Dispositions of Property Get Automatic Accounting Method Change Procedures

The IRS on Thursday issued Rev. Proc. 2014-54, providing procedures for taxpayers to obtain automatic consent to accounting method changes involving dispositions of tangible depreciable property. The guidance outlines how taxpayers may obtain the IRS’s automatic consent to change to certain methods provided in recently finalized regulations (T.D. 9689, issued Aug. 14). The methods are provided under Regs. Sec. 1.168(i)-1 (general asset accounts); Regs. Sec. 1.168(i)-7 (accounting for modified accelerated cost recovery system (MACRS) property); and Regs. Sec. 1.168(i)-8 (dispositions of MACRS property).

The revenue procedure issued Thursday revises procedures in the appendix of Rev. Proc. 2011-14 (which prescribes automatic consent procedures generally and for a wide range of specific methods), as the appendix was modified earlier this year by Rev. Proc. 2014-17. Specifically, it:

  • Removes appendix Section 6.19 (lessor improvements abandoned at termination of lease) as obsolete;
  • Provides that Section 6.29, regarding disposition of a building or structural component, does not apply to any demolition of a structure to which Sec. 280B (denying deductibility of demolition costs, losses, and amounts chargeable to capital account) and associated regulations apply;
  • Allows changes regarding general asset accounts and partial dispositions of tangible depreciable assets, to be made under Regs. Secs. 1.168(i)-1 and 1.168(i)-8;
  • Allows a late partial disposition election under Regs. Sec. 1.168(i)-8 to be treated as a change in method of accounting for a limited period;
  • Provides additional changes from one permissible method of accounting for MACRS property to another; and
  • Clarifies that appendix Section 10.11 (tangible property) does not apply to amounts paid or incurred for certain materials and supplies a taxpayer has elected to capitalize and depreciate.

Rev. Proc. 2014-54 also adds new automatic changes to Rev. Proc. 2011-14 (as appendix Sections 6.38 through 6.40) for:

  • Disposition of a building or structural component;
  • Dispositions of tangible depreciable assets other than a building or its structural components; and
  • Dispositions of tangible depreciable assets in a general asset account.

Rev. Proc. 2014-54 is effective Sept. 18, 2014, with transitional rules for taxpayers with a previously filed Form 3115, Application for Change in Accounting Method, under Rev. Proc. 97-27 or 2014-17.

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