Second Accounting Method Change for Repair Regulations Issued

The IRS recently released Rev. Proc. 2014-17, providing guidance for filing change in accounting methods for dispositions of tangible depreciable property. This revenue procedure modifies and supersedes Rev. Proc. 2012-20 which previously provided guidance in this area. Rev. Proc. 2014-17 joins Rev. Proc. 2014-16 in furnishing accounting methods related to the final, temporary, and proposed regulations primarily in the area of capitalization and repair expense.

Rev. Proc. 2014-17 key provisions:
  • Allows late partial disposition elections for a limited amount of time. A taxpayer can claim a loss on structural components retired in earlier years through an IRC Section 481(a) adjustment. In general, calendar year taxpayers will need to make this change in 2013 in order to take advantage of dispositions from prior years. For example, losses may be recognized on disposals of components of a 2002 restaurant building related to a 2010 remodel.
  • Limited time to revoke late general asset account election. For taxpayers who previously made a late general asset account election under Rev. Proc. 2012-20, they may revoke that election. Some taxpayers that made a general asset account election under Rev. Proc. 2012-20 and the temporary regulations may find it no longer favorable.

Due to the limited time frames for making these changes, you need to quickly determine how the new rules will affect you.