Guidance on Tangible Property Could Spur Controversy, Practitioners Say

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Major new rules (REG-168745-03, T.D. 9564) on whether taxpayers must capitalize—or can deduct—amounts paid to acquire, produce, or improve tangible property contain significant changes and could lead to comments and perhaps controversy in several areas, practitioners tell BNA. In interviews, practitioners from three of the Big Four accounting firms say the rules contain both favorable elements and some that might cause concern for taxpayers. They say one area of major change is a de minimis rule for the treatment of tangible property, such as materials and supplies. Another, practitioners say, is a new, bifurcated approach that calls for taxpayers to “split” buildings into numerous components when determining what must be capitalized. George Manousos, tax partner in the Washington National Tax Services group at PricewaterhouseCoopers, tells BNA that “at first blush, there are clearly some favorable rules,” but says there are still areas that may cause difficulties.

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