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The Internal Revenue Service has issued its final tangible property regulations for classifying repairs and maintenance as an expense or as a capitalized asset. These rules are effective January 1, 2014. It is expected that the new regulations will affect every business, particularly those with significant investments in the acquisition and repair and maintenance of real and tangible property.

Under the new regulations, expenditures must be capitalized if the expenditure results in betterment to the property, adapts the property to a new use or results in a restoration to the property. The regulations provide certain exceptions and elections for materials and supplies and routine maintenance, as well as for small businesses. These exceptions are dependent on such factors as whether or not the taxpayer has a capitalization policy and what type of financial statements the entity issues. These exceptions and safe harbors are not a one size fits all and some entities may not be eligible to adopt them.

Please contact Michael Sexton ( and Eric Seidman ( at Wouch Maloney & Co. (215-675-8364), so that we can assist you in determining how these encompassing and complex new regulations apply to your business and the steps you need to take to assure compliance with the regulations. Chadwick Service Company can handle all of your plumbing and mechanical needs. Please call us today for more information on our preventative maintenance contracts for your equipment or find additional information at