Final Guidance Issued Finalizing & Extending Disposition Elections

The IRS issued final regulations September 18, 2014 relating to disposition of tangible depreciable property.


In 93 pages of guidance, Rev. Proc. 2014-54 sets forth the procedures by which a taxpayer may obtain the automatic consent of the Commissioner to change to the methods of accounting concerning the rules for general asset accounts, accounting for property depreciated as MACRS property, and for disposition of MACRS property.

The recent change also allows a late partial disposition election to be treated as a change in method of accounting for a limited period of time, through January 1, 2015 (previously only available for years January 1, 2012-2013.) allowing taxpayers to make a late partial disposition now through the 2014 tax year.

The revenue procedure also modifies section 10.11 of the Appendix of Rev. Proc. 2011-14 regarding a change to the method of accounting for amounts paid to acquire, produce, or improve tangible property, and certain changes in method of accounting for dispositions of tangible depreciable property.


Summary

Rev. Proc. 2014-54 modifies the Appendix of Rev. Proc. 2011-14 by:

  • Removing section 6.19 (lessor improvements abandoned at termination of lease) because it is obsolete
  • Revising section 6.29 (disposition of a building or structural component) to provide that this measure does not apply to any demolition of a structure to which section 280B and Reg. section 1.280B-1 apply
  • Revising sections 6.32 (general asset account elections), 6.34 (revocation of a general asset account election), and 6.35 (partial dispositions of tangible depreciable assets to which the IRS’s adjustment pertains) to allow these changes in method of accounting to be made under Reg. section 1.168(i)-1 or 1.168(i)-8
  • Revising section 6.33 (late partial disposition election) to allow a late partial disposition election under Reg. section 1.168(i)-8 to be treated as a change in method of accounting for a limited period of time
  • Revising section 6.37 (permissible to permissible method of accounting for depreciation of MACRS property) to provide additional changes in method of accounting that are consistent with Reg. section 1.168(i)-1 or 1.168(i)-8
  • Revising section 10.11 (tangible property) to clarify that this section of the Appendix does not apply to amounts paid or incurred for certain materials and supplies that the taxpayer has elected to capitalize and depreciate under Reg. section 1.162-3(d) or 1.162-3T(d)
  • Modifying the Appendix of Rev. Proc. 2011-14 by adding sections 6.38 through 6.40 to provide additional changes in method of accounting that are consistent with Reg. section 1.168(i)-1 or 1.168(i)-8
  • Providing charts that summarize the changes in methods of accounting that may be made under Rev. Proc. 2011-14 for dispositions of MACRS property

Learn more about how disposition studies and the tangible property regulations can benefit you by visit Engineered Tax Services here. Through a thorough analysis of your expenses for repairs and maintenance, ETS can help you reduce your tax liability and improve cash flow by properly reclassifying these expenditures.

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