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Guidance – 2010 Section 179 Expense Rev. Proc. 2010-24

By Stacie Clifford Kitts, CPA

Golly, I am so busy that I haven’t  been paying attention to the latest announcements.

I am trying to catch up beginning with this one. Revenue Procedure 2010-24 – update on direct expensing of certain depreciable assets.  For those of you who are not CPA’s, accountants, or tax preparers in general,  direct expensing means that you can take an immediate deduction for tax purposes the cost of certain assets that you would otherwise need to capitalize and depreciate over a number of years.  This is important information in the planning process when you are considering  cash flow and income tax requirements.

For 2010,

.. the HIRE Act changes the $125,000 amount and the $500,000 amount to $250,000 and $800,000, respectively, for taxable years beginning in 2010.

Section 201 of the Act also provides that these amounts will not be adjusted for inflation for taxable years beginning in 2010.

A complete copy of the Revenue Procedure is provided below.

Rev. Proc. 2010-24

SECTION 1. PURPOSE

This revenue procedure modifies the inflation adjusted amounts in Rev. Proc. 2009-50, 2009-45 I.R.B. 617, that apply to taxpayers who elect to expense certain

depreciable assets under § 179 of the Internal Revenue Code. This modification reflects statutory changes enacted subsequent to the publication of Rev. Proc. 2009-50.

SECTION 2. BACKGROUND

Prior to the enactment of the Hiring Incentives to Restore Employment Act of 2010, Pub. L. No.111-147, 124 Stat. 71 (2010) (the HIRE Act), § 179(b)(1) prescribed a

$125,000 limitation (the $125,000 amount) on the aggregate cost of § 179 property that could be treated as an expense for taxable years beginning after 2006 and before 2011.

For those same taxable years, § 179(b)(2) provided that the $125,000 amount is reduced by the amount by which the cost of § 179 property placed in service during the

taxable year exceeds $500,000 (the $500,000 amount). Both the $125,000 amount and the $500,000 amount were adjusted for inflation annually under § 179(b)(5). For

taxable years beginning in 2010, section 3.20 of Rev. Proc. 2009-50 provides that the $125,000 amount and the $500,000 amount, adjusted for inflation, are $134,000 and

$530,000, respectively.

Section 102 of the Economic Stimulus Act of 2008, Pub. L. No.110-185, 122 Stat. 613 (2008), changed the $125,000 amount and the $500,000 amount to $250,000 and

$800,000, respectively, for taxable years beginning in 2008 and 2009, and also provided that these amounts will not be adjusted for inflation.

Similarly, § 201 of the HIRE Act changes the $125,000 amount and the $500,000 amount to $250,000 and $800,000, respectively, for taxable years beginning in 2010.

Section 201 of the Act also provides that these amounts will not be adjusted for inflation for taxable years beginning in 2010.

SECTION 3. APPLICATION

To reflect the statutory changes made to § 179 by § 201 of the HIRE Act, section 3.20 of Rev. Proc. 2009-50 is modified to read as follows:

.20 Election to Expense Certain Depreciable Assets. For taxable years beginning in 2010, under § 179(b)(1) the aggregate cost of any § 179 property a

taxpayer may elect to treat as an expense cannot exceed $250,000. Under § 179(b)(2), the $250,000 limitation is reduced (but not below zero) by the amount by which the cost

of § 179 property placed in service during the 2010 taxable year exceeds $800,000.

SECTION 4. EFFECT ON OTHER DOCUMENTS

Section 3.20 of Rev. Proc. 2009-50 is modified and superseded.

SECTION 5. EFFECTIVE DATE

This revenue procedure is effective for taxable years beginning in 2010.

SECTION 6. DRAFTING INFORMATION

The principal author of this revenue procedure is Patrick M. Clinton of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information

regarding this revenue procedure contact Patrick M. Clinton on (202) 622-4930 (not a toll-free call).

