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WASHINGTON TAX ALERT FROM DON BARNES JANUARY 18, 2012 (COST SEGREGATION)

Washington Tax Alert from Don Barnes, dbarnes@washingtontaxlaw.com

January 18, 2012

The Tax Court issued a decision yesterday negating an automatic accounting method change based on a cost segregation study because the taxpayer had agreed to an IRC § 1060 allocation which described the assets acquired as “buildings” and “real property improvements,” rather than machinery, equipment or fixtures. Peco Foods Inc. v. Commissioner, T.C. Memo. 2012-18. The Court held the taxpayer was bound by the characterization of the assets in the allocation schedule entered into with the seller of the assets.