Bonus Asset Basis

General

Taxpayers are allowed a bonus asset basis adjustment under G.S. §105-15.6(e) if an asset is transferred and the tax basis of the asset carries over from the transferor to the transferee for federal income tax purposes.

Definitions

Transferor.  An individual, partnership, corporation, S Corporation, limited liability company, or an estate or trust that does not fully distribute income to its beneficiaries.

Owner in a transferor.  One or more of the following of a transferor:

  • A partner, shareholder, or member.
  • A beneficiary subject to North Carolina income taxation.

Remaining life of the asset.  The remaining years in the asset’s federal recovery period, as determined under section 168(c) of the Code.

Bonus Asset Basis Adjustments

A bonus asset basis adjustment is required when the following occur:

  1.  There is an actual or deemed transfer of an asset;
  2.  The tax basis of the transferred asset carries over from the transferor to the transferee for federal income tax purposes; and
  3.  Each transferor or owner in a transferor that added bonus depreciation to its federal taxable income or adjusted gross income, as appropriate, certifies in writing that they will not take any remaining future State bonus depreciation deductions associated with the transferred asset.

When the above requirements are met, the transferee is eligible to deduct the remaining bonus depreciation deductions associated with the transferred asset.  An adjustment to federal adjusted gross income is required for each year the asset with the bonus asset basis is depreciated.  In addition, upon sale or other disposition of the asset, adjusted gross income must be increased or decreased to account for any difference in the basis for State and federal income tax purposes.

Refer to the Personal Taxes Bulletins for further examples and details.