IRS Revenue Procedure
2002-14

Code Secs. 61, 280F



<<FULL TEXT>>

26 CFR 601.105: Examination of returns and claims for refund, credit, or
abatement; determination of correct tax liability.
(Also Part I, section 61, 280F; 1.61-21, 1.280F-7.)


REV. PROC. 2002-14

SECTION 1. PURPOSE

This revenue procedure provides: (1) limitations on depreciation
deductions for owners of passenger automobiles first placed in service
during calendar year 2002, including separate limitations on passenger
automobiles designed to be propelled primarily by electricity and built by
an original equipment manufacturer (electric automobiles); (2) the amounts
to be included in income by lessees of passenger automobiles first leased
during calendar year 2002, including separate inclusion amounts for
electric automobiles; and (3) the maximum allowable value of
employer-provided automobiles first made available to employees for
personal use in calendar year 2002 for which the vehicle cents-per-mile
valuation rule provided under section 1.61-21(e) of the Income Tax
Regulations may be applicable. The tables detailing these depreciation
limitations and lessee inclusion amounts reflect the automobile price
inflation adjustments required by section 280F(d)(7) of the Internal
Revenue Code. The maximum allowable automobile value for applying the
vehicle cents-per-mile valuation rule reflects the automobile price
inflation adjustment of section 280F(d)(7) as required by section
1.61-21(e)(1)(iii)(A).


SECTION 2. BACKGROUND

For owners of automobiles, section 280F(a) imposes dollar limitations
on the depreciation deduction for the year that the automobile is placed
in service and each succeeding year. In the case of electric automobiles
placed in service after August 5, 1997, and before January 1, 2005,
section 280F(a)(1)(C) requires tripling of these limitation amounts.
Section 280F(d)(7) requires the amounts allowable as depreciation
deductions to be increased by a price inflation adjustment amount for
passenger automobiles placed in service after 1988.

For leased automobiles, section 280F(c) requires a reduction in the
deduction allowed to the lessee of the automobile. The reduction must be
substantially equivalent to the limitations on the depreciation deductions
imposed on owners of automobiles. Under section 1.280F-7(a), this
reduction requires the lessees to include in gross income an inclusion
amount determined by applying a formula to the amount obtained from a
table. There is a table for lessees of electric automobiles and a table
for all other passenger automobiles. Each table shows inclusion amounts
for a range of fair market values for each tax year after the automobile
is first leased.

For automobiles first provided by employers to employees that meet the
requirements of section 1.61-21(e)(1), the value to the employee of the
use of the automobile may be determined under the vehicle cents-per-mile
valuation rule of section 1.61-21(e). Section 1.61-21(e)(1)(iii)(A)
provides that for an automobile first made available after 1988 to any
employee of the employer for personal use, the value of the use of the
automobile may not be determined under the vehicle cents-per-mile
valuation rule for a calendar year if the fair market value of the
automobile (determined pursuant to section 1.61-21(d)(5)(i) through (iv))
on the first date the automobile is made available to the employee exceeds
$12,800 as adjusted by section 280F(d)(7).


SECTION 3. SCOPE AND OBJECTIVE

01. The limitations on depreciation deductions in section 4.02 of this
revenue procedure apply to automobiles (other than leased automobiles)
that are placed in service in calendar year 2002 and continue to apply for
each tax year that the automobile remains in service.

02. The tables in section 4.03 of this revenue procedure apply to
leased automobiles for which the lease term begins in calendar year 2002.
Lessees of such automobiles must use these tables to determine the
inclusion amount for each tax year during which the automobile is leased.

03. See Rev. Proc. 96-25 (1996-1 C.B. 681) for information on
determining inclusion amounts for automobiles first leased before January
1, 1997; Rev. Proc. 97-20 (1997-1 C.B. 647) for automobiles first leased
during calendar year 1997, including electric automobiles first leased on
or after January 1, 1997, and before August 6, 1997; Rev. Proc. 98-24
(1998-1 C.B. 663) for electric automobiles first leased after August 5,
1997, and before January 1, 1998; Rev. Proc. 98-30 (1998-1 C.B. 930) for
all automobiles first leased in calendar year 1998; Rev. Proc. 99-14
(1999-1 C.B. 413) for all automobiles first leased in calendar year 1999;
Rev. Proc. 2000-18 (2000-9 I.R.B. 722) for all automobiles first leased in
calendar year 2000, and Rev. Proc. 2001-19 (2001-9 I.R.B. 732) for all
automobiles first leased in calendar year 2001.

