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A new, extensive set or proposed regulations (REG-168745-03-35) has been issued to clarify the treatment of expenditures incurred in selling, acquiring, producing, or improving tangible assets. They replace the regulations proposed in August 2006.
Like those, these proposed regulations provide guidance on how to determine whether an expenditure must be capitalized as an improvement cost. Specifically, these proposed regulations require capitalization of expenditures that result in a betterment or restoration of the property, and they describe the factors used to determine whether an expenditure results in a betterment or restoration. They also provide guidance concerning the appropriate unit of property to which the betterment and restoration rules should be applied.
The proposed regulations address expenditures to sell,...