The question of whether an expenditure is currently deductible (e.g., as repairs or materials and supplies) or whether it should be capitalized has been a continuing source of controversy between the Internal Revenue Service (IRS) and taxpayers.
In an attempt to aid taxpayers in distinguishing between capital expenditures and deductible business expenses, the IRS has issued final regulations under Code Sections 162(a) and 263(a). The final regulations replace temporary regulations under Code Sections 162(a) and 263(a), and also affect rules related to accounting for and disposing of depreciable property under Code Section 167.
The final regulations are effective for tax years beginning on or after Jan. 1, 2014. It is expected that nearly all taxpayers will be impacted by these new rules.
KSM is reviewing the new regulations and will be providing guidance to help clients understand these new rules. In the meantime, please contact your KSM advisor if you have specific questions.