What the New Tangible Asset Regulations Say About Disposing MACRS Property (Part 7)

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

  • capitalization vs. repairDispositions of MACRS property include transfer of ownership of the asset, or permanent withdrawal of asset from trade or business
  • New provision: retirement of a structural component of a building  now constitutes a disposition of MACRS property – mandatory treatment
  • Taxpayers must recognize gain/loss on dispositions of components of buildings
  1. Consider implications for restoration rules
  2. Consider electing general asset account (GAA)
  • Taxpayers that own a building will likely make a late GAA election
    Taxpayers may recognize dispositions of components of personal property if componentization is applied consistently
  • The costs of removing a depreciable asset are generally deductible, special rules apply to components

Our CapX Program

Freed Maxick's integrated team of tax and accounting method specialists, and cost segregation engineers can help you comply with these complicated regulations. We’re pleased to bring you FreedMaxick's CapX (Capitalization or Expense) Consulting Service -- 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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