Treasury and IRS Issue Depreciation Regulations

Last week, the Treasury Department and Internal Revenue Service issued proposed and temporary regulations that provide guidance for computing depreciation deductions under the Modified Accelerated Cost Recovery System (MACRS) in section 168 of the Internal Revenue Code when property is acquired in a like-kind exchange or as a result of an involuntary conversion.

"Previously, the depreciation rules for MACRS property acquired in a like-kind exchange or involuntary conversion transaction were unclear. These regulations provide clear rules to taxpayers depreciating property acquired and relinquished in these transactions," stated Acting Treasury Assistant Secretary for Tax Policy Greg Jenner.

The regulations also provide guidance on the annual depreciation allowances for automobiles that are both acquired in a like-kind exchange or involuntary conversion transaction and subject to the special automobile depreciation limitations in section 280F.

The regulations generally apply to like-kind exchange and involuntary conversion transactions after February 27, 2004. Taxpayers generally may rely on these regulations, or any prior guidance issued by the Internal Revenue Service, for MACRS property acquired in a like-kind exchange or involuntary conversion transaction before the effective date of the regulations.

Related Documents:

TD 9115: Final and temporary regulations

REG-106590-00: Notice of proposed rulemaking

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