Guidance: This Notice Provides an Extension of Time to Pay For Spouses of Military Members Working In Specified Areas

Notice 2010-30 provides an extension of time to pay tax until October 15, 2010 to civilian spouses of military service members working in American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands (“U.S. territory”) but claiming residence or domicile for tax purposes in a State or the District of Columbia pursuant to the Military Spouses Residency Relief Act (“MSRRA”).  In addition, this notice provides procedures for filing claims for refund of federal income taxes to civilian spouses of military service members working in a State or the District of Columbia but claiming residence or domicile for tax purposes in a U.S. territory under MSRRA.

Notice 2010-30 will be published in Internal Revenue Bulletin 2010-18 on May 3, 2010.

Guidance Regarding Change of Address

Revenue Procedure 2010-16 explains how the Internal Revenue Service is informed of a change of address.

Revenue Procedure 2010-16 will be in Internal Revenue Bulletin 2010-19, dated May 10, 2010.

Guidance: This Regulation Provides Notice of Public Hearing About Preparer Identifying Numbers

REG-134235-08 provides notice of public hearing on a notice of proposed rulemaking providing guidance to tax return preparers on furnishing an identifying number on tax returns and claims for refund of tax that they prepare.

Guidance: More on Reporting Uncertain Tax Positions – Better Read This One!

Announcement 2010-30 releases the draft schedule, Schedule UTP, accompanied by draft instructions that provide a further explanation of the Service’s proposal requiring reporting of uncertain tax positions, and invites public comment on the draft schedule and instructions.

Announcement 2010-30 will be in IRB 2010-19, dated May 10, 2010. 

Links:

Announcement 2010-30 releases the draft schedule, Schedule UTP, accompanied by draft instructions that provide a further explanation of the Service’s proposal requiring reporting of uncertain tax positions, and invites public comment on the draft schedule and instructions.

Announcement 2010-30 will be in IRB 2010-19, dated May 10, 2010.

Comments Invited For Guidance Priorty List

Notice 2010-43, the Department of Treasury and IRS invite public comments on recommendations for items that should be included on the 2010–2011 Guidance Priority List. Taxpayers may submit recommendations for guidance at any time during the year. Recommendations submitted by June 30, 2010, will be reviewed for possible inclusion on the original 2010-2011 Guidance Priority List. Recommendations received after June 30, 2010, will be reviewed for inclusion in the next periodic update.

Notice 2010-43 will appear in IRB 2010-22, dated June 1, 2010.

Guidance: Notice that Form 3115 Application for Change in Accounting Method Has Been Revised

Announcement 2010-32 informs taxpayers and practitioners that the IRS has revised Form 3115, Application for Change in Accounting Method, and its instructions.  The Form 3115 (Rev. December 2009) replaces the December 2003 version.  This announcement also provides a transition period and transition guidance.

Announcement 2010-32 will appear in IRB 2010-19 dated May 10, 2010.

Guidance – Premium Rates for Small Group Market Patient Protection and Affordable Care Act

Revenue Ruling 2010-13 publishes the State average premium rates for the small group market for purposes of calculating the section 45R tax credit for small employers.  Section 45R was added to the Code by Section 1421 of the Patient Protection and Affordable Care Act.

Revenue Ruling 2010-13 will be published in Internal Revenue Bulletin 2010-21 on May 24, 2010.

2010 Guidance: Announcement 2010-16 Suspends FBAR Filing Requirement for NON US Citizens

Announcement 2010-16 temporarily suspends, for persons who are not United States citizens, United States residents or domestic entities the requirement to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), for the 2009 and earlier calendar years.

Announcement 2010-16 will be published in Internal Revenue Bulletin 2010-11 on March 15, 2010.

