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What is a Capital Expenditure?

January 1, 2015

IRS Changes Rules on Capital Expenditures Effective January 1, 2014!

The IRS published important and long awaited temporary regulations on December 23, 2011, that provide guidance on the application of sections 162(a) and 263(a) of the Internal Revenue Code that define what is a repair and currently deductible versus what must be capitalized and depreciated over its prescribed depreciable life. These new temporary regulations replace proposed regulations which were issued in 2008. Although they are called temporary regulations, they are the rules all taxpayers must abide by. The effective date of the temporary regulations was originally January 1, 2012; the IRS has changed the effective date to January 1, 2014.

These regulations are quite complicated and will require considerable research into your past practices. Do not hesitate! Begin this process now!

The temporary regulations are quite lengthy, detailed, and somewhat confusing — but they included many examples which can help you better understand the Service’s position.

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