Final Tangible Property Regulation -- Routine Maintenance Safe Harbor
January 29, 2014
By Anthony V. Luceri III, CPA and Mariana Moghadam, CPA
Do you own tangible or real property that requires “routine maintenance?” The IRS included a routine maintenance safe harbor provision in the Final Tangible Property Regulations released on September 13, 2013. Routine maintenance, by definition, is the recurring activities that you expect to perform as a result of the use of a unit of property, building structure, or building system to sustain their ordinarily efficient operating condition. These recurring activities include the inspection, cleaning, and testing of the unit of property, building structure, or building system and the replacement of damaged or worn parts with comparable, reasonable, and commercially available replacement parts.
The routine maintenance safe harbor provision will not apply if the amount paid results in a betterment to the property or adapts the property to a new or different use.
For a unit of property, the activities are considered routine only if, at the time the property is placed in service, you reasonably expect to perform the activities more than once during the class life of the property.
For a building structure or each building system, the activities are considered routine only if you reasonably expect to perform the activities more than once during the 10-year period beginning at the time the building structure or system, upon which the routine maintenance is performed, is placed in service.
If you’d like to discuss this further, please feel free to contact anyone listed above.