Discussion:NC Bonus Depreciation

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Discussion Forum Index --> Advanced Tax Questions --> NC Bonus Depreciation


Discussion Forum Index --> Tax Questions --> NC Bonus Depreciation

Porterj5 (talk|edits) said:

9 May 2014
I have a client with an issue regarding North Carolina Bonus Deprecation adjustments.

North Carolina requires that 85% of bonus depreciation taken on a federal return be added back for NC taxable income in the first year then over the course of the next 5 years 20% of the add back is deducted. For example if $100 is added back in Year 1, Years 2-6 will have a $20 deduction.

On my client’s 2008 return the added back was input incorrectly. It should have been 36,293 added back then $7,259 deducted over the next 5 years. However, only $7,259 was added back in the first year but in the subsequent years the deduction was calculated correctly so $7,259 was deducted for 2009-2013. This year they received a notice assessing additional tax for 2010-2013. Based on the way the return was filed with an add back of $7,259 the deduction would have been $1,452 so NC is assessing tax on the difference between what they calculate should have been deducted in the subsequent years and what was deducted.

My questions are as follows:

If we send in an amended return for 2008 correcting the add back and increasing income will a tax balance be assessed? NC G.S. 105-241.8 states that the statute to assess tax is three years from the date the return was filed but I can find no reference to what happens if you send an amended return that shows a higher tax balance. The error was due to user error and it not being caught by whoever prepared the 2008 return. So there would be no fraud.

Are we even entitled to claim the correct deduction in the subsequent years since the original add back was wrong?

Any help would be greatly appreciated as I am not coming up with much look in my research.

Ckenefick (talk|edits) said:

15 May 2014
but I can find no reference to what happens if you send an amended return that shows a higher tax balance.

An amended return isn't a "new" return; it is an amendment to a previously filed return. As such, absent an extended SOL, if the SOL has passed on the "original" return, then no more assessments can be made. Thus, if you now file an amended 2008 return (again, assuming no extended SOL issues), it will be returned as not processible.

I've made the same mistake you describe...add back the wrong amount (i.e. too low of an amount) in Year1. What I did was just predicate the subtraction over the next 5-years on the incorrect amount added back...which is kinda what the NCDOR is doing to you now.

Fsteincpa (talk|edits) said:

15 May 2014
And Porter, if you haven't been told, we have all migrated over to www.taxprotalk.com due to the impending demise of TA.

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