Interpretation and Practical Application Tangible Property Regulations Interpretation and Practical Application 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Topics for discussion Unit of Property Improvements Deminimis Safe Harbor 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Unit of Property Functional Interdependence Test Building Systems (9 specified in Regs) How much further breakdown? How to treat new construction vs acq with multiple buildings 1245 Property 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Example #1 – Apartment Complex: What should be the unit of property, the complex or the individual building? 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Example #2 – Apartment Building: What should be the unit of property, the building, the floor, or the individual suite? 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Example #3 – Casino: What should be the unit of property, the complex or the areas of the building? 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Improvements Betterment Ameliorate a Material Condition or Defect Test Did your client have a plan in place prior to acquisition to address issues? Material Addition/Increase in Capacity Test Material Increase in Productivity, Efficiency, Quality or Output Test General interpretation according to ATG advises to look at the condition of the property immediately after the expenditure to the condition of the property immediately prior to the expenditure. 10-18-2017 Education Committee - Copyright Protected
Education Committee - Copyright Protected Improvements Adaptation to New Use Expenditures not consistent with the taxpayer’s ordinary use of the building structure. Restorations Replacement of major component Controversial HVAC example 10-18-2017 Education Committee - Copyright Protected
Education Committee - Copyright Protected Example #4 – Apartment Building: Acquired completely vacant with plans to renovate immediately. Improvement or Expense? Are there retirements? 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Example #5 – Apartment Building: Acquired completely leased with plans to renovate as the leases expire over the next 2 years. Improvement or Expense? Are there retirements? 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Example #6 – Apartment Building: Acquired completely leased with no plans to renovate. Inspector misses structural issues and those must be addressed now. Improvement or Expense? Are there retirements? 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Example #7 – Casino: Property has been around for decades. Needed a refreshening. Thoughts? 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Example #8 – Casino: Casino removed the sports book and installed a $1M Poker Room. Adaptation to new use? 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Example #9 – Auto Dealership: Typical update to GM dealerships. Refreshening or capital improvement? 11/28/2018 Education Committee - Copyright Protected
Education Committee - Copyright Protected Deminimis Safe Harbor Must have capitalization policy (regardless of having an AFS or not) Amounts paid for property with an economic useful life of less than 12 months Amounts paid for property under certain amount per item per invoice Discussion point – can this be applied to an acquisition with a detailed purchase agreement? 10-18-2017 Education Committee - Copyright Protected