CCH has released a special tax briefing providing guidance and analysis of the Internal Revenue Service’s temporary regulations for repairs of tangible property and how they may require companies to change their accounting methods.
The IRS released the long-awaited regulations last December (see IRS Issues Regulations on Tangible Property Repairs). The temporary regulations affect all business taxpayers who acquire, produce or improve tangible property. They are effective for tax years (or costs incurred in taxable years as appropriate) beginning on or after Jan. 1, 2012. However, the regulations are in effect retroactive, depending on the accounting method used at the time and whether it complies with the new standards.
“Nearly every business taxpayer is affected and will need to file one or more accounting method changes to bring prior transactions into compliance with the regulations,” said CCH senior federal tax analyst Ray Suelzer. “Of particular importance to most taxpayers is a rule which now treats dispositions of structural components of a building, such as a roof, as a loss transaction. Taxpayers currently depreciating a previously retired component should file an accounting method change to claim a loss deduction or, alternatively, make a retroactive election to place the building in a modified accelerated cost recovery system general asset account.”
The CCH tax briefing can be accessed here.