Is an expenditure associated with tangible property deductible or must it be capitalized? Learn the rules for the treatment of amounts paid to acquire, produce, repair, or improve the tangible property and proper accounting for dispositions of property subject to depreciation. The capitalization regulations provide objective standards and bright-line rules intended to simplify compliance with the capitalization provisions contained in Section 263(a) of the Internal Revenue Code. This program highlights issues involving what must be capitalized, what can be treated as a repair, and items related to the depreciation of fixed assets.
Apply capitalization rules in general Identify exceptions for materials and supplies Account for costs associated with rotatable spare parts Apply "de minimis" rules for entities with and without an "applicable financial statement" Determine amounts considered "spent to acquire tangible property" Identify improvements to tangible property Unit of property definitions, including special rules applicable to real property Leased property rules for lessees and lessors Routine maintenance safe harbors Determine what is a "betterment" of property Recognize and capture costs of restoration of property Definition of adapting a property to a new or different use Determining property that qualifies for Section 179 expensing treatment Applying cost recovery rules
General rules for expensing vs. capitalizing Capital expenditures Payments to acquire assets Depreciation and section 179 election Payments to improve property Provisions that override capitalization rules Repairs Accounting methods
CPAs, accountants, and financial professionals who advise clients and/or prepare tax returns dealing with expenditures to repair, improve, or acquire tangible property. May also be suitable for public practice.