Why would anyone want this election?

[RightOn]

Section 1.263(a)-3(n). The taxpayer is electing to capitalize amounts paid for the repair and maintenance of tangible property as improvements to such property.

So by electing this rule, the taxpayer would lose the right to expense the repair and maintenance costs and has to capitalize them? Why would a taxpayer want to depreciate something when he should be able to expense it?

[jimmcg]

Expense deferral

Some things quickly come to mind such as net operating loss carry forwards that may be due to expire soon if not used, anticipated favorable tax rates in the near term as opposed to the long term, etc. I could speculate more but depends on the specific facts and circumstances of your situation.

[RightOn]

Some things quickly come to mind such as net operating loss carry forwards that may be due to expire soon if not used, anticipated favorable tax rates in the near term as opposed to the long term, etc. I could speculate more but depends on the specific facts and circumstances of your situation.

By making this election, will the taxpayer have to depreciate every single penny of repair and maintenance expenses in that year?

Or the taxpayer can pick the portion of repair and maintenance expenses that he wants to depreciate and still has the right to expense the other portion?

[TXEA]

By making this election, will the taxpayer have to depreciate every single penny of repair and maintenance expenses in that year?

Or the taxpayer can pick the portion of repair and maintenance expenses that he wants to depreciate and still has the right to expense the other portion?

I think the taxpayer has to capitalize all R & M for the year. Lots of good reasons for this if you have a taxpayer with NOL's or income around the standard deductions and exemptions.

[RightOn]

I think the taxpayer has to capitalize all R & M for the year. Lots of good reasons for this if you have a taxpayer with NOL's or income around the standard deductions and exemptions.

Thank you.

Well, I guess we have to be extra careful not to click this election box in the tax program by mistake if the client wants current year expensing of R & M (and I think most of them do).