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Qualifying reforestation costs are the direct costs of planting or seeding for forestation or re- forestation. Qualified timber property is property that contains trees in significant commercial quantities. See chapter 8 for more information on qualifying reforestation costs and qualified timber property. If you elect to deduct qualified reforestation costs, create and maintain separate timber ac- counts for each qualified timber property and in- clude all reforestation costs and the dates each was applied. Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. How to make the election. You elect to de- duct qualifying reforestation costs by claiming the deduction on your timely filed income tax re- turn (including extensions) for the tax year the expenses were paid or incurred. If Form T (Tim- ber) is required, complete Part IV of the form. If Form T (Timber) is not required, attach a state- ment containing the following information for each qualified timber property for which an election is being made. • The unique stand identification numbers. • The total number of acres reforested dur- ing the tax year. • The nature of the reforestation treatments. • The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Clearly indicate the election on your amended return and write “Filed pursuant to section 301.9100-2.” File the amended return at the same address you filed the original re- turn. The election applies when figuring taxable income for the current tax year and all subse- quent years. For additional information on reforestation costs, see chapter 8. Recapture. This deduction may have to be re- captured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the ex- penditure. For more information on recapturing the deduction, see Depreciation Recapture in Pub. 544. Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. However, if you replace a component (part) of a depreciable as- set, capitalize the removal costs if the replace- ment is an improvement and deduct the costs if the replacement is a repair. Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or eld- erly. You must own or lease the facility or vehi- cle for use in connection with your trade or busi- ness. A facility is all or any part of buildings, struc- tures, equipment, roads, walks, parking lots, or similar real or personal property. A public trans- portation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your custom- ers, even if you are not in the business of pro- viding transportation services). You cannot deduct any costs that you paid or incurred to completely renovate or build a fa- cility or public transportation vehicle or to re- place depreciable property in the normal course of business. Deduction limit. The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. How- ever, you can add any costs over this limit to the basis of the property and depreciate these ex- cess costs. Partners and partnerships. The $15,000 limit applies to a partnership and also to each part- ner in the partnership. A partner can allocate the $15,000 limit in any manner among the part- ner's individually incurred costs and the part- ner's distributive share of partnership costs. If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). If the partnership cannot show this, it is presumed that the partner was able to deduct the distribu- tive share of the partnership's costs in full. Example. Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. Emilio had $12,000 of similar expenses in his sole proprietorship. He elected to deduct $7,000 of them. Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partner- ship's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. Qualification standards. You can deduct your costs as a current expense only if the bar- rier removal meets the guidelines and require- ments issued by the Architectural and Trans- portation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. You can view the Americans with Disabilities Act at ADA.gov/pubs/ada.htm. The following is a list of some architectural barrier removal costs that can be deducted. • Ground and floor surfaces. • Walks. • Parking lots. • Ramps. • Entrances. • Doors and doorways. • Stairs. • Floors. • Toilet rooms. • Water fountains. • Public telephones. • Elevators. • Controls. • Signage. • Alarms. • Protruding objects. • Symbols of accessibility. You can find the ADA guidelines and require- ments for architectural barrier removal at USDOJ.gov/crt/ada/reg3a.html. The costs for removal of transportation barri- ers from rail facilities, buses, and rapid and light rail vehicles are deductible. You can find the guidelines and requirements for transportation barrier removal at FTA.dot.gov. Also, you can access the ADA website at ADA.gov for additional information. Other barrier removals. To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. 1. The removed barrier must be a substantial barrier to access or use of a facility or pub- lic transportation vehicle by persons who have a disability or are elderly. 2. The removed barrier must have been a barrier for at least one major group of per- sons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). 3. The barrier must be removed without cre- ating any new barrier that significantly im- pairs access to or use of the facility or ve- hicle by a major group of persons who have a disability or are elderly. How to make the election. If you elect to de- duct your costs for removing barriers to the dis- abled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. Identify the deduction as a separate item. The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. If you make this election, you must maintain adequate records to support your deduction. For your election to be valid, you generally must file your return by its due date, including extensions. However, if you timely filed your re- turn for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Clearly in- dicate the election on your amended return and write “Filed pursuant to section 301.9100-2.” File the amended return at the same address Chapter 7 Costs You Can Deduct or Capitalize Page 27