E8-7515. Guidance Regarding Deduction and Capitalization of Expenditures Related to Tangible Property; Correction

AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Correction to a notice of proposed rulemaking.

SUMMARY:

This document contains corrections to a notice of proposed rulemaking (REG-168745-03) that was published in the Federal Register on Monday, March 10, 2008 (73 FR 12838) explaining how section 263(a) of the Internal Revenue Code applies to amounts paid to acquire, produce, or improve tangible property. The proposed regulations clarify and expand the standards in the current regulations under section 263(a), as well as provide some bright-line tests (for example, a de minimis rule for acquisitions). The proposed regulations will affect all taxpayers that acquire, produce, or improve tangible property.

FOR FURTHER INFORMATION CONTACT:

Merrill D. Feldstein or Mon L. Lam, [phone] (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The correction notice that is the subject of this document is under sections 162 and 263(a) of the Internal Revenue Code.

Need for Correction

As published, a notice of proposed rulemaking (REG-168745-03) contains errors that may prove to be misleading and are in need of clarification.

Correction of Publication

Accordingly, the publication of a notice of proposed rulemaking (REG-168745-03), which was the subject of FR Doc. E8-4466, is corrected as follows:

1. On page 12838, column 2, in the preamble, under the paragraph heading “I. Overview”, line 9 from the bottom of the column, the language “to the rules relating to unit of property,” is corrected to read “to the rules relating to unit of property and”.

2. On page 12839, column 1, in the preamble, under the paragraph heading “III. Materials and Supplies under § 1.162-3”, line 2 from the bottom of the column, the language “material and supplies regulations, the” is corrected to read “materials and supplies regulations, the”.

3. On page 12839, column 2, in the preamble, under the paragraph heading “III. Materials and Supplies under § 1.162-3”, first paragraph, line 7, the language “economic useful life of the asset for” is corrected to read “economic useful life of the asset for purposes of”.

4. On page 12840, column 3, in the preamble, under the paragraph heading “B. Transaction Costs”, first paragraph, line 7, the language “T.C. 106, 110 (1950), acq., 1951-1 CB 3.” is corrected to read “T.C. 106, 110 (1950), acq., (1951-1 CB 3).”.

5. On page 12841, column 2, in the preamble, under the paragraph heading “C. De Minimis Rule”, line 18 from the bottom of the column, the language “is provided in § 1.263A-1(b)(14) of the” is corrected to read “is provided in § 1.263A-1(b)(14) of”.

6. On page 12842, column 1, in the preamble, under the paragraph heading “VIII. Improvements”, sixth paragraph of the column, the language “(ii) Adapt a unit of property to a new or different use.” is corrected to read “(iii) Adapt a unit of property to a new or different use.”.

7. On page 12842, column 2, in the preamble, under the paragraph heading “VIII. Improvements”, first paragraph of the column, line 3, the language “263A(b), which states that section 263A” is corrected to read “263A(b)(1), which states that section 263A”.

8. On page 12842, column 3, in the preamble, under the paragraph heading “A. Unit of Property”, second paragraph of the column, lines 9 through 10, the language “used in certain regulated industries; network assets were excluded from the” is corrected to read “used in certain regulated industries. Network assets were excluded from the”.

§ 1.162-3

[Corrected]

9. On page 12848, column 2, § 1.162-3(c), line 9, the language “sections. For example, see section” is corrected to read “sections. For example, see”.

10. On page 12848, column 2, § 1.162-3(d)(1)(i), last line, the language “unit of property; or” is corrected to read “unit of property;”.

11. On page 12848, column 2, § 1.162-3(d)(1)(ii), last line, the language “taxpayer's operations; or” is corrected to read “taxpayer's operations;”.

§ 1.263(a)-0

[Corrected]

12. On page 12851, column 1, § 1.263(a)-3(g)(2)(i)(A), the language “(1) Like-new condition.” is corrected to read “(A) Like-new condition.”.

13. On page 12851, column 1, § 1.263(a)-3(g)(2)(i)(B), the language “(2) Economic useful life.” is corrected to read “(B) Economic useful life.”.

§ 1.263(a)-2

[Corrected]

14. On page 12855, column 2, § 1.263(a)-2(d)(4)(vi), line 8, the language “(including within paragraph (d)(4)(iv)(B)” is corrected to read “(including within paragraph (d)(4)(vi)(B)”.

