IRS Drafts New Asset Repair Guidelines

The IRS has issued new temporary taxpayer guidelines in the Federal Register to help clarify the difference between a business expense that is classified as a repair and therefore tax deductible and a capital improvement.

The temporary regulations generally are effective for expenditures made on or after Jan. 1, 2012, and the IRS said the regulations would not affect taxpayers’ 2011 tax returns.

The IRS is requesting written comments by March 26, 2012, and a public hearing on the regulations is scheduled for April 4, 2012.

In 2005, an Appeals Court found for delivery concern FedEx Corp in its challenge to the IRS over deductions of aircraft engine repair costs. The court said FedEx was entitled to deduct the costs and awarded it a refund of $66.5 million.