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Internal Revenue Bulletin:  2011-12 

March 21, 2011 

Rev. Proc. 2011-21


SECTION 1. PURPOSE

This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2011, including separate tables of limitations on depreciation deductions for trucks and vans; (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2011, including a separate table of inclusion amounts for lessees of trucks and vans; and (3) revised tables of depreciation limitations and lessee inclusion amounts for passenger automobiles that were first placed in service or first leased by the taxpayer, respectively, during 2010 and to which the 50 percent additional first year depreciation deduction under § 168(k)(1)(A) of the Internal Revenue Code or the 100 percent additional first year depreciation deduction under § 168(k)(5) applies. The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7).

SECTION 2. BACKGROUND

.01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. This change reflects the higher rate of price inflation for trucks and vans since 1988.

.02 Section 2022(a) of the Small Business Jobs Act of 2010, Pub. L. No. 111-240, 124 Stat. 2504 (September 27, 2010), extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property (as defined in § 168(k)(2)) acquired by the taxpayer after December 31, 2007, and before January 1, 2011, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2011. Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, 124 Stat. 3296 (Dec. 17, 2010) (the “Act”) further extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013.

Section 401(b) of the Act further amended § 168(k) by adding § 168(k)(5). It allows a 100 percent additional first year depreciation deduction for qualified property acquired by a taxpayer after September 8, 2010, and before January 1, 2012, if the taxpayer places the property in service generally before January 1, 2012.

Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies.

.03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv).

Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2011 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation.

.04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Under § 1.280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased.

SECTION 3. SCOPE

.01 The limitations on depreciation deductions in section 4.01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2011, and continue to apply for each taxable year that the passenger automobile remains in service.

.02 The tables in section 4.02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2011. Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. See Rev. Proc. 2006-18, 2006-1 C.B. 645, for passenger automobiles first leased during calendar year 2006; Rev. Proc. 2007-30, 2007-1 C.B. 1104, for passenger automobiles first leased during calendar year 2007; Rev. Proc. 2008-22, 2008-1 C.B. 658, for passenger automobiles first leased during calendar year 2008; Rev. Proc. 2009-24, 2009-1 C.B. 885, for passenger automobiles first leased during calendar year 2009; and Rev. Proc. 2010-18, 2010-1 C.B. 427, as amplified and modified by section 4.03 of this revenue procedure, for passenger automobiles first leased during calendar year 2010.

SECTION 4. APPLICATION

.01 Limitations on Depreciation Deductions for Certain Automobiles.

(1) Amount of the inflation adjustment.

(a) Passenger automobiles (other than trucks or vans). 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. Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. The new car component of the CPI was 115.2 for October 1987 and 137.880 for October 2010. The October 2010 index exceeded the October 1987 index by 22.680. Therefore, the automobile price inflation adjustment for 2011 for passenger automobiles (other than trucks and vans) is 19.69 percent (22.680/115.2 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.1969, 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 trucks and vans) for calendar year 2011. This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2011.

(b) Trucks and vans. To determine the dollar limitations for trucks and vans first placed in service during calendar year 2011, the Service uses the new truck component of the CPI instead of the new car component. The new truck component of the CPI was 112.4 for October 1987 and 142.556 for October 2010. The October 2010 index exceeded the October 1987 index by 30.156. Therefore, the automobile price inflation adjustment for 2011 for trucks and vans is 26.83 percent (30.156/112.4 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.2683, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. This adjustment applies to all trucks and vans that are first placed in service in calendar year 2011.

(2) Amount of the limitation. Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2011. Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction applies. Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction does not apply. The Service intends to issue additional guidance addressing the interaction between the 100 percent additional first year depreciation deduction and § 280F(a) for the taxable years subsequent to the first taxable year.

REV. PROC. 2011-21 TABLE 1
DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES
Tax Year Amount
1st Tax Year $11,060
2nd Tax Year $4,900
3rd Tax Year $2,950
Each Succeeding Year $1,775
REV. PROC. 2011-21 TABLE 2
DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES
Tax Year Amount
1st Tax Year $11,260
2nd Tax Year $5,200
3rd Tax Year $3,150
Each Succeeding Year $1,875
REV. PROC. 2011-21 TABLE 3
DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY
Tax Year Amount
1st Tax Year $3,060
2nd Tax Year $4,900
3rd Tax Year $2,950
Each Succeeding Year $1,775
REV. PROC. 2011-21 TABLE 4
DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY
Tax Year Amount
1st Tax Year $3,260
2nd Tax Year $5,200
3rd Tax Year $3,150
Each Succeeding Year $1,875

.02 Inclusions in Income of Lessees of Passenger Automobiles.

