MOSS ADAMS
Tax Planning Opportunities
By Brian Etzkorn
Senior Manager
Now that the new tax landscape has been set, there are
two important developments in 2013 for food processors
and agribusiness companies. These have been highlighted
because they are likely to have the greatest impact on your
tax planning.
#1: Tangible Property Regulations
The final tangible property regulations were issued by the
IRS in September and will take effect for tax years beginning
on or after January 1, 2014. They apply to all taxpayers that
acquire, produce, or improve tangible property. Key points of
this regulation include:
• An improvement to tangible property must generally
be capitalized. A unit of property has been improved
when activities are performed after the property
has been placed in service and result in betterment,
restoration, or adaptation of the property to a new or
different use. For buildings, the unit of property is either
the building structure or one of the specified systems,
generally leading to increased capitalization.
• There are several safe harbors available, including one
for routine maintenance on building and nonbuilding
property as well as one for small taxpayers to deduct
minor building repairs. For simplicity, you may also
elect to capitalize repairs for tax purposes, if you’re
already capitalizing them for financial statements, by
attaching an election statement to your return.
• You may elect to recognize a loss on a partial disposition of an asset. This beneficial election is an improved
approach to the rules originally outlined in the temporary regulations.
• You may generally follow your financial statement capitalization policy for purchases up to a specified amount
per item if you’ve expensed the purchases in accordance with your policy for your financial statements. For
certain taxpayers, the company’s capitalization policy
must be in writing as of the beginning of the year—as
a result, taxpayers who plan to use this provision for
2014 must act before the end of 2013 if their policy isn’t
already documented. You must elect this provision each
year by attaching a statement to your tax return.
• You may elect to apply any or all of the provisions on
your 2012 or 2013 tax return, even if you’ve already
filed your 2012 return. The window to amend your 2012
return is 180 days after its extended due date.
• The annual election requirement for several provisions
will require taxpayers and their advisors to discuss
these issues each tax year. Once an election is made (or
not made), there is generally no way to change it after
the return is filed.
The mandatory effective date of January 1, 2014, is quickly
approaching, making it essential that business owners
understand the impact the regulations will have on the
company and to create an implementation plan—as soon as
possible—to minimize surprises later. It is strongly recommend that you review your asset capitalization policies to
see that they’re in compliance with the new regulations and
consult with your tax advisor to help you implement necessary changes.
#2: Depreciable Real Estate and Business Equipment
Section 179 Depreciation Deduction
• The Section 179 depreciation deduction for qualifying assets acquired in 2013 is $500,000. This deducContinued on page 19 w
This issue of Northwest Reports is sponsored by Moss Adams LLP’s Food Processing and Agricultural Practice group
of business and financial consulting CPAs. Moss Adams serves as advisors to hundreds of food processing and
agricultural companies.
For more information, visit www.mossadams.com
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