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IRS Extends Grace Period for Partial Disposition Elections


Barbara Lemmer

The Internal Revenue Service recently released final regulations regarding the disposition of tangible property. One of the key issues in these new regulations is the allowance for a partial disposition of tangible property, meaning taxpayers may have opportunities for dispositions leading to increased depreciation expenses and lower taxable income. For example, the regulations may allow taxpayers to write off the undepreciated value of a roof or air conditioning unit when those assets are replaced and new assets are capitalized.

The final regulations also made any such disposition an election, which will be required to be made in the year in which the asset is disposed. What does that mean for previously disposed assets that are still carried on your books? In response to taxpayer questions about how they could take advantage of this election on a retroactive basis, the IRS allowed a late partial disposition election to be treated as a method of accounting for a limited time. The IRS allowed a short window to take a late partial disposition election that closed with the filing of the 2013 tax returns. On Sept. 18, the IRS extended the grace providing taxpayers one last opportunity and the ability to make a late partial disposition election on their 2014 tax return.

What does this mean to you and your business? It means that if you missed your first opportunity to make a late disposition last year, you have one more chance – a chance that could save you significant tax dollars with your next filing. To find out if you have qualifying dispositions and what this election may mean for your organization, call us today.