The Tangible Property "Repair" Regulations Overview
Crystal Germanese, CPA
On December 23, 2011, the IRS released the highly anticipated regulations regarding the deduction and capitalization of tangible asset costs in temporary and proposed form. The Temporary Regulations apply to tax years beginning on or after January 1, 2012 or to amounts paid or incurred in tax years beginning on or after January 1, 2012, as applicable and will affect every taxpayer that acquires, produces or improves tangible property.
The temporary regulations provide guidance under sections 162(a) and 263(a) which we will cover in the following areas:
- Definition and treatment of materials and supplies (Reg. section 1.162-3T)
- Accounting for depreciable (Reg. sections 1.167(a)-7T) and MACRS property (Reg. section 1.168(i)-7T), including retirements (Reg. section 1.167(a)-8T) and general asset account rules (Reg. section 1.168(i)-1T)
- Rules for amounts paid for the acquisition or production of tangible property, including a de minimis rule (Reg. section 1.263(a)-2T)
- Rules for amounts paid for the improvement of tangible property, including a safe harbor for routine maintenance (Reg. section 1.263(a)-3T)
We have compiled a series of additional articles to help taxpayers understand the new rules and understand how they will be implemented.
- Amounts Paid to Acquire or Produce Tangible Property
- Improvement to Tangible Property
- Unit of Property for Purposes of Determining Improvement
- Asset Accounting and Dispositions
- Change In Accounting Method to Comply With the Tangible Property Regulations
The new regulations require virtually every business to review how repairs, maintenance, improvements and replacements are handled for tax purposes. BlumShapiro will continue to provide additional information as to how this change will affect your business and what steps you need to take.
If you have additional questions, please contact Crystal Germanese at email@example.com 860-570-6496.