By: Heidi Henderson
“If there was a ever a year to extend your return…this is it.”
Over the past six months, the IRS has finalized the tangible property regulations in relation to the acquisition, repair and/or disposition of tangible property (T-Regs), along with further guidance. This guidance has clarified partial disposition elections (Revenue Procedure 014-17) along with automatic consents for accounting method changes and elections under the final regs.
One of the key areas of opportunity for taxpayers lies in the ability to write off the undepreciated basis of “ghost assets”, or assets which remain on a taxpayers books but have physically been disposed of, removed, or are no longer in service.
Historically, taxpayers were required to continue depreciating a unit of property or asset even after it was removed or destroyed. However, the final t-regs address a taxpayer's ability to claim a loss on those components via partial disposition elections. This allows for an immediate write-off and the accurate accounting of building components and machinery in accordance with actual activities.
Why is there a limited window of opportunity? The temporary regulations effective for tax years 2012 and 2013 allow for retroactive application of the partial disposition election. Thereby allowing taxpayers to historically identify disposed assets with undepreciated basis and file an accounting method change on their 2013 tax return to write off that remaining basis.
The final regulations also allow for the disposition of assets when removed, however, the election is allowed only in the current year, on a timely filed return. Therefore, many taxpayers have the opportunity on their 2013 tax return to make a one-time adjustment to accurately reflect the status of their tangible property and to comply with these tangible property regulations.
If you feel that this may benefit you or you have additional questions, please feel free to contact Heidi Henderson at Engineered Tax Services at (801) 689-3232 or email at [email protected]
HEIDI HENDERSON | Director of Business Development
Heidi worked as a staff accountant for over 15 years with multiple companies in the Real Estate Finance, Development, Construction, and Commercial Property Industries. She later decided on a career change to embrace corporate marketing, and found her niche with Engineered Tax Services as their VP of Marketing and Business Development.
Her knowledge of construction and development processes along with accounting principles were an ideal fit for Specialty Tax Incentives, which entail a thorough knowledge of Construction Tax Planning, Cost Segregation, Abandonment, Energy Tax Incentives, and an understanding of a properties composition. She has been able to effectively communicate these complex strategies in an understandable, and applicable way to ETS clients across the country.
