Academic journal article Journal of Accountancy

IRS Suspends Repair/capitalization Exams

Academic journal article Journal of Accountancy

IRS Suspends Repair/capitalization Exams

Article excerpt

In March, in a Large Business & Industry (LB&I) Directive (LB&I-4-0312-004), the IRS suspended current field examinations on the repair vs. capitalization issue to permit taxpayers to file accounting method changes under recently issued temporary regulations and revenue procedures.

Taxpayers that are subject to the temporary regulations (T.D. 9564; see Tax Matters coverage March 2012, page 59) are required to file for automatic changes in accounting methods under Rev. Procs. 2012-19 and 2012-20 for tax years beginning after Dec. 31, 2011. The IRS notes in the directive that the revenue procedures waive the scope limitations of Rev. Proc. 2011-14, Section 4.02, for a request to change a method of accounting, which normally apply to a taxpayer under examination, for taxpayers' first or second tax year beginning after Dec. 31, 2011.

The directive applies to the exam activity relating to positions taken on original returns relating to the issues of whether costs incurred to maintain, replace, or improve tangible property must be capitalized under Sec. 263(a) and any correlative issues involving the disposition of structural components of a building or dispositions of tangible depreciable assets (other than a building or its structural components). For examinations of tax years beginning before Jan. 1, 2012, examiners are instructed to discontinue current exam activity and not begin any new activity with regard to these issues. …

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