California depreciation for 1120 C Corporations

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See also: Depreciation tax assumptions

California does not conform to MACRS or ACRS depreciation methods for 1120 C Corporations, except to the extent that such depreciation is passed through from a partnership or LLC classified as a partnership. Also for 1120 C Corporations, California conforms to useful asset lives (the middle asset guide period) in IRS Revenue Procedure 83-35. For the most part, the calculation of the California AMT and California ACE depreciation treatments for 1120 C Corporations do not follow the Internal Revenue Code.

Building the California treatments for all assets

You can build the CA, CA AMT, and/or CA ACE treatments for all assets at once based on asset information entered in the Tax treatment.

The CA treatments can be built for all assets at once in the following ways.

  • In the Setup > Treatments dialog, highlight the CA treatment and click the Build button. With the Build based on values entered in the Tax treatment option selected, choose to either build for all assets or where the treatment is blank, whichever is applicable.
  • When the California return is added to an UltraTax/1120 C corporate client, the CA, CA AMT, and CA ACE treatments will be turned on and built automatically.
  • When the situs for an asset is changed to CA in one of the following dialogs:
    • Asset Detail
    • Setup > Situses
    • Edit > Reassign Assets
    • Setup > Activities

    or when the state for a multi-unit activity in UltraTax CS changes, the CA, CA AMT, and CA ACE treatments will be turned on and built automatically.

During the build, these treatments are set up to follow CA Reg. 24349, California R&TC Sections 24349 - 24354, and the instructions for California Schedule P (100) or California Schedule P (100W) as closely as possible.

The CA depreciation lives conform to the asset guideline classes and periods within IRS Revenue Procedure 83-35. In an effort to determine an asset's depreciation life, the application uses the value entered in the PPT type - CA field to determine which guideline class each asset belongs to. If that association is not turned on, is blank, or Exempt is entered, a determination of the asset class cannot be completed and the life from the Tax treatment will be used. Then, based on other asset information, the application enters the appropriate method for the CA treatment. ("Other asset information" includes whether the asset is marked as Real Property and/or it is marked as used property on the Other tab, and the Method that was entered in the Tax treatment.)

Note: When the Tax life is used in the CA treatment, those lives should be reviewed. The Tax life may or may not be appropriate for the CA treatment per Revenue Procedure 83-35.

The California treatment that is generated when an individual asset is entered

For CA treatments within 1120 C Corporations, the Method/Life Wizard will complete the Life field following IRS Revenue Procedure 83-35 (CA Reg. 24349) and the Method field following California R&TC Sections 24349 through 24354.

CA AMT and CA ACE treatments for 1120 C corporations will be generated automatically following the instructions for California Schedule P (100) or California Schedule P (100W).

Notes

  • Methods will not be updated when the Used checkbox is marked at the top of the Asset Detail dialog. To update the methods, click the Depreciation tab, modify the CA treatment as appropriate, and then regenerate the CA AMT and CA ACE treatments.
  • The CA AMT treatment is not generated for amortized assets. Therefore, you will need to enter AMT amounts for certified pollution control facilities placed in service in California after 1986 and before 1999, and for mining exploration and development costs incurred after 1987.
  • Presumably, for trees and vines placed in service before 1989, the taxpayer could have chosen either a 15-year or a 7-year depreciation recovery period. The Method/Life Wizard uses the 15-year recovery period, which is the more conservative of the two. If a different life is appropriate (based on geographic, climatic, genetic, economic, and other factors), edit that class life on the CA tab of the Setup > Method/Life Wizard.

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