Treasury Issues Final Regulations on Repairs and Maintenance

On September 13, 2013, the IRS and Treasury Department released the final regulations (T.D. 9636) on repairs and maintenance providing guidance for the treatment of expenditures incurred in acquiring, producing, or improving tangible assets (commonly known as the repair and maintenance regulations). These regulations will be published in the Federal Register on September 19th, 2013. On that same day, the Treasury will publish new proposed regulations (REG-110732-13) on dispositions of property depreciable under the Modified Accelerated Cost Recovery System (MACRS). The proposed regulations contain many of the same property disposition rules included in the 2011 temporary regulations. However, the proposed regulations revise the rules on determining the asset disposed of and the qualifying disposition of an asset (and partial asset) in a general asset account. In addition, the IRS notes that it had received many comments on the prior proposed and temporary regulations, most of which it addressed in the issuing rules. Examples of the significant changes include: 1. Adoption of a routine safe harbor for maintenance has been expanded to buildings 2. Revised and simplified de minimis safe harbor for expensing small assets 3. Addition of a safe harbor for small taxpayers to the rules governing improvements to tangible property 4. Refines several of the criteria for defining betterments and restorations to tangible property The new regulations affect all taxpayers that acquire, produce, or improve tangible property and apply to tax years beginning on or after January 1, 2014. Since the final regulations do not finalize or remove the temporary regulations governing dispositions under section 168, taxpayers can continue to apply the rules in Temp. Regs. Sec. 1.168(i)-1T and 1.168(i)-8T for tax years beginning on or after January 1, 2012, and before Jan. 1, 2014. The IRS requests comments on the proposed regulations within 60 days of their publication in the Federal Register on September 19th, and a public hearing has been scheduled for December 19th.

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