GO ZONE - is 50% bonus depreciation eligible for NOL 5 year carryback

[Curious]

is GO Zone 50% bonus depreciation specifically eligible for NOL 5 year carryback?

Our question is as follows:

Re: Go Zone property

Our mortgage company couldn't get all the paperwork done in time for escrow to close by 12/31/07. They were ready to close 1/3/08.

We need that 50% bonus depreciation write-off to be applied to our '2007' return to make it feasible for us to proceed with the purchase.

We were wondering if the 50% depreciation officially 'is' or 'definitely is not' eligible for the 5 year carry back.

Therefore, we buy the go-zone 4-plex officially in 2008, but are able to take the bonus 50% depreciation (or most of it) on our 2007 tax return. Please help. Please clarify. Thanks.

Linda

[BOB W]

is GO Zone 50% bonus depreciation specifically eligible for NOL 5 year carryback?

Our question is as follows:

Re: Go Zone property

Our mortgage company couldn't get all the paperwork done in time for escrow to close by 12/31/07. They were ready to close 1/3/08.

We need that 50% bonus depreciation write-off to be applied to our '2007' return to make it feasible for us to proceed with the purchase.

We were wondering if the 50% depreciation officially 'is' or 'definitely is not' eligible for the 5 year carry back.

Therefore, we buy the go-zone 4-plex officially in 2008, but are able to take the bonus 50% depreciation (or most of it) on our 2007 tax return. Please help. Please clarify. Thanks.

Linda

Gulf Opportunity Zone Act
Bonus Depreciation
Businesses of all sizes affected by Hurricane Katrina
can take a special first year depreciation deduction for
qualified property acquired and placed in service in the
GO Zone after August 27, 2005, and before January 1,
2008 (before January 1, 2009 in the case of nonresidential
real property and residential rental property). The
special deduction is equal to 50 percent of the qualified
property’s depreciable basis.
Enhanced Section 179
Certain small businesses affected by Hurricane Katrina
can annually deduct up to $200,000 in qualifying property
expenditures placed in service in the GO Zone.
This is double the amount otherwise allowed for small
business expensing. In addition, the phaseouts for level
of investment increased from $400,000 to $1 million,
allowing more small businesses to use this tax benefit.
These provisions apply to qualified property acquired and
placed in service in the GO Zone after August 27, 2005
and before January 1, 2008. (Plus indexing for inflation)

Here is the full URL: http://www.irs.gov/pub/irs-pdf/p1460.pdf


Looks like the cut off was December 31, 2007 ????????? Unless it was non residential property or residential rental property............12/31/08

[Curious]

This is rental property so the cut off date is not until 12/31/08 so we are ok there. If we buy in 08, we can take the 50% bonus depreciation in 08.

However....

The problem is we need that 50% bonus depreciation in '2007'. The only way that will work for us is if that 50% depreciation is specificlaly eligible as a NOL - because of the special ruling on the 5 year carry back.

We're not clear if it is eligible as a NOL. Thanks.

[BOB W]

This is rental property so the cut off date is not until 12/31/08 so we are ok there. If we buy in 08, we can take the 50% bonus depreciation in 08.

However....

The problem is we need that 50% bonus depreciation in '2007'. The only way that will work for us is if that 50% depreciation is specificlaly eligible as a NOL - because of the special ruling on the 5 year carry back.

We're not clear if it is eligible as a NOL. Thanks.

I doubt that you will find an answer to your question. Many times questions are asked that should not be asked. When you look at any normal depreciation that will be part of an NOL, there is no question as to its use in an NOL. Sect 179 is normally restricted when it is part of a current year loss, it can't be deducted. I am not aware of any restriction using depreciation or bonus depreciation. Bonus depreciation is not new, but it did end a couple of years ago, and now it is brought back for your issue. I believe bonus depreciation is considered NORMAL depreciation and is handled as such.

In otherwords, I have never heard of any restriction on bonus depreciation. In the past it was required unless you elected out of it.

[Curious]

thanks so much for your input

[Golden Rocket]

Possible Relief

Curious, you might confirm whether the property was under contract for sale in 2007.

I believe the governing year for beginning depreciation on rental property is the "year the property is placed in service." I don't know what that does for or against you, or how to construe the definition. I believe it means that house must be ready to rent whether it is actually rented or not. If a renter was not allowed to take possession because title was held up until Jan 3, then I think you're outa luck.

[BOB W]

thanks so much for your input

Here are some of the rules on the 2003 Bonus Depreciation and other google searches :

http://tax.cchgroup.com/Tax-Briefings/2003-Corporate-Tax-Bonus-Depreciation.pdf

http://nreionline.com/commentary/washington/real_estate_benefits_bonus_depreciation/

http://www.gozoneonline.com/FAQ.html

http://www.gozoneguide.com/story_4.html

I don't see any restriction to NOL use.

[BOB W]

The new EA Journal (Jan_Feb) has an article about NOL's > It does not mentions anything about bonus depreciation but it talks about GOZONE issues.