc) Normallycomputed as indicated, this is the depreciation deduction beforeluxury car and business use limitations are applied. If the vehiclewas sold during the current year, the appropriate percentage is ap-

HowardSoft

Form 2106

10

plied based on year and month the vehicle was placed in service andmonth sold.

35 Add lines 31 and 34. (auto-calc) Computed as indicated.36 Limitation amount from table. (auto-calc) The limitations on depre-

ciation plus section 179 deductions are shown in Table 2-11.37 Multiply line 36 by the percentage on line 14. (auto-calc) Computed

as indicated, this is the limitation that applies this year.38 Smaller of line 35 or line 37. (auto-calc) Computed as indicated, this

is the total depreciation deduction allowed this year, including sec-tion 179 expense and any special first-year allowance. It is used inline 28, above, as a component of total actual expense in line 29.

For more details on the depreciation methods used, see the instructions inthis manual for the Listed Property Worksheet for Form 4562. Also see IRSInstructions for Form 2106. Since worksheet lines cannot be itemized, an ex-tra line is provided above line 27 of Form 2106 itself for your use to supplyadditional details in a supporting statement.

Changes to Table 2-11. As a result of the tax bill signed in March 2002 andretroactively applied to 2001, the limitations on cars are appreciably higherthan in the past for cars for which the special 30% allowance is claimed.The changes are highlighted in Table 2-11, which follows, by the shading ofthe revised parts of the table. The changes affect only the first year of depre-ciation, amounting to an increase of $4,600 for most vehicles ($13,800 forOEM electric vehicles) times the business use percentage.

Addendum 2002

Form 2106

11

Table 2-11. Limitations on Cars (Revised) DATE PLACED IN SERVICE TAX YEAR MAXIMUM 6/19/84through 12/31/84 all $6,000 1/1/85 through 4/2/85 all $6,200 4/3/85 through 12/31/86 all $4,800 1/1/87 through 12/31/90 after 3rd $1,475 1/1/91 through 12/31/92 after 3rd $1,575 1/1/93 through 12/31/94 after 3rd $1,675 1/1/95 through 12/31/96 1st $3,060 " " " 2nd $4,900 " " " 3rd $2,950 " " " after 3rd $1,775 1/1/97 through 12/31/97 1st $3,160 (*) " " " 2nd $5,000 (*) " " " 3rd $3,050 (*) " " " after 3rd $1,775 1/1/98 through 12/31/98 1st $3,160 (*) " " " 2nd $5,000 (*) " " " 3rd $2,950 (*) " " " after 3rd $1,775 1/1/99 through 12/31/99 1st $3,060 (*) " " " 2nd $5,000 (*) " " " 3rd $2,950 (*) " " " after 3rd $1,775 1/1/00 through 12/31/00 1st $3,060 (*) " " " 2nd $4,900 (*) " " " 3nd $2,950 (*) 1/1/01 through 9/10/01 1st $3,060 (*) " " " 2nd $4,900 (*) 9/11/01 through 12/31/02 1st $7,660 (*,**) " " " 2nd $4,900 (*)

(*)If placed in service after 8/5/97, the amount is approximately tripled for OEM electric vehicles. (**)If NOT claiming the special 30% depreciation allowance, the limit is $3,060 instead of $7,660.

NOTE: Actual limitation is THE ABOVE AMOUNT MULTIPLIED BY THE BUSINESS USE PERCENTAGE. (After the recovery period has expired, the remaining depreciation not taken because of the above limitations can be deducted subject to these limitations each year until fully depreciated.)

HowardSoft

Form 4562

12

Form 4562 / Depreciation and AmortizationMajor changes due to IRS redesign of Form 4562. In sharp contrast with thestraightforward approach taken by the IRS in regards to Form 2106, the IRShas performed a major redesign of Form 4562. The IRS has not only addedtwo new lines for the new bonus depreciation (one for regular property andone for listed property) but has also rearranged several lines on side 1 of theform and changed the meanings of Parts II and III of the form! This has re-sulted in a form that is totally incompatible with the prior form, making itnecessary for us to change the data format for the form. Nevertheless, re-lease 2002.03 can view, print, modify, or recalculate a return prepared withany release (that is, in either format) without any added effort on your part.

What’s contained in this section of the Addendum. In order to prevent thechanges from being lost in a long revised chapter for Form 4562, this Adden-dum provides full details only for sections of the form that have significantlychanged in response to the new law. Revised instructions are provided herefor lines 1 through 25 of Form 4562 because the changes in the meaning andorder of many of those lines are significant. However, revised instructionsand figures are provided for only two of the worksheets that support thoselines because all other worksheets are identical to their prior versions. Bycontrast, no new instructions are provided for lines after line 25 because theirorder and meaning are identical to the former Form 4562 except for the linenumbers. The following table of new and old lines is provided to help youcope with the changed line numbers.

Table of Form 4562 line numbers.

New line number Old line number

Part I: 1 through 13 1 through 13 (Part I)

Part II: 14 NEW line (no prior equivalent) 15 and 16 18 and 19 (Part III)

Part III: 17 (Sec. A) 17 (Part III) 18 (Sec. A) 14 (Part II, Sec. A) 19a through 20c 15a through 16c (Part II, Sec. A)

Part IV: 21 through 23 20 through 22 (Part IV)

Part V: 24a and 24b 23a and 23b (Part V) 25 NEW line (no prior equivalent) 26 through 41 24 through 39 (Part V)

Part VI: 42 through 44 40 through 42 (Part VI)

Addendum 2002

Form 4562

13

CAUTION: You MUST use built-in worksheets to claim the new bonus depre-ciation. The two new lines on Form 4562 are supported by modified versionsof worksheets already built into Tax Preparer, which you must access byitemizing the respective lines:• Line 14 supported by the Sec. 179 and Special Allowance Worksheet. This

is a modified version of the former Sec. 179 Worksheet with several newlines to support the new bonus depreciation and the new rules for Sec. 179deductions for New York Liberty Zone property. The same set of work-sheets is accessible at both line 6 and line 14 of Form 4562.

• Line 25 supported by the Listed Property Worksheet. This is a modifiedversion of the Listed Property Worksheet with lines added to support thenew bonus depreciation and the new rules for limitations on cars. Whetheryou itemize line 25, line 26(h), or line 26(i), you access the same set ofworksheets (for more than 50% business use). However, if you itemize line27(h) you access a different set of worksheets (for business use of 50% orless). For the latter set of worksheets the new lines for bonus depreciationare still visible on the screen, but they are forced to zero because the bonusis not available for property used no more than 50% for business.

Details for these modified worksheets appear in the following pages.

