Accounting method changes related to new repair regulations

Under the old regs, it appears that Code 184 was not allowed under the cut-off method.
Unlike 185,186,187,188

anyone know if they was changed under the updated regs in January, 2015

Few questions does a condo association filing a 1120H or 1120 require to file Form 3115?

What if it the tax payer final tax return being filed, we aren't changing accounting method so is Form 3115 required?

If I just elect the safe harbor method rule what accounting change method is this on Form 3115 or do I just elect the statement?

I guess it doesn't really matter what the numbers actually are, even if they were 100,000.

Am I correct in my thought process that they mean filed 3115's when they say respondent?

Thanks RWCPA and Kathyt. The seminars I was speaking of are taught by Eric Wallace. I have taken a couple of short ones on the new repair regs, but none went into detail on the Form 3115's. I have seen both of these that you mention Kathyt. Think I will try to take them!

Does anyone know I can find the webinars by Eric Wallace for purchase?

I don't know why you would. Here's some stuff he wrote, which is highly misleading:

http://tprtoolsandtemplates.com/tpr-news/

Does anyone know I can find the webinars by Eric Wallace for purchase?


http://online.krm.com/iebms/coe/coe_p1_ ... ordingsURL

Thanks for the links.

I'm by no means a skinflint but CCH charges $249 for a 2.5 hour (or 2 hr) seminar. Seems a bit steep to me.

I don't know why you would. Here's some stuff he wrote, which is highly misleading:

http://tprtoolsandtemplates.com/tpr-news/

he forgot to mention that failure to file a 3115 is a capital offense.

I paid $279 for the 8 hour webinar and $129 for the 3 hour.

Look at RickyEA's post #435 there are links to much more affordable webinars from NATP, I also attended both of the ones mentioned in that link, I paid $52 for each of those. I guess I might be a little more dense then some folks here but this stuff had my head spinning so much I had to do a lot of webinars to rap my mind around it.

I have a helpful PDF chart that I found with a nice 3115 methodology, and a nice Decision Tree for Repairs - Expense vs Capitalize. I've used it on several companies already, it works nicely.

Can I upload that PDF into this discussion thread somewhere?

No, file attachments for this board are not turned on. If you have a link to these files where they originally came from, you can share those links here. Or if you created the files yourself you can put them out in Google docs, DropBox, or similar file hosting service then link them here.

The AICPA checklists mention these issues. For example, see the S Corporation long checklist, 802.5, 802.6, and 802.7.

802.5 refers to an election to expense repairs and maintenance under the safe harbor rules. What are they referring to? The routine maintenance safe harbor is not an election.

802.6 refers to the election to expense small business repairs. This must be what we have referred to as the small taxpayer safe harbor.

802.7 refers to the election to expense the cost of materials and supplies under the safe harbor rules. The definition of non-incidental materials and supplies is items costing $200 or less or having an economic useful life of 12 months or less. There is no election that changes this definition, correct? Perhaps they are referring to the $5000/$500 the minimus safe harbor. I tend to think of that as applying to items that would otherwise have to be capitalized because they have an economic useful life of more than 12 months.

What have I misunderstood?

Thank you.

I can't speak for the AICPA or to what they had in mind when they put together the checklist. At a guess, they are being sloppy with their terminology because accounting methods are a subset of elections.

After looking at your M&S/DMSH question, I had a few thoughts.

Section 1.162-3 defines materials and supplies as:

1) Components acquired to maintain, repair, or improve a UoP;
2) fuel, water, lubricants, etc. expected to be consumed within 12 months of their initial use;
3) UoP with a economic useful life of 12 months or less; and,
4) UoPs that cost $200 or less.

These are a definition of materials and supplies, they tell us nothing about the timing. The non-incidental and the incidental (including clear reflection of income) rules tell us about the timing, which can be further altered by the (a)-3 regs; the rotable, emergency, and temporary rules in that section; or, by 263A. Then we have the DMSH that swoops in and swallows up all materials and supplies to which it applies, so they get expensed under that rule (unless overriden by, e.g. 263A) and not under 1.162-3. Make sense?

Vern Hoven separated the changes into group 1, required and retroactive, group 2, required and prospective, and group 3, elective. Unfortunately, he didn't specifically identify where most of the changes belong.

