🤗Understood, but I do have respect for place a respect on a significant career in both private practice and with the IRS as well as several law firms. I have found that there are times when a deeply experienced professional can be wrong or cut corners, but many other times that they simply understand something well past my knowledge. This the advisor makes some excellent points I can't easily drive past. For example:
There is no Designated Change Number in the various IRS revenue procedures and in the Form 3115 instructions that allow a taxpayer to change from deducting an expenditure as an expense to treating it as a capital expenditure with depreciation deductions. There is no automatic change for this.
Changing from expensing a single item to capitalizing the item and claiming depreciation is neither a change in method of accounting nor a change in depreciation that is mentioned in the regulations. In fact, in the thousands of court cases where the IRS has capitalized an expense in an audit, I couldn’t find a single instance where the taxpayer argued that such a change was a change in method of accounting. This instance appears to be a capital expenditure that is a correction of an error, not a change in method of accounting. Although it is a timing issue, that’s not enough to constitute a change of accounting.
So I have to take those points seriously. But I also recognize that this is neither correction of mathematical or a posting errors as outlined by 1.446-1(e)(2)(ii)(b) of the regulations.
And further seems to meet the definition of “Method of accounting change” which includes not only the overall method of accounting of the taxpayer but also the accounting treatment of any item. Treas. Reg. 1.446-1(a)(1). An accounting practice that involves the timing of when an item is included in income or when it is deducted is considered an accounting method. (1) Section 1.446-1(e)(2)(ii)(a) provides that a change in method of accounting includes a change in the treatment of any item that involves the proper time for the inclusion of the item in income or the taking of the item as a deduction. In determining whether a taxpayer's accounting practice for an item involves timing, if the practice does not permanently affect the taxpayer's lifetime income, but does or could change the taxable year in which income is reported, it involves timing and is therefore a method of accounting. See Rev. Proc. 91-31, 1991-1 C.B. 566. The treatment of a material item in the same way in determining the gross income or deductions in two or more consecutively filed tax returns (without regard to any change in status of the method as permissible or impermissible) represents consistent treatment of that item for purposes of § 1.446- 1(e)(2)(ii)(a).
As I mentioned I am inclined to go with the 3115 but I need to be sure that in certifying the prior year amendments that this has been handled correctly.
Thanks for your time and input.
