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Tangible Property Regulations – Should You Use Small Business Exceptions?

By January 5, 2016 No Comments

In early 2015, the Internal Revenue Service issued Rev. Proc. 2015-20, which allowed small businesses to adopt the final tangible property regulations using simplified procedures. In a recent article published in The Tax Advisor, authors David L. Strong, Jane Rohrs, and Susan Grais discuss the options that small businesses have in relation to the tangible property regulations.

What defines a small business?

A taxpayer qualifies for the small business exception if it has one or more separate and distinct trades or businesses that have:

  1. Assets totaling less than 10 million on the first day of the 2014 tax year, or
  2. Average gross receipts of 10 million or less for the prior three tax years.

The Small Business Exception of Rev. Proc. 2015-20

The small business exception of Rev. Proc. 2015-20 allows small businesses to adopt the final tangible property regulation using simplified procedures without filing Form 3115 Application for Change in Accounting Method. Small businesses that adopt this exception:

  1. Do not need to compute Sec. 481(a) adjustment, but
  2. Do not receive audit protection for years prior to 2014.

It important for small businesses to understand the advantages and disadvantages of adopting the small business exception. To read the full referenced article click here. For assistance in how this Revenue Procedure affects your business, please contact Patrick Mutchler at (616) 608-8540 or

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