A taxpayer must follow the procedures in § 1.280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2011. In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure.

REV. PROC. 2011-21 TABLE 5
DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2011
Fair Market Value of Passenger Automobile Tax Year During Lease
Over Not Over 1st 2nd 3rd 4th 5th & later
$18,500 $19,000 3 8 11 13 16
19,000 19,500 4 9 13 15 18
19,500 20,000 4 10 15 17 20
20,000 20,500 5 11 16 19 23
20,500 21,000 5 12 18 21 25
21,000 21,500 6 13 19 24 26
21,500 22,000 6 14 21 26 29
22,000 23,000 7 16 23 29 32
23,000 24,000 8 18 27 32 37
24,000 25,000 9 20 30 36 42
25,000 26,000 10 23 33 40 46
26,000 27,000 11 25 36 44 51
27,000 28,000 12 27 40 48 55
28,000 29,000 13 29 43 52 60
29,000 30,000 14 31 47 55 65
30,000 31,000 15 34 49 60 69
31,000 32,000 16 36 53 63 73
32,000 33,000 17 38 56 68 77
33,000 34,000 18 40 60 71 82
34,000 35,000 19 42 63 75 87
35,000 36,000 20 45 66 79 91
36,000 37,000 21 47 69 83 96
37,000 38,000 22 49 73 87 100
38,000 39,000 23 51 76 91 105
39,000 40,000 24 53 80 94 110
40,000 41,000 25 56 82 99 114
41,000 42,000 26 58 86 102 119
42,000 43,000 27 60 89 107 123
43,000 44,000 28 62 93 110 128
44,000 45,000 29 64 96 114 133
45,000 46,000 30 67 98 119 137
46,000 47,000 31 69 102 122 141
47,000 48,000 32 71 105 127 145
48,000 49,000 33 73 109 130 150
49,000 50,000 34 76 111 134 155
50,000 51,000 35 78 115 138 159
51,000 52,000 36 80 118 142 164
52,000 53,000 37 82 122 146 168
53,000 54,000 38 84 125 150 173
54,000 55,000 39 87 128 153 178
55,000 56,000 40 89 131 158 182
56,000 57,000 41 91 135 161 187
57,000 58,000 42 93 138 166 191
58,000 59,000 43 95 142 169 196
59,000 60,000 44 98 144 174 200
60,000 62,000 46 101 149 179 207
62,000 64,000 48 105 156 187 216
64,000 66,000 50 109 163 195 225
66,000 68,000 52 114 169 203 234
68,000 70,000 54 118 176 211 243
70,000 72,000 56 123 182 218 253
72,000 74,000 58 127 189 226 262
74,000 76,000 60 132 195 234 270
76,000 78,000 62 136 202 242 279
78,000 80,000 64 140 209 250 288
80,000 85,000 67 148 220 264 304
85,000 90,000 72 159 237 283 327
90,000 95,000 77 170 253 303 350
95,000 100,000 82 181 269 323 372
100,000 110,000 90 198 293 352 406
110,000 120,000 100 220 326 391 452
120,000 130,000 110 242 359 430 497
130,000 140,000 120 264 392 469 543
140,000 150,000 130 286 424 509 588
150,000 160,000 140 308 457 548 633
160,000 170,000 150 330 490 587 679
170,000 180,000 160 352 523 626 724
180,000 190,000 170 374 555 666 769
190,000 200,000 180 396 588 705 815
200,000 210,000 190 418 621 744 860
210,000 220,000 200 440 654 784 904
220,000 230,000 210 462 687 823 950
230,000 240,000 220 484 719 863 995
240,000 And up 230 506 752 902 1,040
REV. PROC. 2011-21 TABLE 6
DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2011
Fair Market Value of Truck or Van Tax Year During Lease
Over Not Over 1st 2nd 3rd 4th 5th & later
$19,000 $19,500 3 7 9 12 13
19,500 20,000 3 8 11 14 15
20,000 20,500 4 9 13 15 18
20,500 21,000 4 10 15 17 20
21,000 21,500 5 11 16 20 22
21,500 22,000 5 12 18 22 24
22,000 23,000 6 14 20 24 29
23,000 24,000 7 16 24 28 32
24,000 25,000 8 18 27 32 37
25,000 26,000 9 20 31 36 41
26,000 27,000 10 23 33 40 46
27,000 28,000 11 25 37 43 51
28,000 29,000 12 27 40 48 55
29,000 30,000 13 29 43 52 60
30,000 31,000 14 31 47 56 64
31,000 32,000 15 34 49 60 69
32,000 33,000 16 36 53 63 74
33,000 34,000 17 38 56 68 78
34,000 35,000 18 40 60 71 83
35,000 36,000 19 43 62 76 87
36,000 37,000 20 45 66 79 92
37,000 38,000 21 47 69 83 97
38,000 39,000 22 49 73 87 101
39,000 40,000 23 51 76 91 105
40,000 41,000 24 54 79 95 109
41,000 42,000 25 56 82 99 114
42,000 43,000 26 58 86 103 118
43,000 44,000 27 60 89 107 123
44,000 45,000 28 62 93 110 128
45,000 46,000 29 65 95 115 132
46,000 47,000 30 67 99 118 137
47,000 48,000 31 69 102 123 141
48,000 49,000 32 71 106 126 146
49,000 50,000 33 73 109 130 151
50,000 51,000 34 76 112 134 155
51,000 52,000 35 78 115 138 160
52,000 53,000 36 80 118 143 164
53,000 54,000 37 82 122 146 169
54,000 55,000 38 84 125 150 173
55,000 56,000 39 87 128 154 177
56,000 57,000 40 89 131 158 182
57,000 58,000 41 91 135 162 186
58,000 59,000 42 93 138 166 191
59,000 60,000 43 95 142 169 196
60,000 62,000 45 99 146 175 203
62,000 64,000 47 103 153 183 212
64,000 66,000 49 107 160 191 221
66,000 68,000 51 112 166 199 229
68,000 70,000 53 116 173 206 239
70,000 72,000 55 121 179 214 248
72,000 74,000 57 125 186 222 257
74,000 76,000 59 129 192 231 266
76,000 78,000 61 134 198 239 275
78,000 80,000 63 138 205 246 285
80,000 85,000 66 146 217 260 300
85,000 90,000 71 157 233 280 322
90,000 95,000 76 168 250 299 345
95,000 100,000 81 179 266 319 368
100,000 110,000 89 196 290 348 402
110,000 120,000 99 218 323 387 447
120,000 130,000 109 240 355 427 493
130,000 140,000 119 262 388 466 538
140,000 150,000 129 284 421 505 583
150,000 160,000 139 306 454 544 629
160,000 170,000 149 328 487 583 674
170,000 180,000 159 350 519 623 719
180,000 190,000 169 372 552 662 765
190,000 200,000 179 394 585 701 810
200,000 210,000 189 416 618 740 856
210,000 220,000 199 438 651 779 901
220,000 230,000 209 460 683 819 946
230,000 240,000 219 482 716 858 992
240,000 And up 229 504 749 897 1,037

