IRS Repair Regulations Can Be Taxpayer Friendly; Find Out More

The IRS issued final regulations to clarify rules related to the acquisition, production, or improvement of tangible property in September 2013.  Anders has blogged in great detail about various aspects of the new regulations.  One of the provisions we’ve addressed is the requirement for the taxpayer to have a written capitalization policy. More likely than not, they will also need to notify the IRS of changes of accounting method and/or file various elections along with their 2014 tax return.  To help our clients better understand IRS repair regulations, the Anders repair regulations team has developed a cheat sheet you can find through this link.

You Read that Right

Despite the additional compliance requirements, Anders wants to make it clear that these regulations can be taxpayer friendly.  You read that right, the IRS repair regulations can be taxpayer friendly! As a matter of fact, over the past several months, we’ve guided multiple clients through formal repair regulations studies resulting in a windfall of tax deductions.

How is that Possible? 

One example is that the repair regulations allow taxpayers to make a partial asset disposition election.  This election gives taxpayers an opportunity to clean up their fixed asset schedules by writing off (and deducting the remaining book value of) assets which are on the books but were replaced in prior years and are still being depreciated over their remaining useful lives.

This election is particularly powerful for real estate owners (large and small).  Taxpayers with buildings on their fixed asset schedule which have had roof, HVAC, and/or other large replacements are good candidates for this election.  The ability to use this election to retroactively write-off prior year fixed asset additions expires after the filing of 2014 tax returns.

After the 2014 tax year, only current year partial asset dispositions will be allowed.  2014 tax returns can be extended until September 15, 2015 to allow taxpayers additional time to take advantage of the potentially huge tax savings presented by this portion of the repair regulations.

Your ability to benefit from a repair regulation study is easy to determine.  Generally speaking, all that is needed is a copy of your fixed asset schedule and detail from your repair and maintenance general ledger account(s).  We can conduct a free initial analysis to determine if a repair regulations study would be beneficial to your company.

Contact your Anders advisor today to learn more about how a repair regulations study can benefit you.