Expense or Capitalize? (Currently Unavailable)

Author: Jennifer Kowal

Understanding whether an expense should be capitalized or immediately deducted as an expense is a tax question faced by nearly every business. Taxpayers are often required to capitalize otherwise deductible transactional expenses such as legal fees and appraisals, and even more complicated rules apply to manufacturers and producers of tangible property in determining cost of goods sold. This course covers the general tax rules requiring the capitalization of expenses that create an asset with a useful life that extends substantially beyond the taxable year, the rules for capitalizing transaction costs, and the section 263A regulations that apply to manufacturers and producers of tangible property. It also covers how the change in accounting method rules apply to deducted expenses that should be capitalized.

Publication Date: July 2017

Designed For
Tax practitioners at all levels who provide advice and return preparation on expenditures that may potentially be capitalized.

Topics Covered

• Tax rules on capitalizing expenses with benefit that extends substantially beyond taxable year
• Capitalization of costs relating to acquisition of tangible and intangible assets
• Application of regulations under section 263A to manufacturers and producers of tangible property, and effect on cost of goods sold
• "New" section 263A "repair regulations."
• Applicability of change in accounting method rules to capitalization vs. expensing questions

Learning Objectives

• Recognize and apply general rules for determining when expenses should be capitalized
• Identify rules that require capitalization of transaction costs into basis of acquired assets
• Differentiate the rules of Section 263A and how they apply to clients
• Recognize how new "repair regulations" apply in common scenarios
• Identify which IRC Section allows for immediate expensing of qualifying equipment purchased during the year
• Recognize the qualifications and rules under a Section 179 deduction
• Differentiate statements with respect to bonus depreciation
• Recognize which U.S. Supreme Court case the court concluded that a taxpayer had to capitalize certain large, one-time fees, because they created significant future benefit
• Identify the maximum Section 179 deduction amount for 2017 and how taxpayers can elect the deduction
• Differentiate court case studies and how the rulings apply to real client cases
• Recognize the requirements of IRC Section 263A and do not apply to producers of property with gross receipts of what amount or less during what period of time
• Identify the de minimis safe harbor election amount per invoice or item under IRC Section 263A if the taxpayer has applicable financial statements
• Identify which form a taxpayer is required to file based on the revised repair regulations issued in 2013, if a taxpayer has been treating items differently prior to these regulations

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
Basic familiarity with concept of capitalization of expenditures.

Advance Preparation
None