IRS issues guidance related to final "repairs" regulations and delay of effective date

Washington National Tax Services

The IRS on November 20 issued Notice 2012-73, alerting taxpayers that final regulations regarding deduction and capitalization of expenditures related to tangible property (the final repairs regulations) are expected to be released in 2013. The Notice states that the IRS and Treasury Department anticipate that the final repairs regulations will contain changes from the temporary regulations issued on December 23, 2011 (the temporary repairs regulations).

The Notice also states that the final repairs regulations will be effective for tax years beginning on or after January 1, 2014. Taxpayers will be permitted to apply the temporary repairs regulations (the effective date of which will be changed to tax years beginning on or after January 1, 2014), or the final repairs regulations, for tax years beginning on or after January 1, 2012, and before the applicability date of the final regulations.

Observation: The delay in the effective date of the temporary repairs regulations until tax years beginning on or after January 1, 2014, with the possibility of early adoption in tax years beginning on or after January 1, 2012, is a significant change in the temporary repairs regulations' effective date. This change will allow taxpayers to early adopt favorable portions of the temporary repairs regulations and will allow additional time to evaluate the impact of the temporary repairs regulations and to develop an implementation plan.



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