United States

IRS releases first component of tangible property transition guidance


The IRS has released the first of two revenue procedures (Rev. Proc. 2014-16) providing transitional guidance under the final (and re-proposed) tangible property regulations. This first revenue procedure provides guidance on complying with the final tangible property regulations covering the treatment of materials and supplies and costs to acquire, maintain and improve tangible property. Rev. Proc. 2014-16 provides automatic method change procedures to adopt the final regulations (and temporary regulations issued in 2011) and supersedes Rev. Proc. 2012-19. 

The IRS has not yet released updated transitional guidance under the re-proposed disposition regulations. It is expected that such guidance will be issued within the next month and supersede Rev. Proc. 2012-20. 

The final regulations are generally effective for tax years beginning on or after Jan. 1, 2014, or, where applicable, to amounts paid or incurred after Jan. 1, 2014. As has been communicated in prior alerts, taxpayers have the option of early adopting portions of the temporary or final regulations for taxable years beginning on or after Jan. 1, 2012.

In the coming days, RSM will issue an additional alert with preliminary observations regarding the revenue procedure and a detailed analysis of and insights on the automatic method change procedures.

After the release of the second revenue procedure, RSM will be hosting a webcast on the transitional guidance. The webcast will provide an in-depth analysis of both revenue procedures  and address any immediate action taxpayers should consider taking as a result of the accounting method change procedures. For insight on the final regulations, see the first, second and third articles in the four-part series on the tangible property regulations.

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