04. The maximum fair market value figure in section 4.04(2) of this
revenue procedure applies to employer-provided automobiles first made
available to any employee for personal use in calendar year 2002. See Rev.
Proc. 97-20, for the maximum fair market value figure for automobiles
first made available in calendar year 1997; Rev. Proc. 98-30, for the
maximum fair market value figure for automobiles first made available in
calendar year 1998; Rev. Proc. 99-14, for the maximum fair market value
figure for automobiles first made available in calendar year 1999; Rev.
Proc. 2000-18, for the maximum fair market value figure for automobiles
first made available in calendar year 2000; and Rev. Proc. 2001-19, for
the maximum fair market value figure for automobiles first made available
in calendar year 2001.


SECTION 4. APPLICATION

01. A taxpayer placing an automobile in service for the first time
during calendar year 2002 is limited to the depreciation deduction shown
in Table 1 of section 4.02(2) of this revenue procedure or, in the case of
an electric automobile, Table 2 of this revenue procedure. A taxpayer
first leasing an automobile in calendar year 2002 must determine the
inclusion amount that is added to gross income using Table 3 of section
4.03 of this revenue procedure or, in the case of an electric automobile,
Table 4 of this revenue procedure. In addition, the procedures of section
1.280F-7(a) must be followed. An employer providing an automobile for the
first time in calendar year 2002 for the personal use of any employee may
determine the value of the use of the automobile by using the
cents-per-mile valuation rule in section 1.61-21(e) if the fair market
value of the automobile does not exceed the amount specified in section
4.04(2) of this revenue procedure. If the fair market value of the
automobile exceeds the amount specified in section 4.04(2) of this revenue
procedure, the employer may determine the value of the use of the
automobile under the general valuation rules of section 1.61-21(b) or
under the special valuation rules of section 1.61-21(d) (Automobile lease
valuation) or section 1.61-21(f) (Commuting valuation) if the applicable
requirements are met.

02. LIMITATIONS ON DEPRECIATION DEDUCTIONS FOR CERTAIN AUTOMOBILES.

(1) AMOUNT OF THE INFLATION ADJUSTMENT. Under section 280F(d)(7)(B)(i),
the automobile price inflation adjustment for any calendar year is the
percentage (if any) by which the CPI automobile component for October of
the preceding calendar year exceeds the CPI automobile component for
October 1987. The term "CPI automobile component" is defined in section
280F(d)(7)(B)(ii) as the "automobile component" of the Consumer Price
Index for all Urban Consumers published by the Department of Labor (the
CPI). The new car component of the CPI was 115.2 for October 1987 and
137.7 for October 2001. The October 2001 index exceeded the October 1987
index by 22.5. The Internal Revenue Service has, therefore, determined
that the automobile price inflation adjustment for 2002 is 19.53125
percent (22.5/115.2 x 100%). This adjustment is applicable to all
automobiles that are first placed in service in calendar year 2002. The
dollar limitations in section 280F(a) must therefore be multiplied by a
factor of 0.1953125, and the resulting increases, after rounding to the
nearest $100, are added to the 1988 limitations to give the depreciation
limitations applicable to passenger automobiles (other than electric
automobiles) for calendar year 2002. To determine the dollar limitations
applicable to an electric automobile first placed in service during
calendar year 2002, the dollar limitations in section 280F(a) are tripled
in accordance with section 280F(a)(1)(C) and are then multiplied by a
factor of 0.1953125; the resulting increases, after rounding to the
nearest $100, are added to the tripled 1988 limitations to give the
depreciation limitations for calendar year 2002.

(2) AMOUNT OF THE LIMITATION. For automobiles (other than electric
automobiles) placed in service in calendar year 2002, Table 1 of this
revenue procedure contains the dollar amount of the depreciation
limitations for each tax year. For electric automobiles placed in service
in calendar year 2002, Table 2 of this revenue procedure contains these
amounts.


