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Federal Tax Regulations, Regulation, §1.263(a)-1T, Internal Revenue Service, Capital Expenditures; in general (Temporary)

Temporary Reg. §1.263(a)-1T, below was removed by T.D. 9636, but a taxpayer may choose to apply Temporary Reg. §1.263(a)-1T to tax years beginning on or after January 1, 2012, and before January 1, 2014.

(a) General rule for capital expenditures. – Except as provided in chapter 1 of the Internal Revenue Code, no deduction is allowed for:

  1. Any amount paid for new buildings or for permanent improvements or betterments made to increase the value of any property or estate; or
  2. Any amount paid in restoring property or in making good the exhaustion thereof for which an allowance is or has been made.

(b) Coordination with section 263A.—Section 263(a) generally requires taxpayers to capitalize an amount paid to acquire, produce, or improve real or personal tangible property. Section 263A generally prescribes the direct and indirect costs that must be capitalized to property produced by the taxpayer and property acquired for resale.

(c) Examples of capital expenditures.—The following amounts paid are examples of capital expenditures:

  1.  An amount paid to acquire or produce a unit of real or personal tangible property. (§1.263(a)-2T)
  2. An amount paid to improve a unit of real or personal tangible property. (§1.263(a)-3T)
  3. An amount paid to acquire or create intangibles. (§1.263(a)-4).
  4. An amount paid or incurred to facilitate an acquisition of a trade or business, a change in capital structure of a business entity, and certain other transactions. (§1.263(a)-5).
  5. An amount paid to acquire or create interests in land, such as easements, life estates, mineral interests, timber rights, zoning variances, or other interests in land.
  6. An amount assessed and paid under an agreement between bondholders or shareholders of a corporation to be used in a reorganization of the corporation or voluntary contributions by shareholders to the capital of the corporation for any corporate purpose. (§ 118 and §1.118-1).
  7. An amount paid by a holding company to carry out a guaranty of dividends at a specified rate on the stock of a subsidiary corporation for the purpose of securing new capital for the subsidiary and increasing the value of its stockholdings in the subsidiary. This amount must be added to the cost of the stock in the subsidiary.