Abandonment losses
Key considerations for Power & Utilities Executives

August 2013
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Abandonment losses Key considerations for Power & Utilities Executives

At a glance

The tax implications of closing a plant can vary widely depending upon many factors, and thus it is important to thoroughly evaluate the various possibilities before deciding upon a course of action or making any sort of public announcement.

The tax implications of closing a plant can vary widely depending upon many factors. Under the tax code, retirement of property means "the permanent withdrawal of property from use in the trade or business or in the production of income.” Unfortunately, this definition provides little guidance on how to proceed with the retirement of property. For example, there may be unfavorable tax consequences of announcing that you may eventually restart a plant that you intend to close, as the IRS might look to this announcement as evidence that you did not intend to retire it. It is important to thoroughly evaluate the various possibilities before deciding upon a course of action or making any sort of public announcement.