PART I, ELECTION TO EXPENSE CERTAIN TANGIBLE PROPERTY (SECTION179). IRS Code Section 179 provides for a full deduction of the cost of someproperty (in place of normal depreciation) for property that meets ALL of thefollowing requirements:

Acquired by purchase. Must have been purchased for use in a trade orbusiness.

Current. Must be placed in service during the current tax year.Active business. Must be used at least 50% of the time in the active

conduct of a trade or business (but no section 179 deduction is al-lowed for investment property, so you should claim none for thecopy of Form 4562 that supports Part I of Schedule E).

Tangible. Must be tangible depreciable property.Section 38. Must qualify as Section 38 property (that is, it would have

met the requirements for the investment tax credit had the creditnot been repealed.)

Three important limitations apply to these deductions:A The aggregate of all section 179 deductions, including any from any

Schedule K-1 you receive, on the return cannot exceed $24,000($12,000 if married filing separately). (This limitation is raised to asmuch as $44,000 for qualified zone property of an enterprise zonebusiness and qualified renewal property of a renewal communitybusiness, and $59,000 for New York Liberty Zone property.)

B When the total cost for all section 179 property together exceeds$200,000, the $24,000 limit is reduced dollar-for-dollar so that NOdeduction is allowed when total cost exceeds $224,000. (For mar-ried filing separately, the $12,000 limit is reduced at costs above$100,000, reducing to zero at $112,000.) (Only half the cost of

HowardSoft

Form 4562

14

the property is used in this computation for qualified zone property,qualified renewal property, and New York Liberty Zone property.)

C Section 179 deductions cannot exceed the aggregate taxable incomefrom all trades or businesses that the taxpayer and/or spouse ac-tively conducts, including wages. Therefore, if you have no wagesand only one business and it operates at a loss, you are not allowedANY section 179 deduction. Any amount not deducted this yearbecause of this rule can be carried over to 2002 returns.

Notice in the above paragraphs that there are three kinds of property eligiblefor special treatment in applying the limitations:

Qualified zone property. This is property of an enterprise zone busi-ness, which is designated by the government for special treatment.If a sec. 179 deduction is claimed for any such property LimitationA is raised by the lesser of $20,000 ($35,000 after December 31,2001) or the cost of the qualified property. Furthermore, only halfof the cost of such property is used when applying Limitation B.See IRS Sections 1397C and 1397D for the IRS definitions of quali-fied zone property and enterprise zone business.

Qualified renewal property. This is property of a renewal communitybusiness, which is designated by the government for special treat-ment. If a sec. 179 deduction is claimed for any such property Limi-tation A is raised by the lesser of $20,000 ($35,000 after Decem-ber 31, 2001) or the cost of the qualified property. Furthermore,only half of the cost of such property is used when applying Limita-tion B. See IRS Sections 1400G and 1400J(b) for the IRS defini-tions of qualified renewal property and renewal zone business.CAUTION: The special tax benefits for this kind of property applyONLY to property acquired after December 31, 2001. It thereforedoes not apply to tax year 2001 returns except for fiscal year part-nerships. (The software provides no separate lines for this propertyso you should use lines designated for “qualified zone property” tobenefit from favorable treatment to which you are entitled.)

New York Liberty Zone property. This is property in the New York Lib-erty Zone for which special treatment is provided in the new tax bill,as detailed on page 2 of this Addendum. If a sec. 179 deduction isclaimed for any such property Limitation A is raised by the lesser of$35,000 or the cost of the qualified property. Furthermore, onlyhalf of the cost of such property is used when applying Limitation B.See IRS Sections 1400L for the IRS definition of New York LibertyZone property. The special tax benefits for this kind of property ap-ply ONLY to property acquired after September 10, 2001 and be-fore September 11, 2004.

The limitations are applied in the following lines for deductions on this copyof Form 4562 ONLY, but you may be subject to further limitations if there aresection 179 deductions elsewhere on the return. The limitations technicallyapply to the aggregate of all property throughout the return. You may there-

Addendum 2002

Form 4562

15

fore need to summarize all section 179 deductions for the entire return on anunattached copy of Form 4562 (copy 19 or 20), in order to determine theappropriate limitations, then reduce the deductions accordingly on the indi-vidual Forms 4562.

MFS: Spouse's cost of New York Liberty Zone property. If the filingstatus is married filing separately you must enter the total cost ofNew York Liberty Zone property expensed on the spouse's Form4562. This amount is reflected in line 1, below, and half of it is re-flected in line 2.

MFS: Spouse's cost of qualified zone property. If the filing status ismarried filing separately you must enter the total cost of qualifiedzone property expensed on the spouse's Form 4562. This amount isreflected in line 1, below, and half of it is reflected in line 2. (Alsoinclude the spouse’s cost of any qualified renewal property, whichcarries the same tax benefits as qualified zone property.)

MFS: Spouse's cost of other Section 179 property. If the filing status ismarried filing separately you must enter the total cost of all section179 property expensed on the spouse's Form 4562 excluding quali-fied zone property, qualified renewal property, and New York LibertyZone property already enter in the preceding lines. This amount isreflected in line 2, below.

1 Maximum dollar limitation. (auto-calc) Normally $24,000 for 2001,this limitation will be higher if you identified any property as quali-fied zone property or New York Liberty Zone property, either in thepreceding lines or in the worksheet for line 6 (described later). (Ifyou claim any sec. 179 expense for qualified zone property, quali-fied renewal property, or New York Liberty Zone property on theListed Property Worksheet that supports line 26, you can overridethis line and increase it in accordance with Limitation A, describedearlier, since it is not separately identified on those worksheets.)

2 Total cost of sec 179 property placed during the tax year. (auto-calc)Computed as the total cost of assets for which you claim section179 deductions at lines 6 (taken from your entries on the Section179 Worksheets) and 7 (taken from your entries on the Listed Prop-erty Worksheets for line 26(i), which is posted to line 7), less halfthe cost of qualified zone property included in these totals, plus, ifmarried filing separately, half the spouse's qualified zone propertyplus all of the spouse's other Section 179 property. (If you claimany sec. 179 expense for qualified zone property, qualified renewalproperty, or New York Liberty Zone property on the Listed PropertyWorksheet that supports line 26, you can override this line and re-duce it by half the cost of such property, since it is not separatelyidentified on those worksheets.)

3 Threshold cost before reduction in limitation. (auto-calc) Automati-cally $200,000.

HowardSoft

Form 4562

16

4 Reduction in limitation. (auto-calc) The excess cost for Limitation B(described earlier) is computed here as the total cost in line 2 lessthe threshold in line 3, but no less than zero. HINT: If an entry ap-pears here, reconsider your section 179 claims, because you canavoid Limitation B by claiming the deduction only for less costlyitems.