REV. PROC. 2002-14 TABLE 1

DEPRECIATION LIMITATIONS FOR AUTOMOBILES (OTHER THAN ELECTRIC
AUTOMOBILES) FIRST PLACED IN SERVICE IN CALENDAR YEAR 2002

Tax Year Amount
-------- ------
1st Tax Year $3,060
2nd Tax Year $4,900
3rd Tax Year $2,950
Each Succeeding Year $1,775


REV. PROC. 2002-14 TABLE 2

DEPRECIATION LIMITATIONS FOR ELECTRIC AUTOMOBILES FIRST PLACED IN
SERVICE IN CALENDAR YEAR 2002

Tax Year Amount
-------- ------
1st Tax Year $9,180
2nd Tax Year $14,700
3rd Tax Year $8,750
Each Succeeding Year $5,325


03. INCLUSIONS IN INCOME OF LESSEES OF AUTOMOBILES.

The inclusion amounts for automobiles first leased in calendar year
2002 are calculated under the procedures described in section 1.280F-7(a).
Lessees of automobiles other than electric automobiles should use Table 3
of this revenue procedure in applying these procedures, while lessees of
electric automobiles should use Table 4 of this revenue procedure.


REV. PROC. 2002-14 TABLE 3

DOLLAR AMOUNTS FOR AUTOMOBILES (OTHER THAN ELECTRIC AUTOMOBILES) WITH A
LEASE TERM BEGINNING IN CALENDAR YEAR 2002

Tax Year During Lease
Fair Market Value ----------------------------------------
of Automobile 5th
------------------ and
Over Not Over 1st 2nd 3rd 4th Later
---- -------- --- --- --- --- -----
$15,500 15,800 2 3 5 6 6
15,800 16,100 3 7 9 11 13
16,100 16,400 4 10 14 17 19
16,400 16,700 6 13 18 22 26
16,700 17,000 7 16 23 28 31
17,000 17,500 9 20 29 35 40
17,500 18,000 11 25 37 44 50
18,000 18,500 14 30 44 53 61
18,500 19,000 16 35 52 62 72
19,000 19,500 18 40 60 71 82
19,500 20,000 21 45 67 80 93
20,000 20,500 23 50 75 89 103
20,500 21,000 25 56 82 98 114
21,000 21,500 28 60 90 108 123
21,500 22,000 30 66 97 117 134
22,000 23,000 33 74 108 130 150
23,000 24,000 38 84 123 149 171
24,000 25,000 43 94 139 166 192
25,000 26,000 47 104 154 185 213
26,000 27,000 52 114 169 203 234
27,000 28,000 57 124 185 220 255
28,000 29,000 61 135 199 239 276
29,000 30,000 66 145 214 258 296
30,000 31,000 71 155 230 275 318
31,000 32,000 75 165 245 294 338
32,000 33,000 80 175 260 312 360
33,000 34,000 85 185 276 329 381
34,000 35,000 89 196 290 348 402
35,000 36,000 94 206 305 367 422
36,000 37,000 99 216 321 384 443
37,000 38,000 103 226 336 403 464
38,000 39,000 108 236 351 421 485
39,000 40,000 112 247 366 439 506
40,000 41,000 117 257 381 457 527
41,000 42,000 122 267 396 475 549
42,000 43,000 126 278 411 493 570
43,000 44,000 131 288 426 512 590
44,000 45,000 136 298 441 530 611
45,000 46,000 140 308 457 548 632
46,000 47,000 145 318 472 566 653
47,000 48,000 150 328 487 584 674
48,000 49,000 154 339 502 602 695
49,000 50,000 159 349 517 620 717
50,000 51,000 164 359 532 639 737
51,000 52,000 168 369 548 657 758
52,000 53,000 173 379 563 675 779
53,000 54,000 177 390 578 693 800
54,000 55,000 182 400 593 711 821
55,000 56,000 187 410 608 729 842
56,000 57,000 191 420 624 747 863
57,000 58,000 196 430 639 766 883
58,000 59,000 201 440 654 784 905
59,000 60,000 205 451 669 802 925
60,000 62,000 212 466 692 829 957
62,000 64,000 222 486 722 866 999
64,000 66,000 231 507 752 902 1,041
66,000 68,000 240 527 783 938 1,083
68,000 70,000 250 547 813 974 1,125
70,000 72,000 259 568 843 1,011 1,166
72,000 74,000 268 589 873 1,047 1,208
74,000 76,000 277 609 904 1,083 1,250
76,000 78,000 287 629 934 1,120 1,292
78,000 80,000 296 650 964 1,156 1,334
80,000 85,000 312 686 1,017 1,219 1,408
85,000 90,000 335 737 1,092 1,311 1,512
90,000 95,000 359 787 1,169 1,401 1,617
95,000 100,000 382 838 1,245 1,491 1,722
100,000 110,000 417 915 1,358 1,627 1,880
110,000 120,000 463 1,017 1,509 1,810 2,089
120,000 130,000 510 1,119 1,660 1,991 2,299
130,000 140,000 556 1,221 1,812 2,172 2,509
140,000 150,000 603 1,323 1,963 2,354 2,718
150,000 160,000 649 1,425 2,115 2,535 2,928
160,000 170,000 696 1,527 2,266 2,717 3,137
170,000 180,000 742 1,629 2,418 2,898 3,347
180,000 190,000 789 1,731 2,569 3,080 3,556
190,000 200,000 835 1,833 2,720 3,262 3,766
200,000 210,000 881 1,935 2,872 3,443 3,976
210,000 220,000 928 2,037 3,023 3,625 4,185
220,000 230,000 974 2,139 3,175 3,806 4,395
230,000 240,000 1,021 2,241 3,326 3,988 4,604
240,000 250,000 1,067 2,343 3,478 4,169 4,814


