The
Repair Regulations put in effect on January 1, 2014, contain several elections
and safe harbors. This article will
focus on the de minimis safe harbor election.
Under
the de minimis safe harbor election, an eligible taxpayer may generally deduct
amounts paid for tangible personal property, where the per item or the per
invoice amount does not exceed $5,000.
An eligible taxpayer is one that has an applicable financial statement,
a written capitalization policy as of the first day of the tax year, and
expenses amounts on its applicable financial statements consistent with the
written policy.
An
applicable financial statement (AFS) is a financial statement provided to the
Securities and Exchange Commission, or an audited financial statement used for
creditors or other non-tax purposes. In
determining the per invoice or the per item amount with the $5,000 limitation
in mind, it is important to note that transaction and other costs included in
the same invoice as the item are also included in and allocated to the cost of
the item.
For
taxpayers without an AFS, the rules and election still apply, however the
dollar threshold is reduced to $500.
It is
important to note any materials and supplies purchased that fit within the de
minimis safe harbor parameters are treated as expensed under this election and
not under the rules for materials and supplies. The safe harbor must be applied to all
amounts paid. Please visit: http://www.koscpa.com/announcements/the-de-minimis-safe-harbor-election.