MFS: $ deviation from 50/50 rule. (For MFS filing status ONLY.) Thedollar limitation is line 1 less line 4, but married taxpayers filingseparately must split this amount between themselves. A 50/50split is normal, but the IRS allows you to make a different split aslong as the two of you deduct no more than the dollar limitation onboth of your returns combined. This line is therefore provided to al-ter the split by allowing you to enter a dollar adjustment to the50/50 split ranging from line 1 less line 4 to line 4 less line 1.

5 Dollar limitation for the tax year. (auto-calc) Computed as line 1 lessline 4, plus the preceding deviation if married filing separately, butno less than zero.

6 Other than listed property. (Supported by the Section 179 & SpecialAllowance Worksheet, Figure 2-23.) The claim for property placedin service in the current tax year is detailed here for all except listedproperty. Worksheet details follow the details for line 13, below.REMINDER: Listed property MUST be detailed in Part V using theListed Property Worksheet, not here. Listed property includes cars,computers, and other property that could be partially used for enter-tainment, recreation, or amusement.

7 Listed property - amount from line 29. (auto-calc) Taken as the totalsection 179 expense deduction in Part V, and therefore not com-plete until you complete Part V.

8 Total elected section 179 cost. (auto-calc) Computed as line 6 plus line7.

9 Tentative deduction. (auto-calc) Computed as the lesser of line 5 orline 8. Limitations A and B (described earlier) are enforced here.

10 Carryover of disallowed deduction from 2000. Enter here anyamount of section 179 deduction disallowed in 2000 because of thelimitation of the deduction to taxable business income. This amountis shown on line 13 of the prior-year return, and does not includelimitations caused by the $20,000 limitation that year or the limita-tion resulting when total costs exceed $200,000.

Adjustment to taxable income limitation. In applying Limitation C, de-scribed previously, the software takes into account all wages andself-employment income throughout the return, but does not prorateit among separate Forms 4562. As a result, if you have more thanone Form 4562 with Sec. 179 deductions, you will have to make anegative entry here to reduce the limitation on line 11 by theamount allocated to other Forms 4562.

11 Taxable income limitation. (auto-calc) Limitation C is applied here.

Addendum 2002

Form 4562

17

12 Section 179 expense deduction. (auto-calc) Computed as the lesserof line 11 or the sum of lines 9 and 10. Limitation C is enforcedhere.

13 Carryover of disallowed deduction to 2002. (auto-calc) Computed asline 9 plus line 10 less line 12, this is the amount disallowed due tothe taxable income limitation on line 11, and will be used for line 10on next year's Form 4562.

The Section 179 & Special Allowance Worksheet, Figure 2-23. This worksheetsupports both lines 6 and 14 of Form 4562, both of which relate to additionalfirst-year depreciation for all but Listed Property. Use the Listed PropertyWorksheet in Part V, not this worksheet, for automobiles and other listedproperty. This worksheet is newly expanded in order to handle the require-ments of the new line 14 (for the new “bonus” depreciation), to handle theraised ceilings for New York Liberty Zone Property, and to show the depre-ciable basis to be used for any remaining balance to be depreciated in Part III(MACRS Depreciation).

Tax year on Form 1040. (auto-calc) Taken from your entry on the Con-trol Form for tax year. A deduction is allowed only for propertyplaced in service in the year displayed here.

a. Description of property. Enter the class and brief description of theproperty (such as 7-year/desk) in 25 characters or less. CAUTION:Investment property does NOT qualify, including rental real estatereported on Schedule E, except for certain New York Liberty Zoneproperty. .

Date placed in service. Enter the date in the standard mm/dd/yy for-mat. CAUTION: The date must be within the tax year on Form1040, above, for a Sec. 179 deduction or special allowance to becomputed, and must further be no earlier than Sept. 11, 2001 norlater thanSept. 10,2004 for thespecial allow-ance. .

b. Cost. Enter theTOTAL cost ofthe item forproperty youown, but leavethis line blankfor propertyreported toyou on aSchedule K-1(and thereforeowned or

SECTION 179 & SPECIAL ALLOWANCESECTION 179 & SPECIAL ALLOWANCESECTION 179 & SPECIAL ALLOWANCESECTION 179 & SPECIAL ALLOWANCE Tax year on Form 1040. Tax year on Form 1040. Tax year on Form 1040. Tax year on Form 1040.▒ 2001▒ 2001▒ 2001▒ 2001 a. Description of property : a. Description of property : a. Description of property : a. Description of property :

Date placed in service.. Date placed in service.. Date placed in service.. Date placed in service.. b. Cost.................... 0 b. Cost.................... 0 b. Cost.................... 0 b. Cost.................... 0 Expense deduc'n from K-1 0 Expense deduc'n from K-1 0 Expense deduc'n from K-1 0 Expense deduc'n from K-1 0 NYLibertyZone 179 property...? No NYLibertyZone 179 property...? No NYLibertyZone 179 property...? No NYLibertyZone 179 property...? No Qlfd zone 179 property.......? No Qlfd zone 179 property.......? No Qlfd zone 179 property.......? No Qlfd zone 179 property.......? No Amt 179 deducn NOT to claim 0 Amt 179 deducn NOT to claim 0 Amt 179 deducn NOT to claim 0 Amt 179 deducn NOT to claim 0 c. Elected cost.............. c. Elected cost.............. c. Elected cost.............. c. Elected cost..............▒ 0▒ 0▒ 0▒ 0 Bal. for deprn & spec allow Bal. for deprn & spec allow Bal. for deprn & spec allow Bal. for deprn & spec allow▒ 0▒ 0▒ 0▒ 0 Claim special 30% allowance? Yes Claim special 30% allowance? Yes Claim special 30% allowance? Yes Claim special 30% allowance? Yes > SPEC 30% ALLOW FOR LINE 14. > SPEC 30% ALLOW FOR LINE 14. > SPEC 30% ALLOW FOR LINE 14. > SPEC 30% ALLOW FOR LINE 14.▒ 0▒ 0▒ 0▒ 0 Bal. for MACRS depreciation Bal. for MACRS depreciation Bal. for MACRS depreciation Bal. for MACRS depreciation▒ 0▒ 0▒ 0▒ 0CAUTION: Reduce line c ofCAUTION: Reduce line c ofCAUTION: Reduce line c ofCAUTION: Reduce line c ofMACRS w/s to last balance.MACRS w/s to last balance.MACRS w/s to last balance.MACRS w/s to last balance.

