SECTION 4. APPLICATION

1. A taxpayer placing an automobile in service for the first time during calendar year 1997 is limited to the depreciation deduction shown in Table 1 of section 4.02(2). A taxpayer first leasing an automobile in calendar year 1997 must use Table 2 in section 4.03 to determine the inclusion amount that is added to gross income. Otherwise, the procedures of § 1.280F–7(a) must be followed. An employer providing an automobile for the first time in calendar year 1997 for the personal use of any employee may determine the value of the use of the automobile by using the cents-per-mile valuation rule in § 1.61– 21(e) if the fair market value of the automobile does not exceed the amount specified in section 4.04(2). If the fair market value of the automobile does exceed the amount specified in section 4.04(2), the employer may determine the value of the use of the automobile under the general valuation rules of § 1.61– 21(b) or under the special valuation rules of § 1.61–21(d) (Automobile lease valuation) or § 1.61–21(f) (Commuting valuation) if the applicable requirements are met.

2. Limitations on Depreciation De- ductions for Certain Automobiles.

(1) Amount of the Inflation Adjust- ment. Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. The term ‘‘CPI automobile component’’ is defined in § 280F(d)(7)(B)(ii) as the ‘‘automobile component’’ of the Con

sumer Price Index for all Urban Consumers published by the Department of Labor (the CPI). The new car component of the CPI was 115.2 for October 1987 and 141.5 for October 1996. The October 1996 index exceeded the October 1987 index by 26.3. The Internal Revenue Service has, therefore, determined that the automobile price inflation adjustment for 1997 is 22.83 percent (26.3/115.2 x 100%). This adjustment is applicable to all automobiles that are first placed in service in calendar year

REV. PROC. 97–20 TABLE 1

1997. The dollar limitations in § 280F(a) must therefore be multiplied by a factor of 0.2283, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for

(2) Amount of the Limitation. For automobiles placed in service in calendar year 1997, Table 1 contains the dollar amount of the depreciation limitations for each tax year.

DEPRECIATION LIMITATIONS FOR AUTOMOBILES FIRST PLACED IN SERVICE IN CALENDAR YEAR 1997

Tax Year Amount

1st Tax Year $3,160 2nd Tax Year $5,000 3rd Tax Year $3,050 Each Succeeding Year $1,775

3. Inclusions in Income of Lessees of Automobiles. The inclusion amounts for automobiles first leased in calendar year 1997 are calculated under the procedures described in § 1.280F–7(a). Table 2 of this revenue procedure is the applicable table to be used in applying those procedures.

REV. PROC. 97–20 TABLE 2

DOLLAR AMOUNTS FOR AUTOMOBILES WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 1997

Fair Market Value of Automobile Tax Year During Lease

Over Not Over 1st 2nd 3rd 4th 5th and Later

$ 15,800 16,100 1 5 5 8 10 16,100 16,400 4 10 13 18 21 16,400 16,700 6 15 22 27 32 16,700 17,000 9 20 30 36 44 17,000 17,500 12 28 40 49 58 17,500 18,000 16 37 53 65 77 18,000 18,500 20 46 66 82 95 18,500 19,000 24 55 80 97 114 19,000 19,500 28 64 93 113 132 19,500 20,000 32 73 106 129 151 20,000 20,500 36 82 120 145 169 20,500 21,000 40 91 133 161 187 21,000 21,500 45 99 147 177 205 21,500 22,000 49 108 160 193 224 22,000 23,000 55 122 180 216 252 23,000 24,000 63 140 206 249 288 24,000 25,000 71 158 233 280 326 25,000 26,000 79 176 259 313 362 26,000 27,000 88 193 287 344 399 27,000 28,000 96 211 313 377 435 28,000 29,000 104 229 340 408 473 29,000 30,000 112 247 366 441 509 30,000 31,000 120 265 393 472 546 31,000 32,000 128 283 420 504 583 32,000 33,000 137 301 446 536 620 33,000 34,000 145 319 472 568 657

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REV. PROC. 97–20 TABLE 2—Continued

DOLLAR AMOUNTS FOR AUTOMOBILES WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 1997