2010 Tax Guidance: Revenue Procedure 2010-15 Identifies Circumstances Reducing Understatement of Income Tax Penalty and Related Disclosures on a Taxpayers Return

Revenue Procedure 2010-15 updates Rev. Proc. 2008-14, 2008-1, C.B. 435, and identifies circumstances under which the disclosure on a taxpayer’s income tax return with respect to an item or a position is adequate for purpose of reducing the understatement of income tax under section 6662(d) of the Internal Revenue Code; (relating to the substantial understatement aspect of the accuracy-related penalty), and for the purpose of avoiding the tax return preparer penalty under section 6694(a) (relating to understatements due to unreasonable positions) with respect to income tax returns.

IRS Patrol: IRS Announces Qualified Disaster Treatment for Chile

Washington The Internal Revenue Service today issued guidance designating the earthquake that occurred in Chile in February 2010 as a qualified disaster for federal tax purposes. The guidance allows individuals who receive qualified disaster relief payments from any person to exclude those payments from income on their tax returns. Also, the guidance allows employer-sponsored private foundations to assist employee-victims in areas affected by this earthquake without affecting their tax-exempt status.

Qualified disaster relief payments include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income.

Qualified disasters include Presidentially declared disasters and any other event that the Secretary of the Treasury determines to be of a catastrophic nature. The IRS has determined that the earthquake that occurred in Chile in February 2010 is an event of a catastrophic nature for purposes of the federal tax law.

The IRS will presume that disaster relief that a private foundation provides to employee-victims and their family members in areas affected by the earthquake in Chile are consistent with the foundation’s charitable purposes.

Notice 2010-26 designates the Chile earthquake occurring in February 2010 as a qualified disaster for purposes of § 139 of the Internal Revenue Code in the affected areas of Chile.  The designation enables employer-sponsored private foundations to assist certain victims in areas affected by the Chile earthquake and enables recipients to exclude qualified disaster relief payments from gross income.     
 
Notice 2010-26 will be published in Internal Revenue Bulletin 2010-14 on April 5, 2010.

IRS Patrol: N-2010-19: Guidance for Persons Making Transfers in Trust after December 31, 2009

Notice 2010-19 applies to taxpayers making gifts in trust during 2010.  Under section 2511(c), a transfer of property to a non-wholly-owned grantor trust is a transfer by gift of the entire interest in the property.  To determine whether a transfer to a wholly-owned grantor trust constitutes a gift, the gift tax provisions in effect prior to 2010 apply.

Notice 2010-19 will be in IRB 2010-7, dated February 16, 2010.

IRS Patrol: 2010 Depreciation Limitations For Owners Of Passenger Automobiles

Revenue Procedure 2010-18 provides the depreciation deduction limitations for owners of passenger automobiles first placed in service, and amounts to be included in income by lessees of passenger automobiles first leased, during calendar year 2010.  This revenue procedure includes tables detailing these depreciation limitations and lessee inclusion amounts that reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code.

Revenue Procedure 2010-18 will be published in Internal Revenue Bulletin 2010-9 on March 1, 2010.

IRS Patrol:provides a safe harbor method of reporting gain or loss for certain taxpayers who initiate deferred like-kind exchanges under § 1031 of the Internal Revenue Code but fail to complete the exchange because a qualified intermediary (QI) defaults on its obligation

Revenue Procedure 2010-14 provides a safe harbor method of reporting gain or loss for certain taxpayers who initiate deferred like-kind exchanges under § 1031 of the Internal Revenue Code but fail to complete the exchange because a qualified intermediary (QI) defaults on its obligation to acquire and transfer replacement property to the taxpayer.   If a taxpayer meets the requirements of the revenue procedure, the Internal Revenue Service will not treat the taxpayer as being in actual or constructive receipt of exchange proceeds if the taxpayer does not complete an exchange because of a default of a QI that becomes subject to a bankruptcy or receivership proceeding.   A taxpayer reports gain under the revenue procedure on the disposition of relinquished property as the taxpayer receives payments.

Revenue Procedure 2010-14 will be in IRB 2010-12, dated March 22, 2010.

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