2

TLS, have you I.R.S. SPECIFICATIONS TO BE REMOVED BEFORE PRINTING

transmitted all R Action Date Signature
text files for this INSTRUCTIONS TO PRINTERS
cycle update? FORM 4255, PAGE 1 of 2
MARGINS: TOP 13mm (1⁄2 "), CENTER SIDES. PRINTS: HEAD to HEAD O.K. to print
PAPER: WHITE WRITING, SUB. 20. INK: BLACK
FLAT SIZE: 203mm (8")
279mm (11")
Date PERFORATE: NONE Revised proofs
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT requested

Form 4255
(Rev. February 2006)
Recapture of Investment Credit OMB No. 1545-0166

Attachment
Department of the Treasury 䊳 Attach to your income tax return. Sequence No. 65
Internal Revenue Service
Name(s) as shown on return Identifying number

Type of property—State whether rehabilitation, energy, reforestation, qualifying advanced coal project, or qualifying gasification project
Properties
property. (See the Instructions for Form 3468 for the year the investment credit property was placed in service for definitions.) If rehabilitation
property, also show type of building. If energy property, show type.

Original Investment Credit

Computation Steps: Properties
(see Specific Instructions) A B C D
1 Original rate of credit 1
2 Cost or other basis 2
3 Original credit. Multiply line 2 by the
percentage on line 1 3
4 Date property was placed in service 4 / / / / / / / /
5 Date property ceased to be qualified
investment credit property 5 / / / / / / / /
6 Number of full years between the date on line
4 and the date on line 5 6
Recapture Tax
7 Recapture percentage (see instructions) 7
8 Tentative recapture tax. Multiply line 3 by the
percentage on line 7 8
9 Add all the amounts on line 8 9
10 Enter the recapture tax from property for which there was an increase in nonqualified nonrecourse
financing (attach separate computation) 10
11 Add lines 9 and 10 11
12 Portion of original credit (line 3) not used to offset tax in any year, plus any carryback and
carryforward of credits you now can apply to the original credit year because you have freed up
tax liability in the amount of the tax recaptured. Do not enter more than line 11—see instructions 12
13 Total increase in tax. Subtract line 12 from line 11. Enter here and on the appropriate line of your
tax return. See section 45K(b)(4) if you claim the nonconventional source fuel credit. Electing large
partnerships, see instructions 13

General Instructions ● You changed the use of the property the cost or other basis of property to you
before the end of the recapture period so for which you claimed a credit.
Section references are to the Internal that it no longer qualifies as investment ● You returned leased property (on which
Revenue Code unless otherwise noted. credit property. you claimed a credit) to the lessor before
● The business use of the property the end of the recapture period.
Purpose of Form decreased before the end of the recapture ● A net increase in the amount of
Use Form 4255 to figure the increase in period so that it no longer qualifies (in whole nonqualified nonrecourse financing
tax for the recapture of investment credit or in part) as investment credit property. occurred for any property to which section
claimed. ● Any building to which section 47(d) 49(a)(1) applied. For more details, see the
applies will no longer be a qualified instructions for line 10.
Who Must Refigure the rehabilitated building when placed in Exceptions to recapture. Recapture of the
Investment Credit service. investment credit does not apply to the
Generally, you must refigure the ● Any property to which section 48(b) following.
investment credit and may have to applies will no longer qualify as investment ● A transfer because of the death of the
recapture all or part of it if any of the credit property when placed in service. taxpayer.
following apply. ● Before the end of the recapture period, ● A transfer between spouses or incident
● You disposed of investment credit your proportionate interest was reduced by to divorce under section 1041. However, a
property before the end of 5 full years after more than one-third in a partnership, S later disposition by the transferee is
the property was placed in service corporation, estate, or trust that allocated subject to recapture to the same extent as
(recapture period).
For Paperwork Reduction Act Notice, see back of form. Cat. No. 41488C Form 4255 (Rev. 2-2006)
 2
I.R.S. SPECIFICATIONS TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 4255, PAGE 2 of 2
MARGINS: TOP 13mm (1⁄2 "), CENTER SIDES. PRINTS: HEAD to HEAD
PAPER: WHITE WRITING, SUB. 20. INK: BLACK
FLAT SIZE: 203mm (8")
279mm (11")
PERFORATE: NONE
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 4255 (Rev. 2-2006) Page 2