Am I correct that required and retroactive changes are the following:

184, change in treatment of disbursements based upon changes in unit of property. Includes routine maintenance safe harbor.

189, optional method for rotable and temporary spare parts

190, change by dealer in property to deduct commissions and transaction costs to facilitate the sale of property

191, change by non-dealer in property to capitalizing commissions and other costs to facilitate the sale of property (weren't we all already doing this?)

192, capitalizing acquisition or production costs (again, weren't we all already doing this?)

193, change to deduct whether and which costs related to pursuing the acquisition of real property


Am I correct that the required and prospective changes (no 481 adjustment) are:

186, deduct non-incidental materials and supplies when used or consumed.

187, deducting incidental materials and supplies when paid


Elective issues:

196, late partial disposition election


Elective issues, no 3115 impact:

De minimis safe harbor
safe harbor for small taxpayers
a couple of elections to capitalize otherwise deductible costs that are not a list in detail.


Thanks for the help…

Elective issues, no 3115 impact:

De minimis safe harbor
safe harbor for small taxpayers
a couple of elections to capitalize otherwise deductible costs that are not a list in detail.

Election for partial dispositions should be on this list too, correct? (not a late election)

That's what I meant w/ Code 196 above - sorry if I was not clear. I called it the late pde, but maybe just pde is the correct term. But yes, that needs to be included on the 3115. My understanding is 2014 is the only year when we can make the election to deduct the old stuff. After 2014, it is on a current year basis only.

You guys even sure you totally understand the new regulations, or at least the meat of them?

If you don't, how do you even know if you're "changing methods?"

I mean, we've had a few posts about "real world" examples...and not a lot of people have chimed in...

Alright, wanted to circle back with a 3115 that I'm working on right now. I initially wanted to file the 3115 to adopt the RMSH, but as I was working through it, I added some more sections from 162-4 for non routine maintenance as well as the new improvement standards under 263(a)-3. Here is what my 3115 looks like:

Check the appropriate box to indicate the type of accounting method change being requested: Other - 1.162-4, 1.263(a)-3, 1.263(a)-3(I)
Part 1 1a: 184
Part II: All "no" up to box 14. Check yes on box 14, because in this case it will be used in the books
Part II box 16: yes
Part III: blank
Part IV: Line 24: no
Line 25: $0
Line 26/7: no

Schedule A/B/C/D: empty

Attachment for lines 12a-12d:
12a: The taxpayer is changing its method of accounting for repairs and maintenance in accordance with regulation section 1.162-4. Taxpayer is also changing its method of accounting for improvements of tangible property under regulation section 1.263(a)-3
12b: Taxpayer is currently deducting repairs and maintenance when paid. The taxpayer has not incurred any improvement expenses related to tangible personal property
12c: Taxpayer proposes to change its method of accounting for repairs and maintenance to apply regulation section 1.162-4. Taxpayer also proposes to adopt the routine maintenance safe harbor under regulation section 1.263(a)-3(i). Finally, taxpayer proposes to adopt the improvement standards under regulation section 1.263(a)-3
12d: cash

Thoughts/comments? The reason I initially want to file the 3115 is because of the RMSH (this client has a maintenance contract for ultrasound machines they own). However as I was working through it, I thought it was a decent idea to also mention the non routine maint section under 162-4 as well as adopting the improvement standards under 263(a)-3

You don't have have to check the "other" box, that is only for Advance Consent Requests, As for question 12a) Taxpayer is adopting the Tangible Property Regulations issued by the Internal Revenue Service on September 13, 2013. 12c) Compliance with Tangible Property Regulations issued by the Internal Revenue Service on September 13, 2013.

We adopted some broad generic language that will be used for the majority of our small taxpayers. Hope this helps.

I am new to this forum, and have been following the repair regs thread(s). Our firm will likely file 150+ method changes. We have many clients involved in construction, real estate development and apartment building rentals. I am still unclear if I can file one 3115 for all of the method changes or if two or more are required. Does anyone have insight on this particular topic?

For any method changes relating to the Tangible Property Regulations, you can file one 3115. They are also waiving the filing fee. I'm sure that waiver is for this year only.