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Sparring with the IRS: The New (Final?) Repair Regulation Rules Wichita State University

Sparring with the IRS: The New (Final?) Repair Regulation Rules Wichita State University Accounting & Auditing Conference May 19, 2014 Curtis Dean , CPA , MST, CGMA, CFP ® V ice President, Tax Research & Special Projects Allen, Gibbs & Houlik, L.C. .

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Sparring with the IRS: The New (Final?) Repair Regulation Rules Wichita State University

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  1. Sparring with the IRS: • The New (Final?) Repair Regulation Rules • Wichita State University • Accounting & Auditing Conference • May 19, 2014 • Curtis Dean, CPA, MST, CGMA, CFP® • Vice President, Tax Research & Special Projects • Allen, Gibbs & Houlik, L.C.

  2. SPAR – Select Property Acquisitions or Repairs

  3. Acquisition/production of tangible property • Capitalize to basis of acquired/produced tangible property: • Amount paid to acquire/produce • Costs to defend or perfect title • Inherently facilitative costs • Exceptions: • De minimis rule • Materials and supplies deductible under Reg. section 1.162-3T, unless elect to capitalize

  4. Repairs • Units of Property (UOP) • Buildings • Componentization • Structural Part

  5. Componentization • What is componentization? • Did it exist before? • If so, when did it leave? • Is it back?

  6. Repairs • Units of Property (UOP) • Personal Property • Functional interdependence standard • Plant property – discrete and major function

  7. B. A. R. rules

  8. B. A. R. Improvement Standards or or

  9. Betterment = capitalize

  10. Adaptation = capitalize

  11. Restoration = capitalize

  12. Restoration = capitalize

  13. Automatic Accounting Method Changes • Each of these on separate Forms 3115 • #7 – Impermissible to permissible depreciation • #21 – Removal costs • #196 – Late partial disposition election

  14. Automatic Accounting Method Changes • All of these on one Form 3115 • #184 to #193 covering: • Units of Property • Materials and supplies • Repairs and maintenance • Transaction costs • Etc.

  15. Key Annual Elections • Statements required: • De minimis rule safe harbor • Capitalize all repair and maintenance costs • Small Taxpayer Safe Harbor

  16. Key Annual Elections • No Statements required: • Capitalize and depreciate rotable spare parts • Partial Disposition Election

  17. Dealing with the IRS • Circular 230 • Signing returns • Penalty assessment

  18. Circular 230 Disclaimer • Any advice contained in this material is not intended or written to be tax advice, and cannot be relied upon as such, nor can it be used for the purpose of avoiding tax penalties that may be imposed by the IRS or states, or promoting, marketing or recommending to another party any transaction or matter addressed herein. • These materials should not be used as a substitute for consultation with competent professional advisors. Before making any decision or taking any action, you should obtain appropriate professional guidance.

  19. Winners by Split Decision • Questions?

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