Form 4562, Part V, Line 27e

[jmhastings]

On form 4562, line 26 & 27, column (e) is Basis for Depreciation. Here are the IRS instructions for that line/column:

Column (e)—Basis for depreciation (business/invest-ment use only). Multiply column (d) by the percentage in column (c). From that result, subtract any section 179 expense deduction, any special depreciation allowance, any credit for employer-provided childcare facilities and services, and half of any investment credit taken before 1986 (unless you claimed the reduced credit). For automobiles and other listed property placed in service after 1985 (that is, transition property), reduce the depreciable basis by the entire investment credit.

My question is whether or not prior standard depreciation (not special or 179) on this listed property--in this case a cargo van-- is to be subtracted from the result of column (d) multiplied by column (c).

Here are the parameters:

(c) % business use=49%

(d) cost basis=$52,080

(f) recovery period=5.00

(g) method convention=SL-MQ

This asset is in the fourth year of the depreciation schedule and the sum all prior depreciation is $23,752. By this I mean the total of line 26 or 27 column (h) in 2021 through 2023 returns.

Also I'm unsure of what the last sentence is referring to by "entire investment credit"

[ThomasM125]

You are not to deduct prior "standard" depreciation from the result of column (c) of Part V of form 4562 (business use percentage) times column (d) (cost basis) to arrive at the basis of depreciation in column (e). The basis for depreciation is not affected by standard depreciation deductions.

The reference to an investment credit means if you qualified for an investment credit for the property, you need to reduce the depreciation basis by the cost of the property used to qualify for the investment credit. That is so you don't use the property for a deduction as well as a credit, as you can only take one or the other for the cost of the property.