Capitalization Regs Reproposed


Rather than finalize 18-month-old proposed regulations on capitalization of tangible assets, the Service withdrew the 2006 proposed regulations and reproposed them in revised form March 10. The regulations are intended to better distinguish between repair or maintenance on the one hand versus improvements and provide a standard for “betterment or restoration” of property. The new version preserved many elements from the 2006 release and followed the same general plan. However, it introduced several new rules that took their cue from public commentary on the earlier release, such as a $100 de minimis rule for material and supplies, as well as a safe harbor for routine maintenance. The new proposed regulations (REG-168745-03) also provide that property with an economic useful life of 12 months or less will be considered material or supplies, in harmony with depreciable asset rules of Treas. Reg. § 1.167(a)-1(b). Also, amounts paid to adapt property to a new or different use are now removed from the category of property improvements that materially increase the property’s value and are treated separately.

SPONSORED REPORT

Solving the lease accounting challenge

The challenges of the new lease accounting standard have been pervasive to say the least. In this free, independently-written report, you'll learn effective adoption strategies as well as resources for easing the transition to the new standard.

FEATURE

Tackling TCJA changes this tax season

Return preparers must be ready for how the Tax Cuts and Jobs Act has modified many common features of individual and business returns.