(1) Oregon law and
federal law differ substantially with respect to allowable methods of
depreciation, depletion, or other cost recovery. Therefore, the adjusted basis
of a particular asset for Oregon tax purposes will often differ from federal
adjusted basis. Upon the sale, exchange, or other disposition of such an asset,
federal taxable income must be increased or decreased by the difference in
depreciation, depletion, etc., allowed or allowable in previous years for
Oregon and federal tax purposes.
Example. B corporation purchased property in 1982 for $5,000.
For federal tax purposes, B elected to expense the total cost under IRC Section
179 and, therefore, had a basis in the property of zero. For Oregon tax
purposes, B had claimed $3,000 of depreciation on the property in 1982 and
1983, and had an adjusted basis of $2,000 in the property when it was sold in
1983. Federal taxable income for 1983 must be reduced by $2,000 ($5,000-3,000)
in arriving at Oregon taxable income.
(2) Effective for tax years ending after
December 31, 1986, for property dispositions after February 28, 1986, the
provisions of section
453C of the Internal Revenue Code
concerning the proportionate disallowance rule have been adopted by Oregon as
part of its tie to federal accounting methods. Under the federal provisions, a
taxpayer's average indebtedness is treated as an installment payment in the
ratio of the face amount of installment obligations receivable to the adjusted
basis in all assets.
(3) In
computing Oregon taxable income, a modification shall be made to reflect the
difference in deemed installment income created for federal and Oregon tax
purposes by the proportionate disallowance rule. Such a difference arises when
the basis of assets for federal and Oregon tax purposes is not the same. If the
Oregon deemed income is greater than the federal, the difference shall be an
addition. If the Oregon deemed income is less than the federal, the difference
shall be a subtraction.
(4) Oregon
has also adopted the repeal of IRC Section 453C through its tie to federal
accounting methods. The repeal applies to dispositions in taxable years
beginning after December 31, 1987.
Notes
Or. Admin. Code §
150-317-0420
RD 7-1983, f.
12-20-83, cert. ef. 12-31-83; RD 11-1988, f. 12-19-88, cert. ef. 12-31-88;
Renumbered from 150-317.356,
REV
68-2016, f. 8-15-16, cert. ef.
9/1/2016
Stat. Auth.: ORS
305.100
Stats. Implemented: ORS
317.356
