There may be tax savings opportunities for owners of commercial real estate and other tangible property.
The new tangible property regulations are complex and difficult to implement and comply with. Facts and circumstances of each business situation will need to be analyzed to determine the proper treatment of almost all business expenditures for materials and supplies, repairs and maintenance, and asset purchases and related depreciation deductions.
Your business should elevate the importance and time restrictions in implementing these rules to assure proper compliance with the regulations and to identify potential tax savings and benefits.
These tangible property regulations are the most dramatic changes in tax law to affect businesses since the overhaul of the Internal Revenue Code in 1986. They apply to all forms of business, whether a “C” corporation, an “S” corporation, a partnership, an LLC, a sole proprietorship (Schedule C on individual return), or a rental (Schedule E on individual return). Non-profit organizations and some Trusts may also be affected.
Small taxpayers (defined as total assets of less than $10 million as of January 1, 2014 or average annual gross receipts of $10 million or less for the prior three taxable years) should be aware that they may be exempt from compliance with the new Tangible Property Regulations. It is important to note, however, that small businesses must still implement the regulations and therefore it may still be in their best interest to comply and file the necessary forms unless they have immaterial fixed assets. Filing the forms may protect small companies and provide them with an opportunity to still qualify for the related deductions
Your accountant must carefully evaluate the facts and circumstances of your business situation to determine the proper treatment of all business expenditures for materials and supplies, repairs and maintenance, and asset purchases along with the impact on subsequent depreciation.
Needless to say, these regulations are quite complex and require timely attention.