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which contained final regulations under Sec. 168
that provide the rules regarding depreciation and About the
dispositions, including partial dispositions of tan- authors
gible depreciable property. They are generally effec- Caleb Cordonnier,
tive for tax years beginning on or after Jan. 1, 2014. CPA, is a senior
The rules in these regulations cover topics including manager, and
materials and supplies; repairs and maintenance; Jason Seo, J.D.,
and acquisitions, production, improvement, and LL.M., is a manager,
dispositions of property, as well as providing general both in the
rules for capital expenditures on property. National Tax Office
of Grant Thornton
Materials and supplies LLP in Washington,
t has been said that when people look at the Under Regs. Sec. 1.162-3, materials and supplies D.C.
Mona Lisa, they will feel or see something are generally defined as a unit of property costing
Idifferent every time. The painting doesn’t change, $200 or less and units of property with economic
but the viewer’s perspective does. A similar effect useful lives of, or that would be used or consumed
can occur with tax rules. Taxpayers can revisit rules in, 12 months or less. Generally, amounts paid
that have not been recently changed and apply to acquire or produce incidental materials and
them to their current tax situation to discover supplies are deductible when paid, while amounts
something new. This article would like to take you paid to acquire or produce nonincidental materi-
back to 2014 and the tangible property regula- als and supplies are deductible in the tax year in
tions, also known as the “repair regs.,” to explore which they are used or consumed. The de minimis
how and why taxpayers may want to revisit the safe harbor, described below, generally is applied
rules to plan for the future. to amounts paid for materials and supplies prior to
the rules of this regulation.
A QUICK REVIEW The regulations define spare parts (a special
In late 2013 the IRS published T.D. 9636, which kind of material and supply) in three categories:
contained final regulations under Secs. 162(a) and rotable, temporary, and standby emergency spare
263(a) that provide the rules regarding when costs parts. Rotable spare parts are acquired for instal-
incurred to acquire, produce, or improve tangible lation on a unit of property, removable from that
property must be capitalized or may be deducted. unit of property, generally repaired or improved,
Then, in late 2014, the IRS published T.D. 9689, and either reinstalled on the same property

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