Proposed/temporary tangible capitalization regulations: High-level overview

December 2011


This WNTS Insight will provide a high-level overview of the recent proposed and temporary regulations (REG - 168745-03, the temporary regulations) issued on Friday, December 23, under section 263(a), Guidance Regarding Deduction and Capitalization of Expenditures Related to Tangible Property. (See WNTS Insight, "IRS releases long-awaited tangible property repair regulations," December 23, 2011.)

Although the temporary regulations adopt many of the principles in the 2008 proposed regulations (the proposed regulations), the temporary regulations create new rules that are significantly different relative to prior law and the proposed regulations.

The temporary regulations generally are effective for tax years beginning on or after January 1, 2012, and generally require a section 481(a) adjustment when a taxpayer makes an accounting method change to comply with the temporary regulations.

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