Forthcoming tangible property regulations expected to address several key issues

Washington National Tax Services

In 2008 the IRS issued reproposed regulations under section 263(a) for amounts paid to acquire, produce, or improve tangible property (the "2008 reproposed regulations"). These regulations first had been issued as proposed regulations in August 2006 (the "2006 proposed regulations"). The 2006 proposed regulations contained many provisions that were criticized as complex, not providing certainty, or otherwise overly burdensome to taxpayers.

Since the issuance of the 2008 reproposed regulations, there has been significant IRS activity related to the tax treatment of repairs, including designating repairs as a Tier I issue; issuing an audit technique guide; and including a repairs change in accounting method in the mass automatic change in accounting method Revenue Procedure.

The IRS has received numerous comments and recommendations related to the 2008 reproposed regulations under section 263(a) to improve, clarify, and simplify the rules. The IRS announced recently that the forthcoming regulations anticipated to be issued in the spring of 2011 will be a combination of proposed, temporary, and final rules. Key issues expected to be addressed are discussed in this WNTS Insight.

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