Also see: Sample IRS Election Statement: Annual De Minimis Safe Harbor Election Statement.
             Sample IRS Election Statement: Small Taxpayer Safe Harbor Election for Building Property.

Sample IRS Election Statement: Election to Capitalize Repair and Maintenance Costs.

(Parker Tax Publishing March 14, 2015)

The 2013 final "repair regulations" allow a taxpayer to elect to treat amounts paid during the tax year for repair and maintenance to tangible property as amounts paid to improve that property and as an asset subject to the allowance for depreciation, as long as the taxpayer incurs the amounts in carrying on a trade or business and the taxpayer treats the amounts as capital expenditures on its books and records used for regularly computing income (Reg. Sec. 1.263(a)-3).

A taxpayer that elects this treatment must apply the election to all amounts paid for repair and maintenance to tangible property that it treats as capital expenditures on its books and records in that tax year (Reg. Sec. 1.263(a)-3(n)(1)).

A taxpayer makes this election by attaching a statement to the taxpayer's timely filed original federal tax return (including extensions) for the tax year in which the improvement is placed in service. The statement must be titled "Section 1.263(a)-3(n) Election" and include the taxpayer's name, address, taxpayer identification number, and a statement that the taxpayer is making the election to capitalize repair and maintenance costs under Reg. Sec. 1.263(a)-3(n).

In the case of a consolidated group filing a consolidated income tax return, the election is made for each member of the consolidated group by the common parent, and the statement must also include the names and taxpayer identification numbers of each member for which the election is made.

In the case of an S corporation or a partnership, the election is made by the S corporation or partnership and not by the shareholders or partners.

Sample Election Statement

Reg. Sec. 1.263(a)-3(n)) Election to Capitalize Repair and Maintenance Costs

[Taxpayer Address]

[Taxpayer Name(s)]

[TIN(s)]

The taxpayer is hereby making the election to capitalize repair and maintenance costs under Reg. Sec. 1.263(a)-3(n).

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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