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Fixed Asset Review

While fixed asset reviews are not a new concept, the new Final Tangible Property Regulations bring two new aspects to the process. The regulations mandate retroactive compliance with the new repairs rules and offer an opportunity to identify dispositions, both of which affect how a company manages its depreciation schedules. Though the regulations are highly complex and difficult to apply, they are largely taxpayer friendly and serve to clarify and simplify existing tax law while providing a benefit by accelerating income. A fixed asset review identifies items that were improperly capitalized instead of expensed, items that were capitalized with the incorrect recovery periods, and items that were properly capitalized but should have been disposed. Under the new regulations, companies can now dispose of property that was previously capitalized by conducting a look-back study. However, the look-back opportunity for potential prior year disposals can only be taken on a 2014 tax return. The broader definition of fixed asset review encompasses the identification of:

 

  • disposition opportunities

  • repair opportunities or risks

  • opportunities to apply bonus depreciation

  • opportunities to apply qualified leasehold, restaurant and retail improvements

  • §1245 property

  • cost segregation opportunities

 

A fixed asset review allows companies to correct past depreciation schedules and maximize depreciation expense deductions, achieving compliance and setting a precedent for managing depreciation schedules going forward. SourceHOV Tax has a team of experienced professionals each with many years of Big Four experience conducting large, complex fixed asset reviews. Several members of our team also have knowledge of and firsthand experience in applying the new regulations, and one of our senior leaders is a nationally recognized authority on the regulations, speaking and consulting frequently on the topic.