Applicable percentages.
Applicable percentages. The applicable percentages for 3-, 5-, and 10-year recovery property are determined according to the following tables:
(i) In the case of 3-year recovery property:
(ii) In the case of 5-year recovery property:
(iii) In the case of 10-year recovery property:
(i) In the case of 3-year recovery property:
(ii) In the case of 5-year recovery property:
(iii) In the case of 10-year recovery property:
(g) Special rules applicable to inclusions in income of lessees. This paragraph (g) applies to the inclusions in gross income of lessees prescribed under paragraphs (d)(2), (e)(6), or (f) of this section, or prescribed under § 1.280F–7(b).
(1) Lease term commences within 9 months of the end of lessee's taxable year. If:
(i) The lease term commences within 9 months before the close of the lessee's taxable year,
(ii) The property is not predominantly used in a qualified business use during that portion of the taxable year, and
(iii) The lease term continues into the lessee's subsequent taxable year, then the inclusion amount is added to gross income in the lessee's subsequent taxable year and the amount is determined by taking into account the average of the business/investment use for both taxable years and the applicable percentage for the taxable year in which the lease term begins (or, in the case of a passenger automobile with a fair market value greater than $16,500, the appropriate dollar amount for the taxable year in which the lease term begins).
(2) Lease term less than one year. If the lease term is less than one year, the amount which must be added to gross income is an amount that bears the same ratio to the inclusion amount determined before the application of this paragraph (g)(2) as the number of days in the lease term bears to 365.
(3) Maximum inclusion amount. The inclusion amount shall not exceed the sum of all deductible amounts in connection with the use of the listed property properly allocable to the lessee's taxable year in which the inclusion amount must be added to gross income.
(h) Definitions—(1) Lease term. In determining the term of any lease for purposes of this section, the rules of section 168(i)(3)(A) shall apply.
(2) Fair market value. For purposes of this section, the fair market value of listed property is such value on the first day of the lease term. If the capitalized cost of listed property is specified in the lease agreement, the lessee shall treat such amount as the fair market value of the property.
(3) Average business/investment use. For purposes of this section, the average business/investment use of any listed property is the average of the business/investment use for the first taxable year in which the business use percentage is 50 percent or less and all preceding taxable years in which such property is leased. See paragraph (g)(1) of this section for special rule when lease term commences within 9 months before the end of the lessee's taxable year.
(i) Examples. This section may be illustrated by the following examples.