Adjusting the Wisconsin Basis of Depreciated or Amortized Assets

​​(Effective for taxable years beginning after December 31, 2013)

Note: This adjustment only applies to taxpayers that previously reported the modification for a short taxable year, and as a result, were not able to recognize the full addition. See common question number 27 for an example.

  1. Am I required to make an addition or subtraction modification for property that was being depreciated (or amortized) on the last day of tax year 2013?

  2. Is it mandatory to amortize the depreciation difference over five years or can I keep the federal and Wisconsin basis of assets different?

  3. What happens when an asset is disposed of prior to expiration of the five-year amortization period?

  4. Is the amortization of the difference in basis reported on Schedule I?

  5. How does the basis adjustment apply when a sole proprietor reorganizes as a C corporation on January 1, 2014?

  6. How does the basis adjustment apply in the case of a partnership liquidation?

  7. How does the basis adjustment apply in the case of a corporate liquidation?

  8. How is the unamortized basis balance treated when a tax-option (S) corporation is liquidated?

  9. What happens if an individual dies before the 5-year period ends?

  10. If there is a difference between the amount of depreciation claimed for Wisconsin regular and minimum tax purposes, do I need to make a modification on Schedule MT to account for the difference in adjusted basis of the assets?

  11. Can the subtraction for difference in basis create a net operating loss (NOL) for individuals, estates, and trusts?

  12. Can any portion of the subtraction for difference in basis that does not provide a tax benefit be carried over and used in a future year by an individual, estate, or trust?

  13. After January 1, 2014, will the federal and Wisconsin basis of depreciated and amortized assets always be the same?

  14. How does the depreciation/amortization basis adjustment apply to Wisconsin combined groups?

  15. Can you have a different federal and Wisconsin basis in a depreciable asset starting in 2014?

  16. How does federal bonus depreciation affect the new subtraction modification for the difference in federal and Wisconsin basis of assets?

  17. Does this five-year basis amortization apply to rental property reported on Schedule E?

  18. The new subtraction modification for the difference in basis of assets is amortized over five years. What if the asset class is 3, 7, 10 or 15 year property?

  19. If I sell an asset in 2014, is the gain/loss amortized over five years as part of the subtraction modification?

  20. In 2014, a farmer sells a depreciable asset for $130,000 that was bought in a prior year for $120,000. On December 31, 2013, the federal adjusted basis of the asset is $0 and the WI adjusted basis of the asset is $60,000. What is the difference in basis of the asset for purposes of the new subtraction modification and what is the amount of gain the farmer reports for Wisconsin?

  21. How does the subtraction modification affect the computation of the deduction for 1/2 of self-employment tax, retirement contributions, medical insurance subtraction, child and dependent care subtraction, itemized deductions credit and NOLs? Does the new subtraction modification require the income limitations for these items to be recomputed under Wisconsin law?

  22. An LLC, taxed as a partnership, is filing a final return due to technical termination. As described in Revenue Ruling 99-6 Situation 2, the IRS will treat the sale as a sale of membership interest by the original members and as an asset purchase by the buyer. How is the subtraction modification reported?

  23. What happens when I have different bases for assets placed in service in 2014 or later, such as when I elect different section 179 expense for federal and Wisconsin?

  24. How do I account for a difference in the section 179 expense carryover for federal and Wisconsin?

  25. Is the difference in basis calculated at the end of the 2013 tax year considered an asset subject to section 179 expense?

  26. How do the depreciation changes impact the computation of the manufacturing and agricultural credit?

  27. How do I report the subtraction modification in a short taxable year?


Applicable Laws and Rules

This document provides statements or interpretations of the following laws and regulations enacted as of December 13, 2019: Sections 71.05, 71.34 and 71.98, Wis. Stats.

Laws enacted and in effect after December 13, 2019, new administrative rules, and court decisions may change the interpretations in this document. Guidance issued prior to December 13, 2019, that is contrary to the information in this document is superseded by this document, pursuant to sec. 73.16(2)(a), Wis. Stats.

FOR QUESTIONS OR COMMENTS CONTACT:

MS 5-77
WISCONSIN DEPARTMENT OF REVENUE
Customer Service Bureau
PO Box 8949
Madison, WI 53708-8949
Phone: (608) 266-2772
Fax: (608) 267-1030
Email additional questions to DORFranchise@wisconsin.gov

Guidance Document Number: 100093

December 13, 2019