Tax Alert

Department of Treasury and IRS Release Much-Anticipated Tangible Asset Regulations

(Dec. 30, 2011)

The Internal Revenue Service (IRS) and U.S. Department of Treasury released the much-anticipated tangible asset regulations in temporary and proposed format on Dec. 23, 2011. The regulations replace previously proposed regulations issued in March 2008 and provide guidance for taxpayers on the treatment of costs to acquire, repair, maintain, and improve real and personal tangible property.

The temporary regulations carry over many of the rules and standards from the 2008 proposed regulations, but there are some significant changes. In particular, the application of the capitalization standards to the context of building related expenditures has been revised significantly. Additional provisions related to the application of the disposal rules to building structural components have been included as well.

The regulations generally are effective for tax years beginning on or after Jan. 1, 2012. Issued in temporary form, these regulations are binding on taxpayers. As a result, taxpayers will need to determine whether they are currently in compliance with the new regulations. Per the regulations, changes to comply are changes in accounting methods and generally will require a Section 481(a) adjustment. The IRS has indicated that additional guidance on transition and implementation rules is imminent and will be released as two revenue procedures.

These new regulations likely will affect most taxpayers who own real or personal tangible property. For more information, read a more thorough discussion of the regulations.

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For help determining how the regulations may affect your business, please contact David Strong at 616.752.4251 or, Ed Meyette at 616.752.4234 or, or any Crowe Horwath LLP tax professional.

Under U.S. Treasury rules issued in 2005, we must inform you that any advice in this communication to you was not intended or written to be used, and cannot be used, to avoid any government penalties that may be imposed on a taxpayer.

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David Strong
Managing Director