Impact of the final ‘repair’ regulations on the retail industry

Tax Controversy & Dispute Resolution ()
The IRS and Treasury Department recently released final regulations regarding the deduction and capitalization of expenditures related to tangible property (the ‘final regulations’), as well as re-proposed regulations regarding the disposition of tangible depreciable property (the ‘2013 proposed regulations’). Collectively, these regulations are meant to help taxpayers better distinguish between currently deductible repair and maintenance expenses under Section 162(a) and expenditures that must be capitalized under Section 263(a), and provide them with more guidance regarding dispositions, including partial dispositions. For tax years beginning on or after January 1, 2014, retailers will need to evaluate the impact of these new regulations on their businesses.