SECTION 5. EFFECT ON OTHER

DOCUMENTS

.01 Rev. Proc. 2002–9 is modified and amplified to include the accounting method change provided in section 4.01 of this revenue procedure in section 2 of the APPENDIX.

.02 Section 2.01 of the APPENDIX of Rev. Proc. 2002–9 is modified as follows:

(1) Section 2.01(2)(a)(ii) of the APPENDIX is modified to read as follows:

“(ii) for which depreciation is determined under § 56(a)(1), § 56(g)(4)(A), § 167, § 168, § 197, § 1400L(b), or § 1400L(c), or under § 168 prior to its amendment in 1986 (former § 168); and”

(2) Section 2.01(2)(c)(vi) of the APPENDIX is modified to read as follows:

“(vi) any property for which a taxpayer is revoking a timely valid election, or making a late election, under § 167, § 168, § 1400L(b), former § 168, or § 13261(g)(2) or (3) of the Revenue Reconciliation Act of 1993 (1993 Act), 1993–3 C.B. 1, 128 (relating to amortizable § 197 intangibles). A taxpayer may request consent to revoke or make the election by submitting a request for a letter ruling under Rev. Proc. 2002–1 (2002–1 I.R.B. 1) (or any successor);”

(3) Section 2.01(2)(c)(xii) of the APPENDIX is modified to read as follows:

“(xii) any change in method of accounting involving both a change from treating the cost or other basis of the property as nondepreciable property to treating the cost or other basis of the property as depreciable property and the adoption of a method of accounting for depreciation requiring an election under

May 20, 2002 965 2002–20 I.R.B.

§ 167, §168, § 1400L(b), former § 168, or § 13261(g)(2) or (3) of the 1993 Act (for example, a change in the treatment of the space consumed in landfills placed in service in 1990 from nondepreciable to depreciable property (assuming section 2.01(2)(c)(xiii) of the APPENDIX does not apply) and the making of an election under § 168(f)(1) to depreciate this property under the unit-of-production method of depreciation under § 167);”

(4) Section 2.01(6)(d) of the APPENDIX is modified to read as follows:

“(d) Section 167 property . Generally, for any taxable year, the depreciation allowable for property for which depreciation is determined under § 167, is determined either:

(i) under the depreciation method adopted by a taxpayer for the property; or

(ii) if that depreciation method does not result in a reasonable allowance for depreciation or a taxpayer has not adopted a depreciation method for the property, under the straight-line depreciation method.

For determining the estimated useful life and salvage value of the property, see § 1.167(a)–1(b) and (c), respectively.

The depreciation allowable for any taxable year for property subject to § 167(f) (regarding certain property excluded from § 197) is determined by using the depreciation method and useful life prescribed in § 167(f). If computer software is depreciated under § 167(f)(1) and is qualified property (as defined in § 168(k)(2)) or qualified New York Liberty Zone (Liberty Zone) property (as defined in § 1400L(b)(2)), the deprecia

tion allowable for that computer software under § 167(f)(1) is also determined by taking into account the additional 30 percent depreciation (additional first year depreciation) deduction provided by § 168(k) or § 1400L(b), as applicable, unless the taxpayer made a timely valid election not to deduct the additional first year depreciation for the property.”

(5) Section 2.01(6)(e) of the APPENDIX is modified to read as follows:

“(e) Section 168 property . The depreciation allowable for any taxable year for property for which depreciation is determined under § 168, is determined as follows:

(i) by using either:

(A) the general depreciation system in § 168(a); or

(B) the alternative depreciation system in § 168(g) if the property is required to be depreciated under the alternative depreciation system pursuant to § 168 (g)(1) or other provisions of the Code (for example, property described in § 263A (e)(2)(A) or § 280F(b)(1)). Property required to be depreciated under the alternative depreciation system pursuant to § 168(g)(1) includes property in a class (as set out in § 168(e)) for which the taxpayer made a timely election under § 168 (g)(7); and

(ii) if the property is qualified property or Liberty Zone property, by taking into account the additional first year depreciation deduction provided by § 168(k) or § 1400L(b), as applicable, unless the taxpayer made a timely valid election not to deduct the additional first year depreciation for the property.”

(6) Section 2.01(6) of the APPENDIX is modified by adding a new paragraph (h) to read as follows:

“(h) Qualified New York Liberty Zone leasehold improvement property . The depreciation allowable for any taxable year for qualified New York Liberty Zone leasehold improvement property (as defined in § 1400L(c)(2)) is determined by using the depreciation method and recovery period prescribed in § 1400L(c).”

.03 Section 2.02(2)(c)(vi) of the APPENDIX of Rev. Proc. 2002–9 is modified as follows:

“(vi) any property for which depreciation is determined under § 56(a)(1), § 56(g)(4)(A)(i), (ii), (iii), or (v), § 168, § 1400L(b), or § 1400L(c), or under § 168 prior to its amendment in 1986 (former § 168);”