15. On page 12855, column 3, § 1.263(a)-2(d)(4)(vii) Example 3., line 12, the language “under § 1.162-3(a)(1) and § 1.163-3(d)(1)(iii),” is corrected to read “under § 1.162-3(a)(1) and § 1.162-3(d)(1)(iii),”.

16. On page 12855, column 3, § 1.263(a)-2(d)(4)(vii) Example 4., the language “an election under § 1.162-3(d) to capitalize” is corrected to read “an election under § 1.162-3(e) to capitalize”.

§ 1.263(a)-3

[Corrected]

17. On page 12856, column 3, § 1.263(a)-3(c)(1), line 4 from the bottom of the paragraph, the language “of the production or resale activities,” is corrected to read “of production or resale activities,”.

18. On page 12858, column 2, § 1.263(a)-3(d)(2)(iv) Example 4., line 5, the language “business. Within the plant X utilizes an” is corrected to read “business. Within the plant, X utilizes an”.

19. On page 12860, column 1, § 1.263(a)-3(e)(5) Example 1. (i), line 10, the language “replacement part. After the ESVs the engines” is corrected to read “ replacement part. After the ESVs, the engines”.

20. On page 12861, column 1, § 1.263(a)-3(e)(5) Example 7., lines 22 through 25, the language “costs. Because the scheduled maintenance involves recurring activities that X expects to perform more than once during the 18 year class life of the towboat. This maintenance” is corrected to read “costs. The scheduled maintenance involves recurring activities that X expects to perform more than once during the 18 year class life of the towboat. Because this maintenance”.

21. On page 12861, column 2, § 1.263(a)-3(e)(5) Example 9., line 9 from the bottom of the paragraph, the language “ordinary efficient operating condition if the” is corrected to read “ordinarily efficient operating condition if the”.

22. On page 12861, column 3, § 1.263(a)-3(f)(2)(i), line 13, the language “financial statement (as described in” is corrected to read “financial statement (as defined in”.

23. On page 12862, column 1, § 1.263(a)-3(f)(3) Example 3. (i), lines 4 and 5, the language “for use its manufacturing operations. Assume that the machine is a unit of property and it” is corrected to read “for use in its manufacturing operations. Assume that the machine is a unit of property and”.

24. On page 12862, column 3, § 1.263(a)-3(f)(3) Example 6. (i), line 1, the language “Example 6. Not a betterment. X owns a” is corrected to read “Example 6. Not a betterment. (i) X owns a”.

25. On page 12863, column 2, § 1.263(a)-3(f)(3) Example 8., line 2, the language “quality of the plant or its output of compared” is corrected to read “quality of the plant or its output compared”.

26. On page 12864, column 1, § 1.263(a)-3(g)(2)(i)(A), line 1, the language “(1) Like-new condition. A unit of” is corrected to read “(A) Like-new condition. A unit of”.

27. On page 12864, column 1, § 1.263(a)-3(g)(2)(i)(B), line 1, the language “(2) Economic useful life. The” is corrected to read “(B) Economic useful life. The”.

28. On page 12864, column 2, § 1.263(a)-3(g)(3)(i)(A), line 1, the language “(1) A part or a combination of parts” is corrected to read “(A) A part or a combination of parts”.

29. On page 12864, column 2, § 1.263(a)-3(g)(3)(i)(B), line 1, the language “(2) A part or a combination of parts” is corrected to read “(B) A part or a combination of parts”.

30. On page 12864, column 3, § 1.263(a)-3(g)(4) Example 2., line 4, the language “for which it had property taken into account” is corrected to read “for which it had properly taken into account”.

31. On page 12865, column 1, § 1.263(a)-3(g)(4) Example 6., first paragraph of the column, line 4, the language “rebuild, the freight car has been restored to” is corrected to read “rebuild, the freight car has been restored to a”.

32. On page 12865, column 1, § 1.263(a)-3(g)(4) Example 6., line 11, the language “paid restore the freight car to like-new” is corrected to read “paid restore the freight car to a like-new”.

33. On page 12865, column 1, § 1.263(a)-3(g)(4) Example 7., line 9, the language “the freight car to like-new condition after the” is corrected to read “the freight car to a like-new condition after the”.

LaNita Van Dyke,

Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel, (Procedure and Administration).