Wednesday, January 20, 2016

Final thoughts on Liveblogging the IRS TPR Webinar

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.

Even More IRS TPR Liveblogging

IRS is now clarifying what most of us took for a mistake in an answer by an IRS presenter at the previous presentation of this webinar. Shingles could be a capitalizable restoration or betterment in certain circumstances. But the replacement of just the shingles often would be a repair.

More liveblogging TPR Webinar

My first question gets answered re: RP 2015-20 and its presumptive use.  Merrill Feldstein says a post-2014 method change would be nonautomatic (until the expiration of the 5-year item eligibility rule) and that only 2014 and later costs would qualify.

To return to the possibility of the presumption being rebuttable, I think that many taxpayers will have a tough time demonstrating that the presumption does not apply. I have thoughts on how to do so, but can't cover while liveblogging.

Liveblogging the IRS TPR Webinar (Pt 3)

Jill El-Bendary of SBSE states that inventoriable items treated as nonincidental materials and supplies under Rev. Proc. 2002-28 are not eligible for the DMSH. The same applies to Rev. Proc. 2001-10.

Liveblogging IRS TPR Webinar (pt 2)

Merrill Feldstein of Chief Counsel says that taxpayers can amend returns back to 2012 to use the higher DMSH threshold if the DMSH was elected on the original return and the taxpayer had in place procedures at the beginning of that year to expense the item under its book policy (and did deduct it for book purposes).

IRS TPR Webinar - Liveblogging

The Service presenter just confirmed that if a taxpayer qualifies to use Rev. Proc. 2015-20 and did nothing, they will be presumed to have elected into its provisions.This isn't the worst case scenario, since the presumption would presumably be rebuttable. It just means that the taxpayer will have to pay for additional factual development to demonstrate that not only that it did nothing, but that it has not changed its methods of accounting if it wants to make a covered method change and take into account pre-2014 amounts in its section 481(a) adjustment.