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Focus on Taxation: Revised Accounting Method Change Procedures Related to Tangible Property Regulations Issued

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In September of 2013 the IRS issued final tangible property regulations that provided guidance on the application of Internal Revenue Code Sections 162(a) and 263(a) to amounts paid to acquire, produce, or improve tangible property. RubinBrown has previously communicated that in order to adopt these new regulations, which are generally applicable to tax years beginning on or after January 1, 2014, change in accounting method filings will be required. On January 24, 2014 the IRS provided revised procedures for making these filings.
January 27, 2014
In September of 2013 the IRS issued final tangible property regulations that provided guidance on the application of Internal Revenue Code Sections 162(a) and 263(a) to amounts paid to acquire, produce, or improve tangible property. RubinBrown has previously communicated that in order to adopt these new regulations, which are generally applicable to tax years beginning on or after January 1, 2014, change in accounting method filings will be required. On January 24, 2014 the IRS provided revised procedures for making these filings.

Revenue Procedure 2014-16, which is generally effective January 24, 2014, adds new Section 10.11 to the Appendix of Revenue Procedure 2011-14 to provide automatic consent procedure for changes:
  • to deducting amounts paid or incurred to acquire or produce non-incidental materials and supplies in the tax year in which they are first used or consumed in the taxpayer's operations;
  • to deducting amounts to acquire or produce incidental materials and supplies in the tax year in which paid or incurred;
  • to deducting amounts paid or incurred to acquire or produce non-incidental rotable and temporary spare parts in the tax year in which the taxpayer disposes of the parts;
  • to the optional method of accounting for rotable and temporary spare parts;
  • to deducting amounts paid or incurred for repair and maintenance;
  • to capitalizing amounts paid or incurred for improvements to tangible property;
  • by a dealer in property, to deducting amounts paid or incurred for commissions and other transaction costs that facilitate the sale of property;
  • by a non-dealer in property, to capitalizing amounts paid or incurred for commissions and other costs that facilitate the sale of property;
  • to capitalizing amounts paid or incurred to acquire or produce property;
  • to deducting amounts paid or incurred in the process of investigating or otherwise pursuing the acquisition of real property; and
  • to the optional regulatory accounting method to determine whether amounts paid or incurred to repair, maintain, or improve tangible property are treated as deductible expenses or capital expenditures. 
Change in accounting method consent is required to comply with these complex final tangible property regulations. Taxpayers should work closely with their tax advisor to discuss the additional efforts that will be required to obtain this IRS consent. Please contact your RubinBrown engagement representative with any questions.

 

Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

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