Under the new Repair and Capitalization Regulation - T.D. 9636, retirement of a building component is now a partial disposition. Partial disposition includes sale or exchange, retirement, physical abandonment, and destruction among other dispositions. Thus various renovations, remodels, replacements, abandonments are all triggers for possible disposition write off benefits. Common examples might be replacing roofs, HVAC, and electrical items. Asset Valuation is our term for determining and providing the original cost basis of the items disposed. The tax professional can calculate the undepreciated portion of that cost (net book value) and write that cost basis off.
This quantification of disposed assets resulting from renovations/improvements facilitates current year write off of the undepreciated balance. This can only be elected in the year of disposition only.
CSSI has a proven implementation plan we are currently using with tax firms across the country so they don’t overlook any deductions for their clients (we are their free backroom analyst providing engineering-based calculations) – however, time is crucial as the disposition must be elected in the year of disposition.
Expected Results for the property owner: Easier Compliance; Lower cost basis facilitated for recapture/capital gains calculation if property is sold; and non-cash deductions to offset taxable income.