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.
Not all taxpayers had the time to analyze their fixed asset list for missed repair deductions and, therefore, were not able to compute and deduct the amount that would have resulted from this analysis in 2014.
There is now good news for these taxpayers as recently issued Revenue Procedure 2016-29 provides a one-year extension for taxpayers to implement the necessary analysis of the fixed asset list and make the changes and take the deduction in 2015. The extension allows for the filing of an automatic Form 3115 after May 5, 2016 for tax years ending on or after September 30, 2015.
In short, this means that taxpayers who filed zero change 3115s for 2014 tax returns because they did not have time to scrub their depreciation schedules for missed repair deductions should now consider filing another 3115 for the 2015 tax year to claim those missed deductions under the final Tangible Property Regulations. This also applies to those who filed 3115s and claimed some, but not all, missed repair deductions from prior tax years.
In prior articles, we presented a more detailed explanation of the definition of what the changes 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.