Figure 2-23. Section 179 & Special AllowanceWorksheet (Revised)

HowardSoft

Form 4562

18

leased by a partnership, not you).Expense deduction from Schedule K-1. If the elected section 179

amount is reported to you on a Schedule K-1 (from a partnership),and the cost of the item is not available, enter the elected amounthere. A deduction will appear at line c even though line b will re-main blank.

Qualified zone property? Answer Yes only if the property qualifies asqualified zone property (or qualified renewal property if placed inservice after 2001), as described previously. A Yes answer leads toan increase in the limit on line 1 of Form 4562, and only half of thecost of the property is used in line 2.

Amount of sec. 179 deduction you elect NOT to claim. Enter the part ofthe cost on line b (or expense deduction from Schedule K-1) to bedepreciated rather than expensed as section 179 property. If youare claiming ONLY the special allowance (the bonus 30% deprecia-tion), enter here the entire cost that was entered at line b so that nosection 179 deduction results.

c. Elected cost. (auto-calc) This line is computed as the cost (or Sched-ule K-1 amount) less the above amount not to be deducted. How-ever, the result is automatically limited to no more than $24,000 in2001 (or higher for qualified property identified above), but furtherlimitations may apply on Form 4562. If this result is zero, no sec.179 deduction is claimed for this property and it will NOT be re-flected in any lines in Part I of Form 4562, and the details from theworksheet will be omitted from line 6 of the official printout of Form4562 and its supporting statements.

Balance for depreciation and special allowance. (auto-calc) Computedas the cost on line b less the sec. 179 deduction on line c, this isthe reduced basis that must be used when computing the new bo-nus depreciation (special allowance). (If no special allowance isclaimed this is also the basis to be used for any depreciation claimedin Part III for this property.)

Claim special 30% allowance? Thanks to the retroactive tax bill, youmay qualify for a bonus first-year depreciation amounting to 30% ofthe depreciable basis. To claim this special first-year depreciationyou must answer Yes here. However, the software will allow youto answer Yes ONLY if all of the following conditions are met:* business use start date is no earlier than 9/11/2001,* business use start date is no later than 9/10/2004, and* business use start date is within the tax year of the return.In addition, you should only answer Yes if the property meets all ofthe qualifications listed on pages 2 and 3 of this Addendum. If youcan answer Yes, the allowed deduction will be reflected on the nextline. CAUTION: If you elect not to make this claim even though youare eligible for it, you must treat all property in the same class in the

Addendum 2002

Form 4562

19

same way and attach a statement to the return identifying the classfor which you elect out of the special allowance.

SPECIAL 30% ALLOWANCE FOR LINE 14. (auto-calc) Computed as30% of the balance shown below line c if you answered Yes to thepreceding question. Otherwise zero. This result will appear at line14 of an official printout of Form 4562.

Balance for MACRS depreciation. (auto-calc) Computed as the cost online b less the sec. 179 deduction on line c and the preceding 30%allowance, this is the reduced basis that must be used when com-puting any further depreciation for this property. This is thereforethe amount to enter on line c of any MACRS worksheet you createfor this property in Part III of Form 4562.

When you exit the worksheet, lines b, c, and the special allowance line areseparately summed for all worksheets and posted to lines 2, 6, and 14, re-spectively, of Form 4562. (The amount for line 2 may be further modified byother entries or special treatment for qualified property.)

PART II, SPECIAL DEPRECIATION ALLOWANCE AND OTHER DEPRECIA-TION. This new section is a catchall for depreciation that is neither MACRSdepreciation (which is claimed in Part III) nor depreciation for listed property(which is claimed in Part V). This section includes the new 30% bonus de-preciation as well as the depreciation of property not eligible for MACRS de-preciation, including property placed in service before 1987 and property de-preciated under sec. 168(f)(1).

14 Special depreciation allowance for certain property acquired afterSept. 10, 2001. (Supported by the Section 179 & Special AllowanceWorksheet, Figure 2-23.) This line is used to claim the new 30%bonus depreciation for all but listed property. (The bonus deprecia-tion is claimed for listed property at line 25.) The worksheets youaccess here serve two purposes: to support the section 179 deduc-tions at line 6 and to support the new bonus depreciation deductionhere at line 14 (as detailed on the preceding two pages). When theofficial Form 4562 is printed, only the sec. 179 details from theworksheets are printed (at line 6), because the IRS has made noprovision for details of the special allowance. However the compu-tation of the two deductions on the same worksheet is importantbecause (1) they are both first-year depreciation deductions, (2) theconditions for qualification are the same in most cases, and (3) thecomputation for the special allowance depends on how much sec.179 deduction has been taken for the same property. CAUTION:You should NOT make an entry here yourself but rather completethe supporting worksheets. The proper deduction will then appearhere when you return from the worksheets. Furthermore, if youmake an entry here manually yourself it will be overwritten by in-formation on the supporting worksheets once you itemize either line6 or line 14 of Form 4562.

HowardSoft

Form 4562

20

15 Property Subject to Section 168(f)(1) election. (Supported by Sec.168(f)(1) Election Worksheet, Figure 2-25.) Use this line for prop-erty you elect to depreciate by the units-of-production method orany other method not based on a term of years. You should use theprovided supporting worksheet so that the detail required by the IRSis printed with the official return.

ACRS depreciation. (Supported by the MACRS/ACRS Worksheet, Fig-ure 2-24.) Use this line for property, other than listed property, pre-viously depreciated by the regular or optional ACRS methods. Thedate placed in service must be from 1981 through 1986, with onlyrare exceptions, and the worksheets prevent its use for other dates.Note that the former ACRS classes are not the same as the currentMACRS classes. For any given property, you must use the sameclass you used on your prior tax return, not the ones noted at line19a through 19i. See details for line a of the MACRS/ACRS Work-sheet for instructions on entering the proper classification. (The IRSdoes not require that the supporting detail for this line be filed withthe return, but rather that you keep the details in your own records.You can therefore invoke the Detach Support key described inChapter 7 to suppress the printing of the worksheets for this line.)

Other depreciation. (Supported by Depreciation Worksheet, Figure 2-26.) Use this line for property placed in service BEFORE January 1,1981, and certain other property that cannot be depreciated byACRS methods. (The IRS does not require that the supporting detailfor this line be filed with the return, but rather that you keep the de-tails in your own records. You can therefore invoke the Detach Sup-port key described in Chapter 7 to suppress the printing of theworksheets for this line.)

16 ACRS and other depreciation. (auto-calc) Computed as the sum ofthe above two lines.

Note that "transitional property," which is depreciated by ACRS rules eventhough placed in service in 1987, must be reported on the MACRS/ACRSWorksheet using the Manual Method, because the built-in date checkingblocks the use of the automatic methods for this special case.

