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IRS Updates Procedures for Automatic Consent Procedures for Changes in Accounting Method


3/12/14

Synopsis
 
The IRS has released revised automatic consent procedures for changes in accounting methods relating to dispositions of tangible depreciable property. Revenue Procedure 2014-17 modifies and supersedes Revenue Procedure 2012-20, and is effective February 28, 2014.
 
Issue
 
Revenue Procedure 2014-17 provides automatic accounting method change procedures as they relate to the temporary, proposed, and final repair regulations. The new guidance contains the procedures by which a taxpayer may obtain automatic consent to change to certain methods of accounting when disposing of depreciable tangible property. It also provides, for a limited time period, that the normal scope limitations that would prevent an automatic change (such as having changed the same item within the past five years or being under audit) will not apply.
 
Significant accounting method changes under the Revenue Procedure include:

  • Dispositions of tangible depreciable property (including building systems and components, land improvements, and personal property)
  • Disposition of tangible depreciable property in a General Asset Account (“GAA”)
  • Late Partial Disposition elections will now be treated as a change in method of accounting for a limited period of time. This change can be made for retirements in any tax year prior to the tax year for which the change is filed
  • Revocation of a GAA election will be treated as a change in method of accounting for a limited period of time. Taxpayers that made such an election must file a Form 3115 no later than the extended due date of its 2014 tax return.'
  • Making a late GAA election'
  • Correcting the method for depreciating leasehold improvements, if using life of lease
  • Changing from one permissible method to another permissible method of accounting for depreciation of tangible property
     

What Does CohnReznick Think?
A number of these automatic changes may need to be filed by taxpayers even if there is no current year financial impact (a much more costly endeavor). Failing to make these changes within the limited time period, provided in these regulations, would require obtaining IRS consent to make these changes in the future (not an easy task). These changes can impact future dispositions of tangible property and allow for the write-off of partial dispositions during the ownership period.

To learn more about CohnReznick’s Tax Practice, please visit our webpage.


Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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