REV. PROC. 2002-14 TABLE 4

DOLLAR AMOUNTS FOR ELECTRIC AUTOMOBILES WITH A LEASE TERM BEGINNING IN
CALENDAR YEAR 2002

Tax Year During Lease
Fair Market Value ----------------------------------------
of Automobile 5th
------------------ and
Over Not Over 1st 2nd 3rd 4th Later
---- -------- --- --- --- --- -----
$46,000 47,000 3 6 10 11 12
47,000 48,000 7 16 26 29 33
48,000 49,000 12 26 41 47 54
49,000 50,000 17 36 56 66 74
50,000 51,000 21 47 71 83 96
51,000 52,000 26 57 86 102 117
52,000 53,000 31 67 101 120 138
53,000 54,000 35 77 117 138 159
54,000 55,000 40 87 132 156 180
55,000 56,000 45 98 146 174 201
56,000 57,000 49 108 161 193 222
57,000 58,000 54 118 177 211 242
58,000 59,000 59 128 192 229 264
59,000 60,000 63 139 206 248 284
60,000 62,000 70 154 229 275 316
62,000 64,000 79 174 260 311 358
64,000 66,000 89 195 290 347 400
66,000 68,000 98 215 320 384 442
68,000 70,000 107 236 350 420 484
70,000 72,000 117 256 381 456 525
72,000 74,000 126 276 411 493 567
74,000 76,000 135 297 441 529 609
76,000 78,000 145 317 472 564 652
78,000 80,000 154 337 502 602 693
80,000 85,000 170 373 555 665 767
85,000 90,000 193 424 631 756 871
90,000 95,000 217 475 706 847 976
95,000 100,000 240 526 782 937 1,081
100,000 110,000 275 602 896 1,073 1,239
110,000 120,000 321 705 1,047 1,255 1,448
120,000 130,000 368 806 1,199 1,436 1,658
130,000 140,000 414 909 1,350 1,617 1,868
140,000 150,000 460 1,011 1,501 1,800 2,076
150,000 160,000 507 1,113 1,652 1,981 2,287
160,000 170,000 553 1,215 1,804 2,163 2,496
170,000 180,000 600 1,317 1,955 2,344 2,706
180,000 190,000 646 1,419 2,107 2,525 2,916
190,000 200,000 693 1,521 2,258 2,707 3,125
200,000 210,000 739 1,623 2,410 2,888 3,335
210,000 220,000 786 1,725 2,561 3,070 3,544
220,000 230,000 832 1,827 2,712 3,252 3,754
230,000 240,000 879 1,929 2,863 3,434 3,963
240,000 250,000 925 2,031 3,015 3,615 4,173