Fair Market Value of Automobile Tax Year During Lease

Over Not Over 1st 2nd 3rd 4th 5th and Later

34,000 35,000 153 337 499 600 693 35,000 36,000 161 355 526 631 731 36,000 37,000 169 373 552 664 767 37,000 38,000 178 391 578 696 804 38,000 39,000 186 409 605 727 841 39,000 40,000 194 427 632 759 878 40,000 41,000 202 445 658 791 915 41,000 42,000 210 463 685 823 951 42,000 43,000 218 481 712 854 989 43,000 44,000 227 498 739 886 1,026 44,000 45,000 235 516 765 919 1,062 45,000 46,000 243 534 792 951 1,098 46,000 47,000 251 552 819 982 1,136 47,000 48,000 259 570 845 1,015 1,172 48,000 49,000 268 588 871 1,047 1,209 49,000 50,000 276 606 898 1,078 1,246 50,000 51,000 284 624 925 1,110 1,282 51,000 52,000 292 642 951 1,142 1,320 52,000 53,000 300 660 978 1,174 1,356 53,000 54,000 308 678 1,004 1,206 1,394 54,000 55,000 317 695 1,032 1,237 1,430 55,000 56,000 325 713 1,058 1,270 1,467 56,000 57,000 333 732 1,084 1,301 1,504 57,000 58,000 341 750 1,110 1,334 1,540 58,000 59,000 349 768 1,137 1,365 1,578 59,000 60,000 358 785 1,164 1,397 1,615 60,000 62,000 370 812 1,204 1,445 1,670 62,000 64,000 386 848 1,257 1,509 1,743 64,000 66,000 403 884 1,310 1,573 1,817 66,000 68,000 419 920 1,363 1,637 1,890 68,000 70,000 435 956 1,417 1,700 1,964 70,000 72,000 452 991 1,470 1,764 2,038 72,000 74,000 468 1,027 1,524 1,827 2,112 74,000 76,000 484 1,063 1,577 1,891 2,186 76,000 78,000 501 1,099 1,630 1,955 2,259 78,000 80,000 517 1,135 1,683 2,019 2,333 80,000 85,000 546 1,198 1,776 2,130 2,462 85,000 90,000 587 1,287 1,909 2,291 2,645 90,000 95,000 627 1,377 2,042 2,450 2,830 95,000 100,000 668 1,467 2,175 2,609 3,014 100,000 110,000 730 1,601 2,375 2,848 3,290 110,000 120,000 812 1,780 2,641 3,167 3,659 120,000 130,000 893 1,960 2,907 3,486 4,027 130,000 140,000 975 2,139 3,173 3,805 4,395 140,000 150,000 1,057 2,318 3,439 4,125 4,763 150,000 160,000 1,139 2,498 3,704 4,444 5,131 160,000 170,000 1,221 2,677 3,971 4,762 5,500 170,000 180,000 1,302 2,857 4,236 5,082 5,868 180,000 190,000 1,384 3,036 4,503 5,400 6,237 190,000 200,000 1,466 3,215 4,769 5,719 6,605 200,000 210,000 1,548 3,394 5,035 6,039 6,973 210,000 220,000 1,630 3,574 5,300 6,358 7,341 220,000 230,000 1,712 3,753 5,567 6,676 7,710 230,000 240,000 1,793 3,932 5,833 6,996 8,078 240,000 250,000 1,875 4,112 6,099 7,314 8,446

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4. Maximum Automobile Value for Using the Cents-per-mile Valuation Rule.

(1) Amount of Adjustment. Under § 1.61–21(e)(1)(iii)(A), the limitation on the fair market value of an employerprovided automobile first made available to any employee for personal use after 1988 is to be adjusted in accordance with § 280F(d)(7). Accordingly, the adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987 ( See, section 4.02(1).) The new car component of the CPI was 115.2 for October 1987 and 141.5 for October 1996. The October 1996 index exceeded the October 1987 index by 26.3. The Internal Revenue Service has, therefore, determined that the adjustment for 1997 is 22.83 percent (26.3/115.2 x 100%). This adjustment is applicable to all

employer-provided automobiles first made available to any employee for personal use in calendar year 1997. The maximum fair market value specified in § 1.61–21(e)(1)(iii)(A) must therefore be multiplied by a factor of 0.2283, and the resulting increase, after rounding to the nearest $100, is added to $12,800 to give the maximum value for 1997.

(2) The Maximum Automobile Value. For automobiles first made available in calendar year 1997 to any employee of the employer for personal use, the vehicle cents-per-mile valuation rule may be applicable if the fair market value of the automobile on the date it is first made available does not exceed $15,700.