There is an important development that will affect your business. The IRS has issued long-awaited regulations on the tax treatment of amounts paid to acquire, produce, or improve tangible property. The regulations explain when those payments can be deducted currently and when they must be capitalized.
These final regulations retain many provisions of the temporary ones that were issued in 2011. However, they refine and simplify the temporary guidelines and add new safe harbor provisions that will clarify current expense deductions.
The guidance is lengthy and complex. Among other things, it provides detailed definitions of “materials and supplies” and “rotable and temporary spare parts” and prescribes rules and elective de minimis and optional methods for handling their cost. It also has rules for differentiating between deductible repairs and capitalizable improvements, and many other items. The regulations generally are effective for tax years beginning on or after January 1, 2014, but taxpayers can elect to apply them prior to 2014.
A change to conform to the regulations is considered a change in accounting method, for which an accounting adjustment is required and an application must be submitted to the IRS.
If you wish to pursue potential tax-saving opportunities made available by this important IRS guidance, PYA can help. We would be happy to discuss these regulations at length and see how they will affect your specific business situation. Contact the expert listed below at PYA, (800) 270-9629.
