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Final Regs Governing Repairs and Capitalization Make Significant Changes; Effective January 1, 2014

The IRS has released much-anticipated final “repair” regulations (T.D.9636) governing when taxpayers must capitalize and when they can deduct their expenses for acquiring, maintaining, repairing and replacing tangible property. The final regulations make significant taxpayer-friendly changes to the 2011 temporary regulations. Compliance with the labyrinth of rules in the final regs, however, will challenge virtually every business, especially in light of an approaching January 1, 2014 effective date.

The basic structure and requirements within the temporary regulations remained intact. Although the final regulations have been “simplified” in several key areas, they remain complex overall.

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Circular 230 Disclosure
Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties imposed under the Internal Revenue Code or applicable state or local tax law or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

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