PART III, MACRS DEPRECIATION. Depreciation deductions for most propertyplaced in service since 1987 are claimed here, but NOT deductions for listedproperty. (Listed property is reported in Part V, and includes cars, computers,and other property that could be partially used for entertainment, recreation,or amusement.) Line 17 is used for property placed in service before the cur-rent tax year, and lines 19 and 20 are used for property placed in serviceduring the current tax year. The IRS always requires the supporting details fornewly acquired property, so the details for lines 19 and 20 must always beprinted, but you can omit the printing of details for line 17 (by using the De-tach Support key described in Chapter 7 of the User’s Guide).

Section A. This section no longer has a title because it now contains two to-tally unrelated items! The first line is used for reporting MACRS depreciation

Addendum 2002

Form 4562

21

for property placed in service before the tax year of the return, and was for-merly grouped with other old property (lines 19 and 20). The second line isused to make the General Asset Account Election.

17 MACRS deductions for assets placed in service before 2001. (Sup-ported by the MACRS/ACRS Worksheet, Figure 2-24.) The work-sheets that support this line are the same type as those that supportlines 19 and 20. However, the date placed in service must beBEFORE the current tax year (but not before 1987, since MACRSwas introduced in 1987). When you complete worksheets for thisline, you MUST enter the class on line a, using the abbreviationsgiven in the instructions for the worksheet, below, in order to effectthe proper automatic calculations. For the worksheets that supportthis line the date placed in service must precede the current tax year(as entered on the Control Form) but be no earlier than 1987 or elseno deduction will result.

18 Making the election under section 168(i)(4) to group any assetsplaced in service during the tax year into one or more general as-set accounts? If so, you must answer Yes here, and an X will ap-pear in the box provided on the official Form 4562.

Section B – Assets Placed in Service During 2001 Using the General Depre-ciation System. (Supported by the MACRS/ACRS Worksheet, Figure 2-24.)This line is separated by class into nine separate lines, each of which is sup-ported by an independent set of MACRS/ACRS Worksheets, detailed later.Each set provides automatic calculations for the class identified by the line.Deductions for both regular MACRS and the straight-line election under theGeneral Depreciation System (GDS) are provided. The regular MACRS deduc-tion is based on the traditional declining balance (DB) method with automaticswitchover to straight-line when the latter results in a bigger deduction, usinga half-year convention. For this line, the recovery period is always the sameas the class label, even for the straight-line election. (This GDS straight-lineelection is covered by IRS sec. 168(b)(5), and differs from the ADS methoddescribed for line 20 in which the recovery period is generally NOT the sameas the class label. If you elect the straight-line method, you must use thatmethod for ALL worksheets that support the same line.) For worksheets thatsupport these lines the date placed in service must be within the tax year en-tered on the Control Form; otherwise no deduction will result. Furthermore,the class is forced to correspond to the label for the line being supported.

19a 3-year property. Includes race horses more than 2 years old, otherhorses more than 12 years old, and qualified rent-to-own propertyunder sec. 168(i)(14). (ADR class life of 4 years or less. DB methodbased on 200% DB over 3 years, or 2 years for Qualified IndianReservation Property.)

19b 5-year property. Includes other horses, qualified technologicalequipment (such as computers), office equipment, research and ex-perimentation property, and semi-conductor manufacturing equip-ment. It also includes carpeting, furniture, appliances, and other

HowardSoft

Form 4562

22

property that is associated with rental real estate, as highlighted inthe shaded paragraph on the next page. This class now includesqualified New York Liberty Zone leasehold improvement propertyplaced in service after September 10, 2001. CAUTION: All carsand most personal computers fall into this class life, but are gener-ally depreciated in Part V, not here, as listed property. (ADR classlife more than 4 but less than 10 years. DB method based on 200%DB over 5 years, or 3 years for Qualified Indian Reservation Prop-erty.)

19c 7-year property. Includes office furniture and fixtures, and otherproperty with no assigned ADR class life. (ADR class life 10 or morebut less the 16 years. DB method based on 200% DB over 7 years,or 4 years for Qualified Indian Reservation Property.) HINT: Use thisline for property that has no IRS-designated class life.

19d 10-year property. Includes water transportation equipment, single-purpose agricultural/horticultural structures, trees and vines bearingfruit or nuts. (ADR class life 16 or more but less the 20 years. DBmethod based on 200% DB over 10 years, or 6 years for QualifiedIndian Reservation Property.)

19e 15-year property. Includes municipal wastewater treatment plantsand telephone distribution plants. (ADR class life 20 or more butless the 25 years. DB method based on 150% DB over 15 years, or9 years for Qualified Indian Reservation Property.)

19f 20-year property. Includes multi-purpose farm buildings and munici-pal sewers that are not 25-year property. (ADR class life 25 or moreyears, except for most real property. DB method based on 150%DB over 20 years, or 12 years for Qualified Indian Reservation Prop-erty.)

19g 25-year property. For water utility property, this class was createdfor qualifying property placed in service after June 12, 1996.(Based on straight-line depreciation over 25 years.)

19h Residential rental property (27.5-year, mid-month, S/L only). In-cludes buildings in which at least 80% of the rent is from dwellingunits, but excludes most hotels and motels. Also includes escalatorsand elevators. (Based on straight-line depreciation over 27.5 yearsusing a mid-month convention.)

19i Nonresidential real property (mid-month, S/L only). Real property,other than residential rental property, with ADR class life of at least27.5 years. (Based on straight-line depreciation using a mid-monthconvention over a 39-year period, or 22 years for Qualified IndianReservation Property.)

50-year property. Although the IRS Form 4562 still does not provide aseparate line for it, there is a special class for improvements relatedto railroad tracks. Contrary to all other new property, the IRS in-structs you to note any deduction for this property at line 21, not

Addendum 2002

Form 4562

23

here, so we provide a line for this property above line 21 rather thanhere.

Line 19 is automatically computed as the sum of lines a through i.

