The recently released Rev. Proc. 2016-29 details new procedures for automatic accounting method changes (as discussed in a previous KBKG Tax Insight blog). The update effectively provides a one-year IRS extension for taxpayers to implement many portions of the Tangible Property Regulations (TPR).
Most tax professionals know by now that under the Protecting Americans from Tax Hikes (PATH) Act of 2015, the rules for eligibility as Qualified Leasehold Improvements (QLI), Qualified Restaurant Property, and Qualified Retail Property with a 15 year recovery period are now permanent. Additionally, the PATH Act has extended, modified, and will eventually phase out bonus depreciation. However, one of the least discussed provisions that will have a broad impact on all real estate owners is a brand new category of building improvements that significantly increases the likelihood that real property capital expenditures are eligible for bonus depreciation.
Architecture and engineering firms may want to take another look at the oft-forgotten Research & Development (R&D) Tax Credit. Many may be eligible for federal and state research credits without realizing it. Historically, the R&D Tax Credit was geared to only benefit large companies, mostly in the manufacturing, software, high-tech, and pharmaceutical industries. However, recent changes now allow designers of buildings and systems to also claim this credit.
KBKG Video: Using Cost Segregation with Estate Planning
In an article recently published by the AICPA, Using Cost Segregation in Estate Planning, our subject matter expert, Gian Pazzia, CCSP, details the ability to create permanent tax savings after a death occurs through an often overlooked aspect of the Read more
On November 20, 2015, the IRS released Revenue Procedure 2015-56, providing certain “qualified tax payers” engaged in the trade or business of operating a retail establishment or a restaurant a safe harbor accounting method for costs incurred related to remodeling and refreshing of their “qualified buildings.” “Qualified taxpayers” include those conducting activities within NAICS codes 44 or 45, but specifically exclude motor vehicle dealers and gas stations, among others.
KBKG Insight: The Tangible Property Regulations introduced the concept of “Unit of Property” and “building systems” along with the requirement to analyze capital expenditures related to a betterment, adaptation, or restoration of the system rather than the entire building as a Unit of Property. Retailers and restaurateurs have argued that refreshing type activities often require work to be performed on the building systems Read more
The IRS has recently written on their website that eligible taxpayers may elect out of Rev. Proc. 2015-20 by filing a statement with their 2014 tax returns indicating their qualifying trade or business is not applying the simplified procedure of Rev. Proc. 2015-20. Qualified small business taxpayers who accept the relief of Rev. Proc. 2015-20 automatically forfeit any opportunity to retroactively correct capitalized expenditures that should have been deducted in years prior to 2014.
A qualified “small business taxpayer” for this purpose is any business with total assets of less than $10 million or less than $10 million in average annual gross receipts (from prior three taxable years). Read more
Published in BNA Tax Report.
In August, the IRS issued final regulations on dispositions of tangible depreciable property under Sec. 168 (T.D. 9689) that are generally effective for taxable years beginning on or after January 1, 2014. Taxpayers can realize significant benefits from these regulations by identifying building components that have been replaced or demolished in current or prior years.
One notable change from the proposed regulations relates to “reasonable” methods taxpayers may use to determine the basis of a disposed asset component. – Read more at http://www.kbkg.com/tax-insight/new-dispositions-tangible-property-regulations Read more
On September 18, the IRS released an advanced copy of Rev. Proc. 2014-54, which provides guidance on certain changes in method of accounting for dispositions of tangible depreciable property. One of the most notable changes in this 93-page document is that the time for making a late partial disposition election has been extended for one year.
Background: A partial disposition election allows taxpayers to treat the retirement of structural components of a building (e.g., a roof) as a disposition, thus enabling the taxpayer to claim a loss on the remaining cost basis of that component. Whereas a partial disposition election covers dispositions in the current tax year, a late partial disposition election allows taxpayers to go back in prior years and remove previously retired Read more
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