This post was originally published on Forbes
Thanks to the new repair regulations 2015 is shaping up to be the worst tax season ever. I've been looking at and thinking about this issue for years as various versions of the regulations were issued and withdrawn. In 2012 I was working for a national firm that wanted its tax people to be consultative, leaving the nasty work of actually preparing returns to our brothers and sisters in Bangalore. There were initiatives to "go to market" with studies to help clients prepare for the imminent application of the regulations. Whatever else you might say about the regulations, they have been good for white collar employment at the more ethereal levels of the tax industry. Now, though, the rubber is finally hitting the road and the entire industry is facing the prospect of filing multiple accounting method changes (Form 3115) for every single business entity, including individuals with modest Schedule C businesses.
The information you have is not the information you want. The information you want is not the information you need. The information you need is not the information you can obtain. The information you can obtain costs more than you want to pay.
Peter, I agree that what they are selling wouldn’t appear to offer much benefit other than for purposes of the partial disposition rule. Applying the actual repair rules (the BAR tests) has little to do with materiality as a percentage of total cost. Instead, as you point out, whether a cost has to be capitalized as a restoration is really based on whether the part being repaired or replaced is a major size (say, 60% of a roof) or major functional component (say, a truck engine) of the unit of property. It’s got nothing to do with cost of the replacement part as a percentage of the total cost.
Thank you very much for your comments. We have long realized that this is a very challenging issue and in addition to our advocacy efforts, the AICPA has been exploring ways to develop tools that would be useful. The complexity that makes these regulations so challenging also complicates the development of a practical compliance tool for use by all members, as the number of potential scenarios for method changes can easily number in the hundreds or thousands. We appreciate your patience and will be communicating new resources to you shortly.