if the transferor had disposed of the need to refigure the credit. See Regulations from previous years, plus any carrybacks
property at the later date. sections 1.47-4, 1.47-5, and 1.47-6. For an arising within the 3 (or 1) tax years after
● A transfer of an interest in an electing electing large partnership, the recapture the original credit year that are now
large partnership. tax is paid by the partnership. allowed because the recapture and
recomputation of the original credit made
● A transaction to which section 381(a) Partners, shareholders, and
available some additional tax liability in that
applies (relating to certain acquisitions of beneficiaries. If your Schedule K-1 shows
recapture of investment credit claimed in year. See Regulations section 1.47-1(d)
the assets of one corporation by another and Rev. Rul. 72-221, 1972-1 C.B. 15, for
corporation). an earlier year, you will need your copy of
the original Form 3468 to complete lines 1 details.
● A mere change in the form of Special rule for electing large
through 6 of this Form 4255.
conducting a trade or business if: partnerships. Enter zero on line 12. An
Lines A through D. Describe the property
1. The property is retained as investment electing large partnership is treated as
for which you must refigure the credit.
credit property in that trade or business, having used all prior year credits.
and Complete lines 1 through 8 for each Figure the unused portion on a separate
property on which you are refiguring the sheet and enter it on this line. Do not enter
2. The taxpayer retains a substantial
credit. Use a separate column for each more than the recapture tax on line 11.
interest in that trade or business.
item. If you need more columns, use
A mere change in the form of conducting additional Forms 4255 or other schedules Note. Be sure to adjust your current
a trade or business includes a corporation that include all the information shown on unused credit to reflect any unused portion
that elects to be an S corporation and a Form 4255. Enter the total from all the of the original credit that was entered on
corporation whose S election is revoked or separate sheets on line 9. line 12 of this form.
terminated.
Line 1. Enter the rate you used to figure Line 13. Special rule for electing large
For more details on the recapture rules, the original credit from the Form 3468 that partnerships. Subtract the current year
see section 50(a). you filed. credit, if any, shown on Form 3468, from
Caution: See section 46(g)(4) (as in effect Line 2. Enter the cost or other basis that the amount on line 11. Enter the result (but
on November 4, 1990) to figure the you used to figure the original credit. not less than zero) on line 13 and on the
recapture tax if you made a withdrawal tax line of Form 1065-B.
Line 4. Enter the month, day, and year that
from a capital construction fund set up
the property was available for service.
under the Merchant Marine Act of 1936 to
pay the principal of any debt incurred in Line 5. Generally, this will be the date you Paperwork Reduction Act Notice. We
connection with a vessel on which you disposed of the property. For more details, ask for the information on this form to
claimed investment credit. see Regulations section 1.47-1(c). carry out the Internal Revenue laws of the
Line 6. Do not enter partial years. If the United States. You are required to give us
Basis Adjustment on property was held less than 12 months, the information. We need it to ensure that
enter zero. you are complying with these laws and to
Recapture Line 7. Enter the recapture percentage allow us to figure and collect the right
For property subject to investment credit from the following table. amount of tax.
recapture, increase the property’s basis as You are not required to provide the
follows. IF the number of full information requested on a form that is
years on line 6 of THEN the recapture subject to the Paperwork Reduction Act
● For qualified rehabilitation expenditures, Form 4255 is . . . percentage is . . .
increase the basis by 100% of the unless the form displays a valid OMB
recapture tax (or adjustment to carrybacks 0 100 control number. Books or records relating
and carryovers). 1 80 to a form or its instructions must be
2 60 retained as long as their contents may
● For energy property or qualified timber 3 40 become material in the administration of
property, increase the basis by 50% of the 4 20 any Internal Revenue law. Generally, tax
recapture tax (or adjustment to carrybacks 5 or more 0 returns and return information are
and carryovers). confidential, as required by section 6103.
If you are a partner or S corporation Line 9. If you have used more than one The time needed to complete and file
shareholder, the adjusted basis of your Form 4255, or separate sheets to list this form will vary depending on individual
interest in the partnership or stock in the additional items on which you figured an circumstances. The estimated burden for
S corporation is adjusted to take into increase in tax, write to the left of the entry individual taxpayers filing this form is
account the adjustment made to the basis space “Tax from attached” and the total approved under the OMB control number
of property held by the partnership or tax from the separate sheets. Include the 1545-0074 and is included in the estimates
S corporation. amount in the total for line 9. shown in the instructions for their individual
Line 10. For certain taxpayers, the basis or income tax return. The estimated burden
cost of property is limited to the amount
Specific Instructions the taxpayer is at risk for the property at
for all other taxpayers who file this form is
shown below.
Note: Do not figure the recapture tax on year end. The basis or cost must be Recordkeeping 6 hr., 27 min.
lines 1 through 9 if there is an increase in reduced by the amount of any
nonqualified nonrecourse financing related “nonqualified nonrecourse financing” Learning about the
to certain at-risk property. Figure the related to the property at year end. If there law or the form 1 hr., 35 min.
recapture tax for these properties on is an increase in nonqualified nonrecourse Preparing, copying,
separate schedules and enter the recapture financing, recapture may be required. See assembling, and sending
tax on line 10. Include any unused credit section 49(b) for details. Attach a separate the form to the IRS 1 hr., 46 min.
for these properties on line 12. schedule to figure the recapture tax and If you have comments concerning the
enter the total tax on line 10. accuracy of these time estimates or
Partnerships, S corporations, estates,
and trusts. For a partnership (other than Line 12. If you did not use all the credit suggestions for making this form simpler,
an electing large partnership), you originally figured, either in the year you we would be happy to hear from you. See
S corporation, estate, or trust that figured it or in a carryback or carryforward the instructions for the tax return with
allocated any or all of the investment credit year, you do not have to recapture the which this form is filed.
to its partners, shareholders, or amount of the credit you did not use. In
beneficiaries, provide the information they refiguring the credit for the original credit
year, be sure to include any carryforwards

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