The IRS has released preliminary information regarding further changes to the repair regulations
In IRS Notice 2012-73, issued Tuesday, the main issues within the guidance are as follows:
• The final regulations related to repair vs. capitalization will be released in 2013 and will be effective on or after Jan. 1, 2014.
• There will be changes to the temporary repair vs. capitalization regulations that were released on Dec. 23, 2011. The IRS has so far stated the following sections may be changed when they are finalized:
o Dispositions: Sections 1.168(i)-1T and 1.168(i)-8T;
o De Minimis Rule: Section 1.263(a)-2T(g);
o Safe Harbor for Routine Maintenance: Section 1.263(a)-3T(g).
o There is further indication there could be relief for small businesses.
• The effective date of the temporary repair vs. capitalization regulations will change from Jan. 1, 2012 to Jan. 1, 2014.
• Taxpayers will have the option to apply the temporary or final regulations to tax years beginning on or after January 1, 2012 through the end of 2013.
For the full text of IRS Notice 2012-73, click here.
4 Comments
rbmandell, Gian Pazzia sent the following response to your question:
Normally, you have to make the GAA election on a current year return. In light of the new application and of General Asset Accounts, the IRS is allowing taxpayers to file a retro-active GAA elections for assets placed in service in prior years. To do this, you must file a 3115 (Change of Accounting Method Form).
Posted by: MikeCohn | December 19, 2012 5:04 AM
Report this Comment
do you have to do a form 3115 change in accounting to make the GAA elections?
Posted by: rbmandell | December 18, 2012 11:31 AM
Report this Comment
That is an excellent question. The IRS has not addressed that issue in the notice but it seems like to me that they would extend the the two year window to file retro-active GAA elections into 2014. This is only my speculation, but I can't see how they can tell taxpayers the rules go into effect on 1/1/2014 without allowing taxpayers to file retro-GAA elections in the 2014 tax year.
Having said that, the notice does state that you can apply the Temp Regs in the 2012 and 2013 tax years so you still have the option to do it right away.
My recommendation would be to do it as soon as possible so you can begin to take advantage of the tax benefit of having assets in a GAA (write off corresponding repair expenses on replaced components).
Posted by: gian@kbkg.com | December 5, 2012 10:48 AM
Report this Comment
Gian, so are the GAA elections you mentioned in your November 13 article still required to be be made in either on either 2012 or 2013 tax returns, or does this IRS notice defer that requirement two years as well? Thanks for the good articles, very helpful.
Posted by: Midwest CPA | December 5, 2012 7:53 AM
Report this Comment
Add Your Comments...
Already Registered?
If you have already registered to Accounting Today, please use the form below to login. When completed you will immeditely be directed to post a comment.
Not Registered?
You must be registered to post a comment.