[Federal Register Volume 79, Number 250 (Wednesday, December 31, 2014)]
[Rules and Regulations]
[Pages 78696-78698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30186]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9689]
RIN 1545-BL52


Guidance Regarding Dispositions of Tangible Depreciable Property; 
Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendment.

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SUMMARY: This document contains corrections to final regulations (TD 
9689) that were published in the Federal Register on Monday, August 18, 
2014 (79 FR 48661). The final regulations are regarding dispositions of 
property subject to depreciation under section 168 of the Internal 
Revenue Code.

DATES: This correction is effective on December 31, 2014 and applicable 
beginning August 18, 2014.

FOR FURTHER INFORMATION CONTACT: Kathleen Reed, at (202) 317-7005 (not 
a toll free number).

SUPPLEMENTARY INFORMATION:

Background

    The final regulations (TD 9689) that are the subject of this 
correction are under section 168 of the Internal Revenue Code.

Need for Correction

    As published, the final regulations (TD 9689) contain errors that 
may prove

[[Page 78697]]

to be misleading and are in need of clarification.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

    Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Section 1.168(i)-1 also issued under 26 U.S.C. 168(i)(4).

0
Par. 2. Section 1.168(i)-1 is amended as follows:

0
1. Paragraph (c)(2)(ii)(D) is revised.
0
2. The third sentences of paragraphs (e)(3)(ii)(B), Example 2. (ii) and 
(e)(3)(iii)(A) are revised.
0
3. Paragraph (e)(3)(iii)(C)(3) is revised.
0
4. The second sentence of paragraph (e)(3)(v)(B)(1) is revised.
0
5. In paragraph (f)(3) remove the phrase ``Allowed Depreciation 
Deductions Allocated and Apportioned to a Separate Category Total/
Allowed Depreciation Deductions and Apportioned to Foreign Source 
Income.'' and add in its place ``Allowed Depreciation Deductions 
Allocated and Apportioned to a Separate Category/Total Allowed 
Depreciation Deductions and Apportioned to Foreign Source Income.''
0
6. In the first line of paragraph (j)(3)(ii), remove the phrase 
``allowed or''.
0
7. Paragraph (m)(4) is revised.
    The revisions read as follows:


Sec.  1.168(i)-1  General asset accounts.

* * * * *
    (c) * * *
    (2) * * *
    (ii) * * *
    (D) Assets not eligible for any additional first year depreciation 
deduction, including assets for which the taxpayer elected not to 
deduct the additional first year depreciation, provided by, for 
example, section 168(k), section 168(l), section 168(m), section 
168(n), section 1400L(b), or section 1400N(d), must be grouped into a 
separate general asset account;
* * * * *
    (e) * * *
    (3) * * *
    (ii) * * *
    (B) * * *

    Example 2. * * *
    (ii) * * * The gain of $232 is subject to section 1245 to the 
extent of the depreciation allowed or allowable for the account, 
plus the expensed cost for assets in the account, less the amounts 
previously recognized as ordinary income ($1,232 + $0 - $0 = 
$1,232). * * *
    (iii) * * *

    (A) * * * The adjusted depreciable basis of the asset at the time 
of the disposition, as determined under the applicable convention for 
the general asset account in which the asset was included, equals the 
unadjusted depreciable basis of the asset less the greater of the 
depreciation allowed or allowable for the asset. The allowable 
depreciation is computed by using the depreciation method, recovery 
period, and convention applicable to the general asset account in which 
the asset was included and by including the portion of the additional 
first year depreciation deduction claimed for the general asset account 
that is attributable to the asset disposed of. * * *
* * * * *
    (C) * * *
    (3) The depreciation reserve of the general asset account is 
reduced by the greater of the depreciation allowed or allowable for the 
asset as of the end of the taxable year immediately preceding the year 
of disposition. The allowable depreciation is computed by using the 
depreciation method, recovery period, and convention applicable to the 
general asset account in which the asset was included and by including 
the portion of the additional first year depreciation deduction claimed 
for the general asset account that is attributable to the asset 
disposed of; and
* * * * *
    (v) * * *
    (B) * * *
    (1) The adjusted depreciable basis of the asset at the time of 
disposition equals the unadjusted depreciable basis of the asset less 
the greater of the depreciation allowed or allowable for the asset. The 
allowable depreciation is computed by using the depreciation method, 
recovery period, and convention applicable to the general asset account 
in which the asset was included and by including the portion of the 
additional first year depreciation deduction claimed for the general 
asset account that is attributable to the relinquished asset. * * * * *
    (m) * * *
    (4) Optional application of TD 9564. A taxpayer may choose to apply 
Sec.  1.168(i)-1T as contained in 26 CFR part 1 edition revised as of 
April 1, 2014, to taxable years beginning on or after January 1, 2012. 
However, a taxpayer may not apply Sec.  1.168(i)-1T as contained in 26 
CFR part 1 edition revised as of April 1, 2014, to taxable years 
beginning on or after January 1, 2014.
* * * * *

0
Par. 3. Section 1.168(i)-7 is amended by revising paragraph (e)(4) to 
read as follows:


Sec.  1.168(i)-7  Accounting for MACRS property.

* * * * *
    (e) * * *
    (4) Optional application of TD 9564. A taxpayer may choose to apply 
Sec.  1.168(i)-7T as contained in 26 CFR part 1 edition revised as of 
April 1, 2013, to taxable years beginning on or after January 1, 2012. 
However, a taxpayer may not apply Sec.  1.168(i)-7T as contained in 26 
CFR part 1 edition revised as of April 1, 2013, to taxable years 
beginning on or after January 1, 2014.
* * * * *

0
Par. 4. Section 1.168(i)-8 is amended as follows:
0
1. Remove the phrase ``allowed or'' wherever it appears in paragraphs 
(f)(2)(ii), (f)(3)(ii), (h)(2)(iv), and (h)(3)(iv).
0
2. Revise paragraphs (h)(2)(iii) and (h)(3)(iii).
    The revisions read as follows:


Sec.  1.168(i)-8  Dispositions of MACRS property.

* * * * *
    (h) * * *
    (2) * * *
    (iii) The depreciation reserve of the multiple asset account or 
pool must be reduced by the greater of the depreciation allowed or 
allowable for the asset disposed of as of the end of the taxable year 
immediately preceding the year of disposition. The allowable 
depreciation is computed by using the depreciation method, recovery 
period, and convention applicable to the multiple asset account or pool 
in which the asset disposed of was included and by including the 
additional first year depreciation deduction claimed for the asset 
disposed of; and
* * * * *
    (3) * * *
    (iii) The depreciation reserve of the asset must be reduced by the 
greater of the depreciation allowed or allowable for the disposed 
portion as of the end of the taxable year immediately preceding the 
year of disposition. The allowable depreciation is computed by using 
the depreciation method, recovery period, and convention applicable to 
the asset in which the disposed portion was included and by including 
the portion

[[Page 78698]]

of the additional first year depreciation deduction claimed for the 
asset that is attributable to the disposed portion; and
* * * * *

Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
[FR Doc. 2014-30186 Filed 12-30-14; 8:45 am]
BILLING CODE 4830-01-P