IRS Issues Guidance on Capitalization of Tangible Property

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IRS unveils more than 250 pages of guidance on the treatment of amounts paid to acquire, produce, or improve tangible property, issuing proposed and temporary rules (REG-168745-03, T.D. 9564) after nearly eight years of work on the issue. The rules address the application of tax code Sections 162(a) and 263(a) to these amounts. IRS says they clarify and expand the standards in the current regulations and provide certain bright-line tests, such as a de minimis rule for certain acquisitions, for applying these standards. The guidance is a follow-up to rules IRS proposed in March 2008 on the treatment of tangible property. It applies to taxable years beginning on or after Jan. 1, 2012.

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