While many of us were working long hours in mid-September to wrap up the 2012 tax filings for our clients, the IRS was busy as well. On September 13, 2013, the IRS issued the final, revised tangible property regulations TD 9636. In doing so, the taxing authorities have provided clarity for taxpayers in many areas surrounding the treatment of capital expenditures.

These regulations govern the treatment of expenditures incurred in acquiring, producing, or improving tangible assets, including rules on determining whether costs related to tangible property are deductible repairs or capital improvements. The regulations have broad application – they affect all taxpayers that acquire, produce, or improve tangible property.

History

By issuing these regulations, the IRS has sought to resolve the capitalization vs. expense conundrum that has befuddled taxpayers for years. These regulations have followed a tortuous path—the original proposed regulations from 2006 were withdrawn in 2008 after receiving a negative reception, and new proposed regulations were issued. Then in 2011 the 2008 proposed regulations were withdrawn and new regulations were issued in temporary and proposed forms. Those regulations were originally intended to be effective in 2012, but the difficulty of adopting the Read More