United States

New LB&I campaign includes the partial disposition election

TAX ALERT  | 

On March 13, 2018 the IRS Large Business and International Division (LB&I) announced five additional compliance campaigns. A notable addition to the LB&I compliance campaigns for tangible property owners relates to the inclusion of the partial disposition election for buildings.

LB&I announced the implementation of its first 13 campaigns on Jan. 31, 2017, and 11 additional campaigns on Nov. 3, 2017. The addition of the partial disposition election for buildings to the LB&I compliance campaigns marks the first direct application of the campaigns to a fixed asset issue under section 168. For additional information on all five of the new campaigns, click here.

The announcement indicates the goal of the campaign related to the partial disposition election for buildings aims to ensure accurate recognition of gain and loss on partial dispositions of buildings, including structure components. 

The announcement instructs taxpayers that to make a partial disposition election, the taxpayer must substantiate: 

  1. a disposition of a portion of a MACRS asset owned by the taxpayer;
  2. the identity of the partially disposed asset;
  3. the placed-in-service date of the partially disposed asset;
  4. the adjusted basis of the disposed portion; and
  5. a reduction of the adjusted basis of the asset by the disposed portion.

Takeaways

Taxpayers must take steps to adequately substantiate the gain or loss on a partial disposition and carefully maintain such records related to the partial disposition.     

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