AICPA Raises Concerns with IRS Capitalization Rules

Recently the Internal Revenue Service proposed temporary regulations governing the deduction and capitalization of tangible property expenditures that would be unnecessarily complex and burdensome for many taxpayers. According to Patricia Thompson, chair of the Tax Executive Committee of the American Institute of CPAs, “the AICPA is concerned that the overall approach in the temporary regulations relies too heavily of a ‘facts and circumstances’ based approach and contains too few bright-life tests and safe harbors to alleviate administrative burden and complexity.”

The AICPA recommends that the IRS should provide illustrated examples to guide taxpayers on the interrelationship of some of the temporary regulations. Thompson believes providing examples would “enable taxpayers to avoid unintentional missed elections in their efforts to comply with the regulations.” The letter also provides recommendations on the treatment of improvements, as well as materials and supplies under the temporary regulations.

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