We are writing to let you know about an important development that will affect every business, including yours. The IRS has issued long-awaited regulations on the tax treatment of amounts paid to acquire, produce, or improve tangible property. The regulations explain when those payments can be deducted, which confers an immediate tax benefit, and when they must be capitalized.
These final regulations retain many provisions of the temporary regulations that were issued in 2011. However, the final regulations refine and simplify the temporary regulations and add new safe harbor provisions that will help you to nail down expense deductions.
The regulations must be followed for tax years that begin after Dec. 31, 2013—whether a calendar year or a fiscal year, such as a fiscal year beginning July 1, 2014. Taxpayers have the option of applying the final regulations retroactively to the 2012 and 2013 tax years. There’s also a third option to apply the temporary regulations to the 2012 and 2013 tax years.
The regulations are lengthy and complex. Click here to continuing reading a summary that is intended to give an overview of how they treat issues of deduction and capitalization. We would be happy to sit down with you to discuss the regulations at length and see how they will affect your specific business situation.