Problem $12-31($L$0.3)$

Ahmed Zinna, one of your clients, owns two retall establishments in downtown Charlotte and has come to you seeking advice concerni

the tax consequences of complying with the Americans with Disabilities Act. He understands that he needs to install various features a

stores $($e$\mathrm{.}0\mathrm{.}4$ ramps, doorways, and restrooms that are accessible$)$ to make them more accessible to disabled individuals. He asks whet

any tax credits will be available to help offset the cost of the necessary changes. He estimates the cost of the planned changes to his

facilities as follows:

He reminds you that the Calvin Street store was constructed in $2005$ and the Stowe Avenue store is in a building that was constructed

Ahmed operates his business as a sole proprietorship and has approximately eight employees at each location.

Complete the letter to Ahmed in which you summarize your conclusions conceming the tax consequences of his proposed capital

improvements.

Dear Mr$.$ Zinna:

This letter is in response to your inquiry reqarding the tax consequences of the proposed capital improvement projects at your

Calvin Street and Stowe Avenue locations.

As I understand your proposal, you plan to incur certain expenditures that are intended to make your stores more accessible to

disabled individuals in accordance with the Americans with Disabilities Act. The capital improvements you are planning $($e$.$g$.,$

ramps, doorways, and restrooms that are accessible$)$ qualify for the disabled access credit if the costs are incurred for a faclity

that was placed in service before Covernker $6.1020$

The projected expenditures of $

for your Stowe

Avenue location qualify for the credit.

In addition, the credit is calculated at the rate of

$\%$ of the eligible expenditures that exceed s

but do not exceed $1$

$,$ Thus, the maximum credit in your situation would be $5$

You should also

be aware that the basis for depreciation of these capital improvements would be reduced to is

$,$ the amount of the

expenditures reduced by the amount of the disabled acoess credit. The capital improvements you are planning for your Calvin

Street location, even though they gualify for the disabled access credit, may not be depreciated.

Should you need more information or need to darify the information in this letter, please call me$.$

Sincerely,

Kanti Cook, CDA

Partner