Daily Tax Update - December 27, 2011: IRS Issues Temporary, Proposed Rules Relating to Repairs of Tangible Property

TREASURY, IRS ISSUE TEMPORARY, PROPOSED RULES RELATING TO REPAIRS OF TANGIBLE PROPERTY: On December 23, the Treasury Department issued guidance withdrawing the 2008 re-proposed regulations on capitalization of tangible assets -- the so-called repair regs -- and proposing for a third time in nearly five and a half years new regulations designed to reduce uncertainty and controversy regarding section 263(a).

  • The regs were also released as temporary regs, with the new rules generally effective for tax years beginning on or after January 1, 2012. The temporary regulations clarify and expand the standards in the current regulations under sections 162(a) and 263(a) and provide certain bright-line tests (for example, a de minimis rule for certain acquisitions) for applying these standards. The temporary regulations also provide guidance under section 168 regarding the accounting for, and dispositions of, property subject to section 168. The temporary regulations also amend the general asset account regulations. The temporary regulations will affect all taxpayers that acquire, produce, or improve tangible property. These regulations are effective on January 1, 2012.
  • The regs can be accessed via:
    http://www.gpo.gov/fdsys/pkg/FR-2011-12-27/pdf/2011-32024.pdf
    http://www.gpo.gov/fdsys/pkg/FR-2011-12-27/pdf/2011-32246.pdf
  • For additional information, contact Philip R. West - pwest@steptoe.com or Aaron P. Nocjar - anocjar@steptoe.com

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