Tax Accounting Corner: temporary tangible property regulations

The Treasury and IRS issued T.D. 9564, regarding the deduction and capitalization of expenditures related to tangible property. The tangible property regulations primarily provide guidance for improvements to tangible property, the acquisition of tangible property, materials and supplies, and accounting and disposition rules for property subject to the modified accelerated cost recovery system (MACRS) in Section 168. Under the temporary regulations, taxpayers generally must capitalize amounts paid to facilitate the sale of property. If the taxpayer makes an election to apply the de minimis rule to any material or supply, such property is not treated as a material or supply under Temp. Reg. 1.162-3T. Temporary regulations do not allow for loss recognition on the disposition of an asset from a general asset account. Rather, the unadjusted basis and depreciation reserves of the general asset account are not affected and are continued to be depreciated as a single asset. In the case of a technical termination of a partnership under Section 708(b)(1)(B), the terminated partnership is required to apply specific partnership termination rules instead of the general asset account disposition rules.