Final Disposition Regulations & Related Accounting Method Changes Issued

This summer, the Department of the Treasury issued final regulations under section 168 covering the disposition of tangible depreciable property. Key areas include:
  • Guidance regarding dispositions of property including partial dispositions
  • Guidance for general asset account elections
  • Rules for determination of basis of a disposed asset
This fall, IRS issued Rev. Proc. 2014-54 with change in accounting guidance regarding the final disposition regulations.

Key areas include:
  • For 2014 tax years, taxpayers can file a change in accounting method (Form 3115) to make a late partial disposition election for assets retired in earlier tax years.
  • The Consumer Price Index (CPI) rollback method allowed in the proposed regulations is now considered an unreasonable method, but taxpayers can use the Producer Price Index (PPI) rollback method.
  • Certain Forms 3115 filed under Rev. Proc. 2014-17 can be amended until Dec. 21, 2014 to comply with Rev. Proc. 2014-54.
These are the final pieces of guidance in the 10-year Department of the Treasury tangible regulations project. You are expected to comply with the final regulations for tax years beginning on or after January 1, 2014. Current methods of accounting for dispositions of tangible property should be reviewed to ensure compliance with the new regulations. The IRS is anticipating numerous Form 3115 filings due to the guidance issued on the tangibles regulations project.

Confused about what this means for your business? BDO can assist you. Contact us.