New "mass assets" regulation.

• Jurisdiction: United States
• Author: Shanks, Thomas A.
• Date: 01 November 1995

New Regs. Sec. 1.168(i)-1 allows taxpayers to pool similar assets into general asset accounts, which can be depreciated as if they are single assets under Sec. 168(i)(4). The final regulation is more liberal than the proposed regulation, particularly as to the recovery of basis in certain "qualifying" dispositions.

Basic rules

Asset additions may be grouped into a single general asset account if the assets (1) have the same asset class (2) have the same applicable depreciation method and recovery period, (3) have the same applicable convention and (4) are placed in service in the same year (Regs. Sec. 1.168(i)-1c) (2)). Passenger automobiles for which depreciation is limited under Sec. 280F must be grouped into a separate asset account (Regs. Sec. 1.168(i)-i(c)(2)(D)). Typically, the general asset account group is terminated on disposition of the entire asset group or the last remaining asset.

A general asset account may not include an asset used in both a business (or for production of income) and a personal activity. The final regulations have specific rules for assets qualifying for credit under Sec. 47 or 48. Any basis increase on credit recapture removes the asset from the mass asset account treatment. The amount of tax basis in the general asset account is net of any Sec. 179 expensed amounts.

Dispositions

Although general asset accounting treatment is advantageous because it simplifies recordkeeping, it may...