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Tuesday, November 27, 2012

Final Tangible Property Regulations Incoming


On November 20, 2012, the IRS and Treasury Department issued Notice 2012-73 alerting taxpayers to expect final regulations regarding the deduction and capitalization of expenditures related to tangible property in early 2013. The new regulations are expected to reflect changes from the temporary regulations and will provide further guidance on the tax treatment of amounts paid to produce, acquire, or improve tangible property under IRC Sections 162 and 263(a) and disposition of property subject to Section 168. 

One significant change from previous notices, the final regulations (as well as amending the current temporary regulations) are expected to apply to taxable years beginning on or after January 1, 2014. This allows taxpayers two additional years to transition to the rules set forth in the final regulations. However, taxpayers are permitted to apply the provisions of the final regulations to taxable years beginning on or after January 1, 2012.

The above news is certainly a reflection of the numerous written comments provided by taxpayers to the IRS and Treasury Department who have indicated that the revisions will take into account all comments received, including those requesting relief for small businesses. Given the increased burden these final regulations will have on taxpayers, let us hope some further simplification and practicality accompanies the additional time to implement them.

We will continue to monitor this issue in the upcoming months to assist you in both understanding the final regulations as well as determining the best path to implement them.

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