SECTION 3. ELECTION NOT TO

DEDUCT ADDITIONAL FIRST YEAR DEPRECIATION

.01 In General . Pursuant to §§ 168 (k)(2)(C)(iii) and 1400L(b)(2)(C)(iv), a taxpayer may make an election not to deduct the additional first year depreciation for any class of property placed in service during the taxable year. If the taxpayer makes this election, it applies to all qualified property or Liberty Zone property that is in the same class and placed in service in the same taxable year. In addition, the depreciation adjustments under § 56 apply to that property for purposes of computing the taxpayer’s alternative minimum taxable income. The election not to deduct the additional first year depreciation for any class of property placed in service during the taxable year is made separately by each person owning

May 20, 2002 963 2002–20 I.R.B.

qualified property or Liberty Zone property (for example, by each member of a consolidated group, by the partnership, or by the S corporation).

able year beginning in 2000 or 2001 (2000 or 2001 taxable year).

(2) Limited relief for late election .

the taxpayer after September 10, 2001, during the 2000 or 2001 taxable year.

.04 Revocation . An election not to deduct the additional first year depreciation for a class of property that is qualified property or Liberty Zone property placed in service during the taxable year is revocable only with the prior written consent of the Commissioner of Internal Revenue. To seek the Commissioner’s consent, the taxpayer must submit a request for a letter ruling in accordance with the provisions of Rev. Proc. 2002–1 (2002–1 I.R.B. 1) (or any successor).

.05 Failure to make election not to deduct additional first year depreciation . If a taxpayer does not make the election not to deduct the additional first year depreciation for a class of property that is qualified property or Liberty Zone property within the time and in the manner prescribed in section 3.03 or 4.02 of this revenue procedure, the amount of depreciation allowable for that property under § 167(f)(1) or under § 168, as applicable, must be determined for the placed-inservice year and for all subsequent years by taking into account the additional first year depreciation deduction. Thus, the election not to deduct the additional first year depreciation cannot be made by the taxpayer in any other manner (for example, through a request under § 446(e) to change the taxpayer’s method of accounting).