(Source: CCH Incorporated) — The IRS’s long and tortuous repair regulation journey neared completion with the issuance of final repair regulations in T.D. 9636 on September 19, 2013, and Rev. Proc. 2014-16 (I.R.B. 2014- 7, January 24, 2014) detailing the accounting method changes needed to comply with the regulations. Unfortunately for taxpayers (and their return preparers), the journey to implement these rules has just begun. The journey’s ending date, however, is fixed: The regulations are effective for tax years beginning on or after January 1, 2014.
The last leg of the journey for the IRS will be the issuance of final regulations detailing the rules for dispositions of MACRS assets and general asset accounts. This finishing section of the trip should be a veritable breeze; the IRS will likely finalize the proposed versions of these regulations (also separately issued on September 19, 2013) with little or no change. The related revenue procedure for making accounting method changes under the Modified Accelerated Cost Recovery System (MACRS) regulations also needs to be issued but is expected to arrive in short order.
Changes to the temporary regs were made to “clarify, simplify, and refine,” as well as to create several new safe harbors. The most significant changes include:
- A revised and simplified de minimis safe harbor under Reg. §1.263(a)-1(f );
- The extension of the safe harbor for routine maintenance to buildings;
- A new annual election for smaller taxpayers to deduct some maintenance and improvement costs for buildings;
- A new annual election to capitalize repair costs that are capitalized on the taxpayer’s books and records; and
- Refined criteria for defining betterments and restorations to tangible property.
The final regulations also adopt rules in the temporary regulations for accounting for MACRS property in item and mass asset accounts and replace temporary regulations with proposed regulations for dealing with dispositions of MACRS property and GAAs.
Download our Comprehensive Report and learn about the:
- Simplified De Minimis Safe Harbor Covers Taxpayers with AFS
- Casualty Losses and Repair Deduction Compromise
- Routine Maintenance Safe Harbor Extended to Buildings
- New Building Maintenance Safe Harbor Election
- New Book Capitalization Safe Harbor Election
- Retroactive Elections Allowed for 2012 and 2013 Returns
- GAAs Out — Partial Disposition Elections In
- Accounting Method Changes Required in 2014