CCH Axcess Tax

Input Data Notes & Automatic Features Part II

ACE Calculations

Amounts for ACE basis and accumulated ACE are taken in order of precedence from ACE information entered on the Depreciation and Amortization (Form 4562) worksheet.

The following examples illustrate the three ACE calculations performed by California. When there is California ACE information, the larger result of two calculations is the current ACE amount. Each calculation is based on an ACE basis of 25000, Accumulated ACE of 5000, and 20 year life.

Example: A pre-1990 asset with 17.5 years remaining life at 12/31/89 and 8.5 years remaining life at 12/31/99.
Calculation I:
ACE = (ACE Basis) / (remaining life at 12/31/99) = 25000 / 17.5 = 1429.
Calculation II:
ACE = (ACE Basis - Accumulated ACE) / (current remaining life) = (25000 - 5000) / (8.5) = 2353.
Result: ACE is 2353.

Example: A post-1989 asset with 13.5 years remaining life at 12/31/99.
Calculation I:
ACE = (ACE Basis) / (Life of asset) = 25000 / 20 = 1250.
Calculation II:
ACE = (ACE Basis - Accumulated ACE) / (current remaining life) = (25000 - 5000) / 13.5 = 1481.
Result: ACE is 1481.

Example: An ACE asset with no state-if-different input:
California ACE equals federal ACE.

Note: For California to calculate ACE depreciation on current year acquisitions, enter the method code used to calculate current year depreciation.

Section 179 Expense

The California expense deduction for recovery property is normally limited to $25,000.

State if different information must be entered on the state columns of Depreciation and Amortization (Form 4562) worksheet if federal and California depreciation differ. For example, enter a zero or a reduced Section 179 amount if state trade or business income is different than federal. The Section 179 amounts that flow from federal input and the limited entries of Section 179 from state input should total to a maximum Section 179 expense of $25,000 for California.

To override California Section 179 expense on Schedules K and K-1 when depreciation detail is not used, use the Other Adjustments / Overrides - Deductions (Sch. K) section of California Income / Deductions worksheet. Section 179 expense is not allocated to estate or trust partners, but is allocated to grantor trusts.

To process a California expense deduction greater than $25,000 when depreciation detail is used, enter the expense deduction in excess of $25,000 on the state depreciation input, and override the state business income for Section 179 limitation and the state Section 179 maximum dollar limitation on the Depreciation Options and Overrides section of the federal General worksheet.

To process Section 179 expense and assets are entered for current and future years, enter zero for the cost of future year assets in the state columns of the Depreciation and Amortization (Form 4562) worksheet to avoid the cost of future assets from being included in the 200,000 acquisition limit before Section 179 is reduced.

Depletion Properties

Depletion, depreciation, amortization, income and expenses from depletion properties are calculated from entries on the Depletion worksheet.

Percentage depletion on oil and gas properties for California is calculated at 15%, subject to 100% net income property limitation. Use the Property Production Income and Expenses section of the Depletion worksheet to override that rate.

For non-oil and gas production, the calculation is based on the federal rate entered on the Property Production Income and Expenses section of the Depletion worksheet and a limitation of the percentage to 50% of net income on a per property basis. Use the State Rate input to override.

Enter depletion property information from other partnerships on the Property Production Income and Expenses section of the Depletion worksheet. Refer to the instructions for the Depletion worksheet for additional information.