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When preparing calendar year 2014 income tax returns, there was an emphasis focused on the new Tangible Property Regulations (TPRs). Taxpayers were encouraged to analyze depreciation schedules to locate items that were not required to be capitalized under the new regulations for the current and all prior years. A form 3115 was required to make the changes specified which in many cases resulted in a significant deduction for items that were capitalized under the old rules.
In the summer of 2016, these regulations were extended to include 2015 tax returns. There has now been an additional extension put in place for 2016 tax returns.
This means that taxpayers can review their depreciation schedules once again to determine if they contain any items that would be considered repairs under the Tangible Property Regulations. If these exist, the taxpayer can file a form 3115 with their 2016 tax return to allow them to expense the remaining book value of these items as repairs.
Over the last few years, we have seen many taxpayers take advantage of these regulations and it has resulted in a fairly substantial tax savings. Many hope that with the new Presidential administration, tax rates might decrease in 2017. Because of this, accelerating deductions into 2016 has been our focus over the last several months. This would be one area that might allow you additional deductions you might not have already considered.
In prior articles, we presented a more detailed explanation of the definition of what the changes are to the TPRs and in particular what qualified as an "improvement" with respect to the RAB criteria (Restoration, Adaptation or Betterment of the property). If you have any questions or would like copies of previous articles, please contact your RINA representative.