The deductibility of ordinary and necessary business expenses to arrive at taxable income is granted by Sec 162 of the IRC. Sec.263(a) of the IRC requires the capitalization of the costs of acquiring, producing, and improving tangible property, regardless of the size or the cost incurred. Determining whether expenditures related to tangible property are currently deductible business expenses or non-deductible capital expenditures was driven by conflicting case law, as well as administrative rulings on specific factual situations. The Final Tangible Property Regulations (T.D. 9636 Sept 13, 2013) along with the final MACRS regulations (T.D. 9689 Aug. 14 2014) affects corporations, S corporations, partnerships, LLCs, and individuals filing a Form 1040 with Schedule C, E, or F. The final tangibles regulations affect anyone who incurs amounts to acquire, produce or improve tangible real or personal property in trades or businesses.

The text speaks in generalities about property acquisition, depreciation and disposition. Exposure to the final tangible property regulations is a look into the complexities of the tax law surrounding the simple sounding term “fixed assets”.

Read through the CCH Tax Briefing, December, 2014 (attached) and another article of your choice and comment. I do not expect an in-depth understanding and discussion of the regulations, but rather a conversation about the complexities and overview. Were you aware that this undertaking, which was so many years in the making, had finally resulted in final regs.? Does some of it sound like common sense? Think in terms of an iPad used by a sales person to input orders remotely or an ink jet printer. Do these items have a useful life exceeding 12 months? What about the replacement of HVAC in a commercial building? Would it be expected to have a 39 year life? What about Rev. Proc. 2015-20, which provides an exception to procedures originally provided in Rev. Proc. 2014-16 and Rev. Proc. 2014-54 to adopt the final regulations for certain small business taxpayers?