.03 Revised Amounts for Passenger Automobiles Placed in Service During 2010.

(1) Calculation of the Revised Amount. The revised depreciation limits provided in this section 4.03 were calculated by increasing the existing limitations on the first year allowance in Rev. Proc. 2010-18 by $8,000 as provided in § 168(k)(2)(F)(i).

(2) Amount of the Revised Limitation. For passenger automobiles (that are not trucks or vans) placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 7 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. For trucks or vans placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 8 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. If the § 168(k) additional first year depreciation deduction does not apply to a passenger automobile placed in service by the taxpayer in calendar year 2010, the depreciation limitations for each taxable year in Tables 1 and 2 of Rev. Proc. 2010-18 apply.

REV. PROC. 2011-21 TABLE 7
DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2010 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES
Tax Year Amount
1st Tax Year $11,060
2nd Tax Year $4,900
3rd Tax Year $2,950
Each Succeeding Year $1,775
REV. PROC. 2011-21 TABLE 8
DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2010 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES
Tax Year Amount
1st Tax Year $11,160
2nd Tax Year $5,100
3rd Tax Year $3,050
Each Succeeding Year $1,875

(3) Modification to lease inclusion amounts for 2010. The lease inclusion amounts in Tables 3 and 4 of Rev. Proc. 2010-18 are modified by striking the first four lines of the inclusion amounts in each table. Consequently, Table 3 of Rev. Proc. 2010-18 applies to passenger automobiles (other than trucks and vans) that are first leased by the taxpayer in calendar year 2010 with a fair market value over $18,500, and Table 4 of Rev. Proc. 2010-18 applies to trucks and vans that are first leased by the taxpayer in calendar year 2010 with a fair market value over $19,000.

SECTION 5. EFFECTIVE DATE

This revenue procedure, with the exception of section 4.03, applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2011. Section 4.03 of this revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2010.

SECTION 6. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 2010-18 is amplified and modified.

SECTION 7. DRAFTING INFORMATION

The principal author of this revenue procedure is Bernard P. Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Mr. Harvey at (202) 622-4930 (not a toll-free call).


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