20 Assets Placed in Service During 2001 Using the Alternative DepreciationSystem. (Supported by the MACRS/ACRS Worksheet, Figure 2-24.) A sepa-rate kind of straight-line depreciation has been coined by the IRS as the Alter-native Depreciation System (ADS), covered by IRS sec. 168(g). For this typeof depreciation, you must use an IRS-prescribed period, typically the class lifeof the property, rather than the life in the class label, as the recovery period.CAUTION: You are REQUIRED to use this method rather than MACRS forsome property: any tangible property used mostly outside the U. S., any tax-exempt use property, any tax-exempt bond financed property, and any im-ported property covered by an Executive Order of the President of the UnitedStates. This line is separated by type into three separate lines, each of whichis supported by an independent set of MACRS/ACRS Worksheets, detailedlater. Each set provides automatic calculations for the type identified by theline. For worksheets that support these lines the date placed in service mustbe within the tax year entered on the Control Form; otherwise no deductionwill result. Furthermore, except for line 20a the class is forced to correspondto the label for the line being supported.

a Class life type (S/L only). Use this line for property that has an IRS-defined class life, except for real property. When you use the work-sheet accessed here you must enter as the recovery period the ac-tual class life, such as 16 through 20 for 10-year property.

b 12-year (12-year, S/L only). Use this line for property that has no classlife. Such property is assumed to be "7-year property" with a classlife, and hence recovery period, of 12 years.

c 40-year (40-year, mid-month, S/L only). Use this line only for residen-tial rental and nonresidential real property that would be deductedon line 19h or 19i if the alternate system were not used. A 40-yearrecovery period is assumed in this case, using the mid-month con-vention when determining the straight-line deduction.

If elected, you must use the same method for all property in the same classplaced in service in 2001.

SPECIAL ELECTION FOR 2001. In depreciating newly acquired property yougenerally must use the mid-quarter convention in place of the half-year con-vention for all such newly acquired property when more than 40% of thevalue of property placed in service during the year is placed in service in thelast quarter of the year. (Residential rental property, nonresidential real prop-erty, and railroad gratings and tunnel bores are neither subject to this re-quirement nor included in the 40% test.) However, for tax year 2001 alone,you may ignore this rule and use the higher percentage deduction afforded bythe half-year convention for vehicles placed in service in 2001. (This specialelection is a part of the relief package enacted late in 2001 as a result of the9/11/2001 terrorist attacks.) To make the election you must answer the fol-lowing:

HowardSoft

Form 4562

24

Elect out of mid-quarter convention? If you answer Yes, the words“Election Pursuant to Notice 2001-70” will appear below your SSNnear the top of the official printout of Form 4562 to alert the IRS ofyour election. Note that the sole purpose of answering this questionis to alert the IRS of your intention. You still must specify whichconvention you use when you complete the MACRS worksheets forthe property. HINT: Since the IRS actually instructs you to write theabove phrase in the top margin of the form, which is not practicalfor most printers, we recommend that you emphasize the printedwords with a yellow highlighter.

PART IV, SUMMARY. All depreciation deductions are summed here:21 Listed property - amount from line 28. (auto-calc) Taken as the total

section 179 expense deduction in Part V, and therefore not com-plete until you complete Part V. CAUTION: Depreciation for auto-mobiles and other listed property must ALWAYS be detailed in PartV.

50-year property (railroad track). (Supported by the MACRS/ACRSWorksheet, Figure 2-24.) Although the IRS Form 4562 does notprovide a line for it, there is a class for improvements related to aroadbed or right-of-way for railroad track that qualifies as a railroadgrading or tunnel bore under IRS section 168(e)(4). This class hasexisted since 1992, yet the IRS does not provide separate lines forit. Since the IRS instructions call for its deduction at line 22, how-ever, worksheet access is provided here for property placed inservice in 1992 or later. The worksheet you access at this line isfully automated, just like all other classes of property.

22 Total. Add lines 12, 14 through 17, 19 and 20 in column (g), and line21. (auto-calc) Computed as indicated plus the above amount for50-year property, this is the total posted to the supported form forwhich you accessed this copy of Form 4562. (Note that this totalexcludes line 12 for partnership Form 1065 returns because part-nerships must pass section 179 deductions on to its partners.)

23 For assets shown above and placed in service in current year, por-tion of basis attributable to Section 263A costs. This line is for IRSauditing only and does not affect any calculations. If you are subjectto the uniform capitalization rules of section 263A, you must enter,for all property placed in service in the current tax year, the increasein basis from costs that are required to be capitalized.

PART V, LISTED PROPERTY. (Automobiles, certain other vehicles, cellulartelephones, certain computers, and property used for entertainment, recrea-tion, or amusement.) This section is used to report depreciation for all "listedproperty" and to substantiate business use of a vehicle. Listed property in-cludes cars, computers, and other property that could be partially used forentertainment, recreation, or amusement. Listed property includes cellulartelephones. Except for cars, however, property used EXCLUSIVELY in a tax-payer's trade or business at taxpayer's regular business establishment is

Addendum 2002

Form 4562

25

EXEMPT from listed property status. When business use is 50% or less, thesection 179 expense deduction is NOT available and the deduction must bedetermined using the straight-line method over an extended life. CAUTION:The IRS also requires you to complete Part V even for vehicles for which youuse the standard mileage rate or deduct lease expenses, completing lines athrough c of the Listed Property Worksheet, all of Section B, and Section C ifapplicable.

Section A, Depreciation and Other Information. The section 179 expense de-duction and the regular depreciation deduction are both claimed here forListed Property. Note that two separate sets of Listed Property Worksheetssupport this section. The set accessed at line 25 or line 26 supports onlyproperty with more than 50% business use, and the set accessed at line 27supports only property with 50% or less business use:

24a Do you have evidence to support the business/investment useclaimed? You must answer for all listed property taken as a whole.

24b If "Yes", is the evidence written? Again, answer for all propertytaken as a whole.

25 Special depreciation allowance for listed property acquired afterSept. 10, 2001, and used more than 50% in a qualified business use.(Supported by Listed Property Worksheet, Figure 2-27.) This line isused to claim the new 30% bonus depreciation for listed propertyused more than 50% for business. The worksheets you access hereserve three purposes: to support the new bonus depreciation deduc-tion here at line 25, to support the section 179 deductions at col-umn (h) of line 26, and to support the regular depreciation deduc-tions at column (i) of line 26. The computation of these three de-ductions on the same worksheet is important because (1) they allrelate to listed property used more than 50% for business, (2) thecomputation of the special allowance depends on the sec. 179 de-duction claimed for the same property, and (3) the computation ofthe regular depreciation depends on both the sec. 179 deductionand special allowance claimed for the same property. CAUTION:You should NOT make an entry here yourself but rather completethe supporting worksheets. The proper deduction will then appearhere when you return from the worksheets. Furthermore, if youmake an entry here manually yourself it will be overwritten by in-formation on the supporting worksheets once you itemize any of thelines supported by this worksheet. (Note that the worksheets thatsupport this and the next three lines are intended ONLY for propertyused in the business more than 50% of the time. The softwaretherefore computes zero depreciation on any worksheets attachedto these lines that do not have an entry for business use percentagethat exceeds 50%.)

