Spring 2013 issue of Horizons

perform the activities more than once during the class life of the unit of property.

their incidental materials and supplies when they purchased them.

Among the factors to be considered in determining whether a taxpayer is

Rotable spare parts are materials and supplies that a taxpayer acquires for installation on a unit of property with the intention to later remove them from that unit of property, repair or improve them, and then either reinstall them on the same unit of other property or store them for later installation. The regulations provide for an optional method of accounting for rotable spare parts. Under the new regulations, a taxpayer generally can consider its rotable parts as used in its operations and deductible only when it disposes of them. In some cases this treatment is less favorable than capitalizing and depreciating the cost of the spare parts, particularly where the taxpayer will not dispose of the spare parts for many years. In such cases, a taxpayer can elect to treat the parts as depreciable property.

performing routine maintenance are the recurring nature of the activity, industry practice, manufacturers’ recommendations, the taxpayer’s experience, and the taxpayer’s treatment of the activity on its applicable financial statements. Costs of Materials and Supplies The new regulations retain the general framework that taxpayers were permitted to account for costs of their non-incidental materials and supplies as a deferred expense. Under the deferred expense method, taxpayers generally could deduct the cost of their non-incidental materials and supplies when they used and consumed them in operations, and could deduct the cost of

RubinBrown’s Construction Services Group We provide services to general contractors, specialty subcontractors and related companies in the construction industry.

Frank Hogg, CPA – Saint Louis Partner-In-Charge Construction Services Group 314.290.3413 frank.hogg@rubinbrown.com

Jim Massaro, CPA – Denver Partner Construction Services Group 303.952.1211 jim.massaro@rubinbrown.com

Mark A. Jansen, CPA – Saint Louis Vice Chair Construction Services Group 314.290.3208 mark.jansen@rubinbrown.com

Chris Coleman, CPA, CCIFP – Saint Louis Manager Construction Services Group 314.290.3263 chris.coleman@rubinbrown.com

Glenn Henderson, CPA, CFP – Kansas City Partner Construction Services Group 913.499.4429 glenn.henderson@rubinbrown.com

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