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ADS or GDS for US Possessions

Mayday981
Level 3

Hi everyone,

Does anybody here know if ADS is required for US Possessions such as the US Virgin Islands and Puerto Rico? For 168(G)(1)(a), it says "any tangible property which during the taxable year is used predominantly outside the United States." Does outside the United States include US possessions? My client wants to see if we can get bonus depreciation for assets there. He has a partnership that holds assets in those possessions.

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itonewbie
Level 15

To determine what constitutes the United States for purposes of §168(g)(1)(A), you'd need to look to Treas. Reg. §1.168(i)-4(d)(2)(ii), which deals with when a property is deemed to have been used predominantly outside the United States.  Since the determination is made by reference to §1.48-1)g)(1)(i), we'd then need to look to that reg. for the details.

§1.48-1)g)(1)(i), in turn, refers to §7701(a)(9) for the definition of the United States and that code section states clearly that "[t]he term “United States” when used in a geographical sense includes only the States and the District of Columbia."

This means USVI and Puerto Rico are not considered part of the United States for purposes of §168(g)(1)(A) and ADS will be applicable when tangible properties are used predominantly in those locations unless one or more of the exceptions under subparagraph (g)(4) are met.

[You will notice, however, this is in contrast with subparagraph (6)(B), which specifically includes Puerto and US possessions within the definition of the United States for purposes of that particular subparagraph.]

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5 Replies 5
Code_Reader
Level 2
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Mayday981
Level 3

Yep, posted the question in both forums since I needed a quick answer. 

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Code_Reader
Level 2

Not a problem. Just thought if someone found this post they might like to see the discussion there.

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sjrcpa
Level 15

and a different answer.


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itonewbie
Level 15

To determine what constitutes the United States for purposes of §168(g)(1)(A), you'd need to look to Treas. Reg. §1.168(i)-4(d)(2)(ii), which deals with when a property is deemed to have been used predominantly outside the United States.  Since the determination is made by reference to §1.48-1)g)(1)(i), we'd then need to look to that reg. for the details.

§1.48-1)g)(1)(i), in turn, refers to §7701(a)(9) for the definition of the United States and that code section states clearly that "[t]he term “United States” when used in a geographical sense includes only the States and the District of Columbia."

This means USVI and Puerto Rico are not considered part of the United States for purposes of §168(g)(1)(A) and ADS will be applicable when tangible properties are used predominantly in those locations unless one or more of the exceptions under subparagraph (g)(4) are met.

[You will notice, however, this is in contrast with subparagraph (6)(B), which specifically includes Puerto and US possessions within the definition of the United States for purposes of that particular subparagraph.]

---------------------------------------------------------------------------------
Still an AllStar

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