26 Property used over 50% in a qualified business use (h) depreciation.(Supported by Listed Property Worksheet, Figure 2-27.) The depre-ciation deduction is posted here from the same set of worksheets as

HowardSoft

Form 4562

26

support the preceding line. This amount is also reflected in the totalat line 28(h), below, and line 21 in Part IV.

26 Property used over 50% in a qualified business use (i) Section 179.(Supported by Listed Property Worksheet, Figure 2-27.) The current-year expense deduction is posted here from the same set of work-sheets as support the preceding two lines. This amount is also usedfor line 29(i), below, and line 7 in Part I.

Cost of new section 179 property in line 26(i). (Supported by ListedProperty Worksheet, Figure 2-27.) Using the same set of work-sheets as the preceding three lines, the cost of all property forwhich the section 179 deduction was claimed this year is postedhere from the worksheets, then used in line 2 of Part I of this form.

27 Property used 50% or less in a qualified business use (h) deprecia-tion. (Supported by Listed Property Worksheet, Figure 2-27.) Theworksheets that support this line are intended ONLY for propertyused in the business no more than 50% of the time. The softwaretherefore computes zero depreciation for any worksheets attachedto this line that do not have an entry for business use percentage of50% or less. The depreciation deduction from all appropriate work-sheets combined appears here. This total is also reflected in the to-tal at line 28(h), below, and line 21 in Part IV.

28 Total amounts in column (h) for line 21, page 1. (auto-calc) Com-puted as the sum of lines 25, 26(h) and 27(h), this is the total de-preciation for listed property including the new bonus depreciation.

29 Total amounts in column (i) for line 7, page 1. (auto-calc) Taken asthe amount on line 26(i), and posted to line 7 of Part I, this is thetotal sec. 179 expense for listed property.

Pre-1987 part of depreciation in line 29(h) (for California). (auto-calc,supported by Listed Property Worksheet, Figure 2-27.) This line isprovided to simplify preparation of a state return by our CaliforniaSupplement.

If you claim any deductions for vehicles, you must also complete Section Band, if an employer-provided vehicle is involved, Section C, below.

Listed Property Worksheet, Figure 2-27. For most entries you should refer tothe details for MACRS/ACRS Worksheets (Figure 2-24) for more information.However, additional restrictions apply to this worksheet as noted below.(Note that the IRS prefers that the worksheets appear in the order of vehiclesfirst, then 5-year property, 10-year property, etc., so you may need tochange the order of the worksheets after you add a new one. See Ch. 7 forinformation on reordering worksheets.)

a. Type of property. Describe property in 10 characters or less.If automobile: 1=regular, 2=OEM electric. If the property is a vehicle,

it is subject to annual limitations on depreciation deductions -- theso-called “luxury car limitations.” See Table 2-11 (in the details forForm 2106) for a complete list of the limitations, which are applied

Addendum 2002

Form 4562

27

when you enter 1 here. But if the vehicle was produced by anoriginal equipment manufacturer (OEM) and designed to run primar-ily on electricity, enter 2. For OEM electric vehicles that wereplaced in service after August 5, 1997, the limits on luxury cars areapproximately tripled. (The amounts were precisely tripled in 1997,but the application of indexing in accordance with the law nowsometimes makes the amounts slightly more or less than tripled.)

b. Date placed inservice. Enterfull date in themm/dd/yyformat. Thisentry criticallyaffects allcomputations.

Class (3, 5, 7, 10,etc.). This 2-digit entry de-termines therestrictions toapply and thecalculations touse. (See ourdetails for lines19a through20c of Form4562 for ex-amples of classes to use.)

Business use percentage. Enter percentage, from 0 to 100, that de-fines the amount the item was used for business during the taxyear. When the business percentage is 50% or less, straight-linedepreciation must be used, which the software ensures. CAUTION:If you accessed this worksheet from line 25 or line 26, you will notbe allowed to enter any amounts below if your entry here for busi-ness use percentage is 50% or less. Conversely, if you accessedthis worksheet from line 27, you will not be allowed to enter anyamounts below if your entry here for business use percentage ismore than 50%.

c. Business/investment use percentage. This entry will automaticallymatch the above business use percentage unless you increase it toreflect investment use of the property in addition to business use.Through this entry you increase the basis for depreciation withoutincreasing the business use for purposes of the above 50% rule.

d. Cost or other basis. Enter actual cost or gross basis, not adjusted ba-sis, here. The basis for depreciation is computed at line e.CAUTION: If this is qualified zone or other special property, de-

a. Type of property........ a. Type of property........ a. Type of property........ a. Type of property........ If auto: 1=regular,2=OEM elec 0 If auto: 1=regular,2=OEM elec 0 If auto: 1=regular,2=OEM elec 0 If auto: 1=regular,2=OEM elec 0 b. Date placed in service. b. Date placed in service. b. Date placed in service. b. Date placed in service. Class (3,5,7,10, etc.) 0 Class (3,5,7,10, etc.) 0 Class (3,5,7,10, etc.) 0 Class (3,5,7,10, etc.) 0 % of qlfd business use 0 % of qlfd business use 0 % of qlfd business use 0 % of qlfd business use 0 c. % bus+investment use...... 0 c. % bus+investment use...... 0 c. % bus+investment use...... 0 c. % bus+investment use...... 0 d. Cost or other basis...... 0 d. Cost or other basis...... 0 d. Cost or other basis...... 0 d. Cost or other basis...... 0 Sec. 179 deduc(2001orPrior) 0 Sec. 179 deduc(2001orPrior) 0 Sec. 179 deduc(2001orPrior) 0 Sec. 179 deduc(2001orPrior) 0 Claim special 30% allowance? No Claim special 30% allowance? No Claim special 30% allowance? No Claim special 30% allowance? No Special allowance for ln 25 Special allowance for ln 25 Special allowance for ln 25 Special allowance for ln 25▒ 0▒ 0▒ 0▒ 0 e. Deprec'n basis............ e. Deprec'n basis............ e. Deprec'n basis............ e. Deprec'n basis............▒ 0▒ 0▒ 0▒ 0 Deprec'n in past years 0 Deprec'n in past years 0 Deprec'n in past years 0 Deprec'n in past years 0 f. Period of recovery (years) 0 f. Period of recovery (years) 0 f. Period of recovery (years) 0 f. Period of recovery (years) 0 Farm or elect 150% DB.? No Farm or elect 150% DB.? No Farm or elect 150% DB.? No Farm or elect 150% DB.? No MUST use mid-qtr convn? No MUST use mid-qtr convn? No MUST use mid-qtr convn? No MUST use mid-qtr convn? No Convention used........... Convention used........... Convention used........... Convention used........... g. Method (DB,SL,etc.) g. Method (DB,SL,etc.) g. Method (DB,SL,etc.) g. Method (DB,SL,etc.) Month sold(if this yr) 0 Month sold(if this yr) 0 Month sold(if this yr) 0 Month sold(if this yr) 0 Percentage this year.. 0 Percentage this year.. 0 Percentage this year.. 0 Percentage this year.. 0 h. Deprec'n deduction........ h. Deprec'n deduction........ h. Deprec'n deduction........ h. Deprec'n deduction........▒ 0▒ 0▒ 0▒ 0 i. Sec179 cost elected....... i. Sec179 cost elected....... i. Sec179 cost elected....... i. Sec179 cost elected.......▒ 0▒ 0▒ 0▒ 0

Figure 2-27. Listed Property Worksheet (Revised)

HowardSoft

Form 4562

28

scribed previously in the details for the Section 179 Worksheet, youmay need to alter the cost shown at line 2 of Form 4562 becauseno special reduction is applied for amounts from this Listed PropertyWorksheet.

