The IRS and Treasury issued final regulations (T.D. 9636) regarding when costs incurred to acquire, produce or improve tangible property must be capitalized or may be deducted (“repair regulations”) in September 2013.
The IRS and Treasury have also separately reproposed regulations (REG-110732-13) about disposing of depreciable property. When finalized, the rules will apply to taxable years beginning on or after Jan. 1, 2014. A taxpayer may choose to apply the proposed regulations to taxable years beginning on or after Jan. 1, 2012.
What was issued The final regulations replace temporary and proposed regulations issued in 2011 that provided guidance on amounts paid to improve, acquire, produce or dispose of tangible property. The final regulations must be applied for taxable years beginning on or after Jan. 1, 2014. For taxable years beginning on or after Jan. 1, 2012, and before Jan. 1, 2014, a taxpayer may apply the final regulations, the temporary regulations or a combination of both. The regulations include significant changes that will affect all taxpayers that acquire, produce or improve tangible property.
Read the Tax Flash about the final repair regs.
More repair regs resources
IRS releases second of two revenue procedures for filing method changes under repair regulations
The IRS issued a revenue procedure on Feb. 28 that provides taxpayers with rules for filing method changes for disposing of tangible depreciable property. The revenue procedure adds several new method changes to the ones listed in Rev. Proc. 2011-14. In general, the accounting method changes relate to asset grouping rules and disposition rules under the temporary and reproposed regulations. Taxpayers will want to determine how the new rules may affect their current methods of grouping assets and recovery of basis upon disposition of property.
IRS releases revenue procedure for filing method changes under repair regulations
The revenue procedure updates the comprehensive list of automatic method changes in Rev. Proc. 2011-14 by deleting several method changes and adding several new method changes. It consolidates changes under sections of the final regulations, thereby creating fewer designated number changes, and allows for combining multiple method changes on one Form 3115.
Working through the new deduction rules for deducting your business propertyTax compliance might get a little easier. Recently issued final rules for the “repair regulations” are designed to help businesses figure out when they can deduct expenses related to tangible property and when they must capitalize that expense. The final repair regulations offer some simplification for small- and medium-sized businesses, and replace older, proposed and temporary rules issued in 2011.
Final repair regs offer safe harbor options for telecoms
Certain industries, including telecommunications, have worked with the IRS and Treasury to address issues specific to assets used in the industry. As a result, two of the revenue procedures issued in 2011 directly affect the telecommunications industry. Specifically, they offer alternative safe harbor methods for taxpayers to use to determine whether expenditures to maintain, replace or improve wireline network assets and wireless network assets must be capitalized or deducted.