The Service still dances around the big issue that Rev. Proc. 2015-56 brought to the world's attention, (though it has been discussed among practitioners for quite some time): How does section 263A work with section 263(a)? Is it an independent capitalization provision whose "installation" and "construction" rules trump the rules for repairs under the TPR? If so, how and when?
I expect this issue to be addressed at the ABA Tax Section Midyear Meeting in a couple of weeks, but, given the lack of even informal guidance from the Service, most taxpayers and practitioners will be left wondering how the rules work for some time. Speaking of the ABA Tax Section, the Capital Recovery & Leasing committee hosted a wonderful panel on this issue last fall at the ABA Tax Section Joint Fall Meeting.Unfortunately, the panel did not resolve how the two Code section interact. My impression was that, if taxpayer-favorable guidance is not forthcoming, this issue will be litigated sooner rather than later.
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