The final regulations generally are effective for tax years beginning on or after Nov. 13, 2020. However, under the clarified effective date provisions, taxpayers have the following options to determine which regulations to apply to tax years beginning after Dec. 31, 2017, and before the general effective date:
The effective date provisions in the unofficial version of the regulations left the impression that taxpayers could not apply the taxpayer-favorable rules in the final regulations to years prior to the final regulations’ effective date unless the taxpayer consistently applied the final regulations to all tax years beginning after Dec. 31, 2017. This requirement would have required taxpayers to amend both 2018 and, if already filed, 2019 returns to adopt the final regulations or the ATI depreciation change. The revised preamble eliminates this uncertainty, clarifying that taxpayers can use any of the options listed earlier.
Taxpayers should work with their tax adviser to determine whether to apply the final regulations to any particular tax year beginning after Dec. 31, 2017; whether to file an amended return (or an AAR) for a return that already has been filed; or whether to continue to use the 2018 proposed regulations.
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Tax planning: 2020 year-end guide
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