KPMG report - Final repair regulations—no action required for 2013 tax year 

July 11:  Taxpayers may—but are not required to—early adopt the final repair regulations for the 2012 or 2013 tax year (for fiscal year taxpayers, the year that begins in 2012 or 2013). There are no elections or method changes that are required for the 2013 tax year.

Alternatively, taxpayer may choose to apply the 2011 temporary regulations for either the 2012 or 2013 tax year. It is not anticipated that many companies would choose this option.

The following discussion serves as a reminder that the final repair regulations are generally effective for tax years beginning on or after January 1, 2014.

Elections - when and how?

For 2014 tax years, the final repair regulations generally require that certain elections be made or that an accounting method change be filed (in certain cases, both will be necessary).

Certain elections are made with an affirmative statement on the tax return, while others are made by reporting gain or loss or claiming depreciation on the return.

Elections are generally irrevocable.

Compliance with certain aspect of the repair regulations will require an accounting method change, generally under the automatic consent procedures.

Common elections, method changes

The following chart provides a high-level summary of the more common elections and method changes under the final repair regulations and the proposed disposition regulations.

Election Method Change
Area of focus Item Election made with affirmative statement Election made by reporting on the return Method change with 481(a) adjustment Method change with limited 481(a)
Acquisition Costs Book de minimis policy X
Materials and supplies X
Election to capitalize & depreciate rotable or temporary spares X
Repairs and Improvements Repairs vs. improvements X
Book conformity election X
Dispositions Partial disposition X
Late partial disposition election X
Complete asset disposition X

KPMG observation

Although action is not required for 2013, it is advisable to consider the additional time that will be required to complete an assessment of changes required or desired and to implement the final repair regulations for the 2014 tax year.

For more information, contact a tax professional with KPMG’s Fixed Asset Services & Cost Segregation practice or with KPMG’s Washington National Tax practice:

Peter Baltmanis

+1 214 840 6756

Lynn Afeman

+1 617 988 1139

Carol Conjura

+1 202 533 3040

Eric Lucas

+1 202 533 3023

James Atkinson

+1 713 319 3190

Colleen O'Connor

+1 202 533 8049

Catherine Fitzpatrick

+1 202 533 3168

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