Buildings and Other Depreciable Assets

IRS IRC § 42 Audit Technique Guide — Part I (Introduction and Pre-Contact Analysis) · 2026 edition · updated 2026-07-29 · United States

Most IRC §42 projects are owned by single-asset entities; i.e., the only business activity is the IRC §42 project. The eligible basis used to compute the credit should also appear on the balance sheet as depreciable property.

The depreciable asset figure should approximate the eligible basis reported collectively on the Forms 8609, line 7, and on Forms 8609-A, line 1, filed with the tax return. For low-income buildings in an area that is difficult to develop, multiply the depreciable assets by the percentage on Form 8609 line 3b, and then compare to the eligible basis.

Compare the balances of depreciable assets at the end of the year to the beginning of the year. Any significant decrease may be an indication of a sale or disposition of part (or all) of the IRC §42 project. For any such decrease in assets, there may be an IRC §42(j) credit recapture issue.

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▸Contents — IRS IRC § 42 Audit Technique Guide — Part I (Introduction and Pre-Contact Analysis)

IRS IRC § 42 Audit Technique Guide — Part I (Introduction and Pre-Contact Analysis)

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