IRS Releases Revised Audit Technique Guide for Capitalization of Tangible Property

The IRS has issued a revised 202 page Audit Technique Guide for Capitalization of Tangible Property that is meant to outline what agents should do in an examination when looking at the applying the regulations that took effect for tax years beginning on or after January 1, 2014 under IRC §263(a).

The Chapters found in the Guide are:

  • Examination of Tangible Property
  • Compliance Considerations
  • Unit of Property
  • ·       Amounts Paid to Acquire or Produce Property
  • ·       De Minimis Safe Harbor
  • ·       Improvement Rules – Betterments
  • ·       Improvement Rules – Restorations
  • ·       Improvement Rules – New or Different Use
  • ·       Safe Harbors – Special Rules – Other Provisions
  • ·       Materials and Supplies
  • ·       Leased Property
  • ·       Disposition Concepts and MACRS Accounting Rules
  • ·       Dispositions in General
  • ·       MACRS Disposition Rules
  • ·       General Asset Account Rules
  • ·       Accounting Method Changes
  • ·       Accounting Method Changes – Depreciation and Dispositions

As always, the Audit Guide provides a primer on the issues involved in the area, but it does so from the IRS’s perspective.  As well, the issuance of the Guide suggests that the IRS may be getting ready to start looking into this issue again.

Advisers should consider reviewing the Guide to determine what issues, if any, might exist for their clients should they face an examination on these issues.  The Guide does specifically advise agents on steps to take to examine the Form 3115 that was filed (if any), as well as determining if a Form 3115 should have been filed but was not.  The agent is also advised to confirm the calculation of the §481(a) adjustment.