SECTION 2. BACKGROUND

For owners of automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year that the automobile is placed in service and each succeeding year. In the case of electric automobiles placed in service after August 5, 1997, and before January 1, 2005, § 280F(a)(1)(C) requires tripling of these limitation amounts. Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988.

For leased automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the automobile. The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of automobiles. Under § 1.280F–7(a), this reduction requires the lessees to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. There is a table for lessees of electric automobiles

February 4, 2002 450 2002–5 I.R.B.

bile component” is defined in § 280F(d) (7)(B)(ii) as the “automobile component ″ of the Consumer 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 137.7 for October 2001. The October 2001 index exceeded the October 1987 index by 22.5. The Internal Revenue Service has, therefore, determined that the automobile price inflation adjustment for 2002 is 19.53125 percent (22.5/115.2 x 100%). This adjustment is applicable to all automobiles that are first placed in service in calendar year 2002. The dollar limitations in § 280F(a) must therefore be multiplied by a factor of 0.1953125, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than electric automobiles) for calendar year 2002. To determine the dollar limitations applicable to an electric automobile first placed in service during calendar year 2002, the dollar limitations in § 280F(a) are tripled in accordance with § 280F(a)(1)(C) and are then multiplied by a factor of 0.1953125; the resulting increases, after rounding to the nearest $100, are added to the tripled 1988 limitations to give the depreciation limitations for calendar year 2002.

(2) Amount of the Limitation . For automobiles (other than electric automobiles) placed in service in calendar year 2002, Table 1 of this revenue procedure contains the dollar amount of the depreciation limitations for each tax year. For electric automobiles placed in service in calendar year 2002, Table 2 of this revenue procedure contains these amounts.

determine the inclusion amount for each tax year during which the automobile is leased.

3. See Rev. Proc. 96–25 (1996–1 C.B. 681) for information on determining inclusion amounts for automobiles first leased before January 1, 1997; Rev. Proc. 97–20 (1997–1 C.B. 647) for automobiles first leased during calendar year 1997, including electric automobiles first leased on or after January 1, 1997, and before August 6, 1997; Rev. Proc. 98–24 (1998–1 C.B. 663) for electric automobiles first leased after August 5, 1997, and before January 1, 1998; Rev. Proc. 98–30 (1998–1 C.B. 930) for all automobiles first leased in calendar year 1998; Rev. Proc. 99–14 (1999–1 C.B. 413) for all automobiles first leased in calendar year 1999; Rev. Proc. 2000–18 (2000–9 I.R.B.

722. for all automobiles first leased in calendar year 2000, and Rev. Proc. 2001–19 (2001–9 I.R.B. 732) for all automobiles first leased in calendar year

2002. The maximum fair market value figure in section 4.04(2) of this revenue procedure applies to employer-provided automobiles first made available to any employee for personal use in calendar year 2002. See Rev. Proc. 97–20, for the maximum fair market value figure for automobiles first made available in calendar year 1997; Rev. Proc. 98–30, for the maximum fair market value figure for automobiles first made available in calendar year 1998; Rev. Proc. 99–14, for the maximum fair market value figure for automobiles first made available in calendar year 1999; Rev. Proc. 2000–18, for the maximum fair market value figure for automobiles first made available in calendar year 2000; and Rev. Proc. 2001–19, for the maximum fair market value figure for automobiles first made available in calendar year 2001.