The recent release of the Temporary Regulations under Section 263(a) has changed the manner in which the residual
basis of existing assets is handled following removal on remodeling projects. In the past, demolished assets had
to be carried on the client’s books until the full cost had been recovered and ultimately retired. Now, however, the
value of the removed real property assets can be written off as abandoned components in the year incurred that includes the retirement of the disposed assets.
During an asset disposition study, Lindon Engineering Services identifies and quantifies the value of removed 39-year real property components as a result of a renovation or remodel to an existing structure. The accumulated depreciation that has been acquired since the component has been placed in service is then deducted from the estimated value, and the remaining value is subject to a one-time expense deduction usually resulting in a lower tax liability and a more accurate accounting of a company’s assets.