Expense vs Capitalize? Tangible Real Property Regulations
The question is not “what is new?” but “what is not new?”
The world of acquiring, repairing, renovating, and improving a building has changed. In 1986, dividing a building into its various components was “out-lawed.” As time went by, building owners were able to have Engineering Studies performed and values were assigned to various components of the building for depreciation purposes.
The IRS has finalized their Tangible Property Regulations and we have NEW RULES. Instead of components, we have “Building Systems” and “Units of Property.”
Those persons/companies that acquire or build improvements on real estate may have elections to make, and new definitions for the improvements, renovations, adaptations, and betterments of their buildings.
Which brings us to the new rules on when an amount may be expensed or is required to be capitalized.
In this course you will learn the definitions of:
- Maintenance vs. Improvements
Included are discussions on:
- Building Systems
- Unit of Property
- Safe Harbors
At the end of this webinar you will be able to determine:
- When building a building, how to separate the costs between Building Systems.
- If a change to a Building System is a cost to be expensed or is required to be capitalized.
- If a change to a Unit of Property is a cost to be expensed or is required to be capitalized.
- What elections are still available to you?
Capitalizing Vs Expensing - 00:01:30
Example Data - 00:05:35
When to Use Capitalizing - 00:08:55
Limitations of Capitalizing - 00:13:50
When to Use Expensing - 00:14:54
Avoiding Inappropriate Capitalizing and Expensing - 00:18:24
Definitions - 00:21:17
Bonus Depreciation - 00:39:35
Repairs and Improvements - 00:42:56
Listed Property - 00:53:00
Actual Expense Method - 01:05:40
Depreciation Deduction Details - 01:09:55
CAPEX - 01:15:53
Rental or Real Property - 01:17:35
Unit of Property (UOP) - 01:18:51
De Minimis Safe Harbor - 01:23:00
Question and Answer - 01:28:52
Adaption - 00:25:11
Amortization - 00:29:36, 00:50:41
Bonus Depreciation - 00:39:35
Betterment - 00:21:20
Capital Expenditure - 01:09:55
Cash Flow - 00:12:00, 00:16:40
De minimus - 00:16:00, 00:19:40, 01:23:00
Depreciation - 00:07:00, 00:29:36, 01:06:42, 01:09:55
Fixed Assets - 00:09:20
Form 4562 - 00:56:21
GAAP - 00:05:27,
Intangible Assets - 00:09:48
Inventory Costs - 00:14:25
Section 167 - 00:29:36
Section 168 - 00:29:36
Section 179 - 00:29:36, 00:30:52
Patent or Copyright - 00:10:40
Reported Assets - 00:12:45, 00:16:40
Research and Development - 00:18:14, 00:45:37
Restoration - 00:23:18
Safe Harbor - 00:16:00, 01:23:00
Stockholders Equity - 00:11:30, 00:16:40
Adaption: The process of adjustment and alteration to meet new requirements.
Amortization: An accounting term that refers to the process of allocating the cost of an intangible asset over a period of time. It also refers to the repayment of loan principal over time. (investinganswers.com)
Asset: Property owned by a person or company, regarded as having value and available to meet debts, commitments or legacies.
Betterment: An improvement to an asset that makes the asset more efficient or more productive. It is typically expensive in nature.
Bonus Depreciation: A valuable tax-saving tool for businesses. It allows your business to take an immediate first-year deduction on the purchase of eligible business property, in addition to other depreciation. (www.thebalancesmb.com)
Capitalize: To capitalize is to record a cost/expense on the balance sheet for the purposes of delaying full recognition of the expense. In general, capitalizing expenses is beneficial as companies acquiring new assets with long-term lifespans can amortize the costs. (www.investopedia.com)
De minimus: Too trivial or minor to merit consideration.
Depreciation: A reduction in the value of an asset with the passage of time, due in particular to wear and tear.
Equity Turnover: A ratio that measures the proportion of a company's sales to its stockholders' equity. The intent of the measurement is to determine the efficiency with which management is using equity to generate revenue. (www.accountingtools.com)
Expense: Offset (an item of expenditure) as an expense against taxable income.
Fixed Assets: Assets that are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment.
Generally accepted accounting principles (GAAP): A set of rules and guidelines developed by the accounting industry for companies to follow when reporting financial data. Following these rules is especially critical for all publicly traded companies.
Income Statement: One of the three primary financial statements used to assess a company's performance and financial position (the two others being the balance sheet and the cash flow statement). The income statement summarizes the revenues and expenses generated by the company over the entire reporting period. (investinganswers.com)
Intangible Assets: An asset that is not physical in nature. Goodwill, brand recognition and intellectual property, such as patents, trademarks and copyrights, are all intangible assets. (www.investopedia.com)
Listed Property: A special classification for assets that lend themselves to both personal and business use. The designation is for tax purposes only and has no meaning for financial reporting. Common examples of listed property are automobiles, computers and cell phones. (www.aicpastore.com)
Restoration: The action of returning something to a former condition.
Owner of Dorsey & Company CPAs, PLLC 2013 dorseyandcompany.com Owner of Rock City Data Group, Inc. ( Microsoft Gold Certified Partner) 2013 rockcitydata.com Owner of The Payroll Place BS in Accounting, cum laude Arkansas State University CPA, member of AICPA and ASCPA u2013 served on various committees Microsoft Certified Professional (MCP) and Microsoft Small Business Specialist (MSBS) Microsoft Certified Systems Engineer (MCSE), graduating from Six Sigma Green Belt at Villanova ... View Full Profile