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Tax Alert: New IRS Tangible Assets Regulations


March 5, 2014

Attention: All Clients

As we noted in our November 19, 2013 Tax alert, the IRS issued the Final Tangible Property Repair Regulations, which allow taxpayers to now have the opportunity to expense “di mimimis” asset purchases rather than capitalizing and depreciating them over several years.  The “safe harbor” amount that may be expenses was increased to $5,000 per item. 

In our November Alert, we reported that this change would apparently not require the filing of a Form 3115 as a Change in Accounting Method. Well, the IRS has recently issued Revenue Procedure 2014-17 indicating that a Change in Accounting Method, Form 3115, should be filed.  This Revenue Procedure is effective February 28, 2014. The IRS has facilitated this filing by assigning this particular issue a “Designated Automatic Accounting Method Change Number” (DCN).  This means that the taxpayer just needs to complete the Form 3115, with a description of the change and with the DCN of 175. This change is then automatically approved. 

You should consider having this change in accounting method Form 3115 filed.  Also, remember that a formal, written policy is required that states the threshold under which you will be expensing items rather than capitalizing them, as you may establish a threshold that is less than the $5,000 amount noted in the new regulations.