04. MAXIMUM AUTOMOBILE VALUE FOR USING THE CENTS-PER-MILE VALUATION
RULE.

(1) AMOUNT OF ADJUSTMENT. Under section 1.61-21(e)(1)(iii)(A), the
limitation on the fair market value of an employer-provided automobile
first made available to any employee for personal use after 1988 is to be
adjusted in accordance with section 280F(d)(7). Accordingly, the
adjustment for any calendar year is the percentage (if any) by which the
CPI automobile component for October of the preceding calendar year
exceeds the CPI automobile component for October 1987. See, section
4.02(1) of this revenue procedure. The new car component of the CPI was
115.2 for October 1987 and 137.7 for October 2000. The October 2000 index
exceeded the October 1987 by 22.5. The Internal Revenue Service has,
therefore, determined that the adjustment for 2002 is 19.53125 percent
(22.5/115.2 x 100%). This adjustment is applicable to all
employer-provided automobiles first made available to any employee for
personal use in calendar year 2002. The maximum fair market value
specified in section 1.61-21(e)(1)(iii)(A) must therefore be multiplied by
a factor of 0.1953125, and the resulting increase, after rounding to the
nearest $100, is added to $12,800 to give the maximum value for calendar
year 2002.

(2) THE MAXIMUM AUTOMOBILE VALUE. For automobiles first made available
in calendar year 2002 to any employee of the employer for personal use,
the vehicle cents-per-mile valuation rule may be applicable if the fair
market value of the automobile on the date it is first made available does
not exceed $15,300.


SECTION 5. EFFECTIVE DATE

This revenue procedure applies to automobiles (other than lease
automobiles) that are first placed in service during calendar year 2002,
to leased automobiles that first leased during calendar year 2002, and to
employer-provided automobiles first made available to employees for
personal use in calendar year 2002.


DRAFTING INFORMATION

The principal author of this revenue procedure is Bernard P. Harvey of
the Office of the Associate Chief Counsel (Passthroughs and Special
Industries). For further information regarding the depreciation
limitations and lessee inclusion amounts in this revenue procedure,
contact Mr. Harvey at (202) 622-3110; for further information regarding
the maximum automobile value for applying the vehicle cents-per-mile
valuation rule, contact Dan E. Boeskin of the Office of the Associate
Chief Counsel (Tax Exempt and Government Entities) at (202) 622-6040 (not
toll-free calls).

<<END RULING>>
04. Maximum Automobile Value for Using the Cents-per-mile Valuation Rule.
(1) Amount of Adjustment. Under § 1.61-21(e)(1)(iii)(A), the limitation on
the fair market value of an employer-provided automobile first made
available to any employee for personal use after 1988 is to be adjusted in
accordance with § 280F(d)(7). Accordingly, the adjustment for any calendar
year is the percentage (if any) by which the CPI automobile component for
October of the preceding calendar year exceeds the CPI automobile
component for October 1987. See, section 4.02(1) of this revenue
procedure. The new car component of the CPI was 115.2 for October 1987 and
137.7 for October 2000. The October 2000 index exceeded the October 1987
index by 22.5. The Internal Revenue Service has, therefore, determined
that the adjustment for 2002 is 19.53125 percent (22.5/115.2 x 100%). This
adjustment is applicable to all


employer-provided automobiles first made available to any employee for
personal use in calendar year 2002. The maximum fair market value
specified in § 1.61-21(e)(1)(iii)(A) must therefore be multiplied by a
factor of 0.1953125, and the resulting increase, after rounding to the
nearest $100, is added to $12,800 to give the maximum value for calendar
year 2002. (2) The Maximum Automobile Value. For automobiles first made
available in calendar year 2002 to any employee of the employer for
personal use, the vehicle cents-per-mile valuation rule may be applicable
if the fair market value of the automobile on the date it is first made
available does not exceed $15,300.

SECTION 5. EFFECTIVE DATE This revenue procedure applies to automobiles
(other than leased automobiles) that are first placed in service dur-


ing calendar year 2002, to leased automobiles that are first leased
during calendar year 2002, and to employer-provided automobiles first made
available to employees for personal use in calendar year 2002.

DRAFTING INFORMATION The principal author of this revenue procedure is
Bernard P. Harvey of the Office of the Associate Chief Counsel
(Passthroughs and Special Industries). For further information regarding
the depreciation limitations and lessee inclusion amounts in this revenue
procedure, contact Mr. Harvey at (202) 622-3110; for further information
regarding the maximum automobile value for applying the vehicle
cents-per-mile valuation rule, contact Dan E. Boeskin of the Office of the
Associate Chief Counsel (Tax Exempt and Government Entities) at (202)
622-6040 (not toll-free calls).

<<END RULING>>


 

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