Section 179 deduction (2001 or prior). Enter the section 179 deductiontaken in the past or to be taken this year (if acquired in the currenttax year), plus the amount of reduction required for the amount ofInvestment Tax Credit (ITC) taken in the past. (The required reduc-tion for ITC is half of any pre-1986 credit unless you chose to takethe reduced credit at that time.) No section 179 deduction is al-lowed in the current year if the business use percentage is 50% orless. This rule is imposed in determining the amount for line h whenthe date on line b lies in the current tax year. See limitations de-scribed in Part I of Form 4562. If acquired in the current year, yourentry will appear at line I, below, subject to the limitations for cars ifyou identified the property as a regular or OEM electric car. TaxPlanning Hint: When using this line for a tax year after 2001 andthe property was placed in service before that year, you should in-clude the past special allowance taken as well as the section 179deduction taken.

Claim special 30% depreciation allowance? (New line for release2002.03 and later.) If you acquired new (not used) property duringthe tax year, you may qualify for a bonus first-year depreciationamounting to 30% of the depreciable basis (but subject to the limi-tations in Table 2-11 if you identified the property as a car). Toclaim this special first-year depreciation you must answer Yes here.However, the software will allow you to answer Yes ONLY if all ofthe following conditions are met:* percent of business use is more than 50%,* business use start date is no earlier than 9/11/2001,* business use start date is no later than 9/10/2004, and* business use start date is within the tax year of the return.If you can answer Yes, the allowed deduction will be reflected inthe automatically-calculated line that follows, as detailed in our in-structions for that line. CAUTION: If you elect not to make thisclaim even though you are eligible for it, you must treat all propertyin the same class in the same way and attach a statement to the re-turn identifying the class for which you elect out of the special al-lowance.

Special allowance for line 25. (auto-calc) If the business use start datelies in the current tax year and the business use percentage exceeds50%, then this line is computed as the special 30% allowance,subject to the limitations in Table 2-11 when applicable. Otherwisecomputed as zero. The special allowance is figured on a reducedbasis computed as line c times line d less the sec. 179 deductiontaken. The allowance is then 30% of that reduced basis, subject to

Addendum 2002

Form 4562

29

the limitations in Table 2-11 when applicable. This result will be re-flected in line 25 of Form 4562.

e. Basis for depreciation. (auto-calc) Computed as line d times the per-centage on line c, less the section 179 deduction and the precedingspecial allowance.

Depreciation in past years. Enter total depreciation allowable in thepast, whether taken or not. This entry determines the amount youcan deduct after the end of the recovery period for cars previouslysubjected to luxury car maximums.

f. Recovery period (years). This entry is restricted by the software toallowed values. For example, when the SL method is required be-cause of the 50% rule, your entry may be raised to a recovery pe-riod higher than the class label may imply.

Farm or elect 150% DB method? As detailed for the MACRS/ACRSWorksheet, property used in a farming business cannot use the200% DB method, and others may use 150% DB by election.

MUST use mid-quarter convention? (For post-1986 property only.) Ifmore than 40% of your new property for a class was placed inservice in the last quarter of a tax year, you normally must answerYes for all property of the same class for that tax year. However,for 2001 only you are allowed to ignore this rule by claiming a spe-cial election, as described preceding Part II of Form 4562.

Convention used. (auto-calc line when you enter DB, MA, PRE, AC, orSL as the method.) This line shows the convention used in theautomatic calculations, using IRS-defined abbreviations: HY (forhalf-year), MQ (for mid-quarter), FM (for full month), and MM (formid-month).

g. Method (DB, SL, etc.). Three basic methods are built-in: MACRS (DBor MA), the regular prescribed ACRS (PRE or AC), and the straight-line election (SL and S/L). The software recognizes these methodsfrom the first two characters of your entry. All other entries, in-cluding any entry with a leading space, permit you to manually enterANY percentage for "Percentage this year," below. REMINDER: Thesoftware changes your DB, MA, PRE, and AC entry into SL whenthe business use percentage is 50% or less, to conform with IRSrules.

Month sold (if this year). If sold or retired during the tax year, enter themonth sold or retired from 1 to 12. The deduction is determinedautomatically based on the law. (A zero deduction will result for pre-1987 property other than real property under the ACRS rules thatno deduction is allowed in the year of sale.)

Percentage this year. (auto-calc line when you enter DB, MA, PRE, AC,or SL as the method.) If you don't enter a bona fide method, theManual Method is assumed and you can enter the percentage hereyourself. Otherwise the IRS percentage is displayed here to twodecimal places, even though it is retained to three decimal places in

HowardSoft

Form 4562

30

the calculations when so required by the IRS. CAUTION: Do not usethe Manual Method unless you have an unusual exception, such astransition property, because the software has numerous lesser-known subtleties of the law built in, handling all the changes of thepast decade.

h. Depreciation deduction. (auto-calc) Computed as the basis on line etimes the above percentage, and further limited (automatically) tothe amounts in Table 2-11 (detailed for Form 2106, but applicablehere as well) multiplied by business use percentage when you an-swer Yes to the above automobile question.

i. Section 179 cost elected. (auto-calc) Taken as your entry for section179 expense deduction taken (as previously limited for cars whenapplicable), when the date on line b lies within the tax year andbusiness use percentage exceeds 50%.

When you exit the worksheets, the amounts on all lines d, h, and i are sepa-rately summed and posted to the corresponding lines on Form 4562.

Remaining lines of Form 4562 unchanged except for line numbers. Lines 30through 42 of the new Form 4562 match lines 28 through 40 of the formerForm 4562. The line numbers have changed, but the order and meaning ofthe lines are unchanged. You should therefore refer to the Tax Forms Guide2002 Edition (pages 2-241 through 2-244) for the details of these lines.