Taxpayers Need to Make Decisions and Elections Under the New Capitalization vs. Repair Regulations (Part 6)

Author: Don Warrant

In December of 2011, the IRS published comprehensive new regulations governing capitalization vs. deductible repair expenditures for tangible property. For many taxpayers this will mean making changes to accounting methods and systems, new tax compliance requirements, new tax planning opportunities, and on a positive note, the chance to expense items capitalized as improvements in prior tax years.

Taxpayers can implement method changes in 2012, 2013 or 2014 according to IRS Notice 2012-73.  Therefore, taxpayers should incorporate the method changes provided by the new regulations in their tax planning for 2012, 2013 and 2014.

Highlights

  • tangible asset regulationsTaxpayers need to consider the various methods and elections that are available under the new regulations
  • Materials and supplies:  De minimis rule or capitalize and depreciate
  • Rotables and temporary spare parts:  deduct upon disposition, capitalize and depreciate, or new optional method
  • De minimis rule: To apply or capitalize and depreciate specific assets
  • Acquisition of property:  capitalize or expense employee compensation and overhead
  • General asset accounts: make late GAA elections, terminate GAA elections for specific assets or all assets

Our CapX Program

FreedMaxick's CapX (Capitalization or Expense) Consulting Service is a comprehensive program designed to quickly and efficiently bring you into compliance and optimal tax savings. Click here for more information or call Don Warrant at 716-847-2651.

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