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Special Depreciation Allowance

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    Special Depreciation Allowance

    If you fail to take the 30% or 50% Special Depreciation Allowance, and you do not elect out by attaching the required statement, what happens, if anything?

    Election Required

    Reg. 1.168(k)-1T(e)(5):

    If a taxpayer does not make the applicable election specified in paragraph (e)(1) of this section within the time and in the manner prescribed in paragraph (e)(3) or (4) of this section, the amount of depreciation allowable for that property under section 167(f)(1) or under section 168, as applicable, must be determined for the placed-in-service year and for all subsequent taxable years by taking into account the additional first year depreciation deduction...

    In other words, if you don't elect out and don't take the bonus depreciation, you have to reduce the basis of the property anyway, since the bonus depreciation was allowable.


      Elect Out not filed

      Special Depreciation Allowance not taken and the elect out not filed. Is there any remedy to correct this? Can form 3115 be used?



        Yes, it can be fixed. Amended return, or automatic consent for change of accounting method on Form 3115.

        There's more info in Rev. Proc. 2003-50.


          You have until the due date including extensions to make this election. In other words, until October 15th provided you timely filed OR filed for timely extension(s).
          If this problem is from 2003, you make elect (without the consent of the Commissioner) to take, on an amended return, a Section 179 deduction on the property for which the bonus depreciation election was not made. By doing so you would at least receive the benefit of the deprecition "allowable".