Opportunities Await under IRS’ Rewrite of the Rules

For Expensing versus Capitalization

Late in 2011, the IRS issued new regulations affecting virtually every taxpayer that acquires, produces or improves tangible property. The rules set forth certain bright-line tests that allow for immediate deduction of certain costs instead of recovering them through depreciation over time.

Some of the key areas addressed by the regulations include:

  • Definition of "materials and supplies," including requirements for currently deducting them and an elective de minimis method for handling the same.
  • New rules on how to treat repairs including a new safe harbor for "routine maintenance."
  • New rules for what constitutes a "unit of production"(UOP) for capitalization purposes.
  • Guidance on how landlord and tenants must capitalize expenditures related to leased buildings.

We will be analyzing these regulations over the coming weeks and will provide you additional guidance and ideas on how to maximize the tax benefits for your business.

In the meantime, should you have any questions or would like more insight on the new rules, please contact your Meaden & Moore representative or Pete DeMarco at (216) 241-3272 or pdemarco@meadenmoore.com.