Kevin Jerry

materials and supplies

How do the Final Tangibles Regulations Change Deducting Materials and Supplies?

Generally, the final tangibles regulations don’t change the rules for deducting materials and supplies. The final tangibles regulations use existing court cases to decide on the exact definition and treatment of materials and supplies but added some safe harbors to provide clarification. Unfortunately, clarification from the IRS can sometimes just further confuse everyone. Materials and …

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Why Do Some Cost Segregation Firms Take So Long to Finish a Study?

Behind the Scenes of a Cost Segregation Firm Nothing is as frustrating as contracting with a cost segregation firm to help you reduce taxes and then waiting for six, eight, or even twelve weeks to complete the study. While waiting, your CPA tells you your taxes have been completed, but the cost segregation study delays …

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How to Fully Take Advantage of the De minimis Safe Harbor

De minimis Safe Harbor: An Administrative Convenience for the Service and the Taxpayer The Tangible Property Regulations under §263a provide three safe harbors designed to help small and large taxpayers avoid the Regulations’ complex and sometimes confusing nuances. These Regulations determine whether expenditures spent on assets currently in service must be expensed or capitalized.  The …

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Looking at Investing in a Gas Station or Convenience Store? You must read this. 

Gas stations and convenience store (c-store) properties that qualify as a ‘retail motor fuel outlet’ can be depreciated over fifteen years. The standard depreciation life for a commercial property is 39 years. However, the Tax Cuts and Jobs Act passed in 2017 (TCJA) allows for 100% bonus depreciation of qualified property with a recovery period …

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Frequently Asked Questions Regarding Capitalization Versus Expense

What you should know about the Tangible Property Regulations 1. What exactly are the tangible property regulations? §162 of the Internal Revenue Code allows you to deduct all the standard and necessary expenses you experience during the taxable year. This includes the costs of materials and supplies, repairs, and general maintenance. The opposite of §162 …

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What is a Negative 481a Adjustment, and How Do I Get One?

When a tax method change occurs, whether it is from cost segregation, the Tangible Property Regulations, or any other tax method changes (for which the cutoff method cannot be used), a 481a adjustment must be used. Suppose income for any taxable year is under a different method of accounting from the method used in the …

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The Most Overlooked Tax Savings Opportunity for Building and Residential Rental Owners

Routine Maintenance Safe Harbor Building owners! Under the Tangible Property Regulations, passed in 2014, you are not required to capitalize as an improvement or betterment, which means you can expense amounts that meet the following criteria: Amounts paid for recurring activities which keep the property in its ordinarily efficient operating condition, AND you reasonably expect …

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How do I Decide Whether to Expense or Depreciate Expenditures on my Building?

Have the Tangible Property Regulations changed the rules for determining whether an expenditure is a deductible repair or a capital improvement? The Tangible Property Regulations put existing case law and prior tax regulations into a structure to help you determine whether an expenditure is deductible or must be capitalized because it’s a major improvement, restoration, …

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What is a Unit of Property?

The Unit of Property (UOP) concept is not new, but the rules are new to The Tangible Property Regulations under § 1.263(a). In the past, the regulations did not define property for the purposes of determining whether an expenditure after an asset is placed into service adds value to the property, extends the useful life …

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