Expense vs. Capitalize - Getting it Right

Overview

Learn when an expenditure for tangible property is deductible or capitalized for tax purposes. This course provides details of the rules relating to the treatment of amounts paid to acquire, produce, repair, or improve tangible property. In addition, learn the rules for depreciation recovery under Section 168 of the Internal Revenue Code associated with capitalized tangible property. The capitalization provisions provide objective standards and rules, and numerous examples intended to simplify compliance with the expense and capitalization rules contained in Sections 162 and 263(a) of the Internal Revenue Code, and the Treasury Regulations thereunder

Prerequisites

General construction accounting and tax knowledge

Designed For

CPAs, accountants, and financial professionals who advise clients and/or prepare tax returns dealing with expenditures to repair, improve, or acquire tangible property. May also be suitable for public practice.

Objectives

• Apply capitalization rules in general
• Identify capitalization exceptions for materials and supplies
• Account for costs associated with rotable spare parts
• Apply "de minimis" rules in electing not to capitalize certain amounts for entities with and without an "applicable financial statement"
• Determine amounts considered "spent to acquire tangible property"
• Identify improvements to tangible property > Unit of property definitions, including special rules applicable to real property > Leased property rules for lessees and lessors > Routine maintenance safe harbors
• Determine what is the proper tax treatment for cost associated with the "restoration" or "betterment" of property
• Define adapting a property to a new or different use
• Determining property that qualifies for Section 179 expensing treatment
• Applying cost recovery rules under Section 168 and bonus depreciation

Preparation

None