For de minimis safe harbor, are you forced t

[Stan J.]

*Follow up question to my previous post

For de minimis safe harbor, are you forced to bundle labor if it's on the same invoice as materials?

"However, the final regulations also provide that a taxpayer electing to apply the de minimis safe harbor must include in the cost of such property all additional costs (for example, delivery fees, installation services, or similar costs) of acquiring or producing such property if these costs are included on the same invoice with the tangible property."

So if an invoice has $2k in materials and $2k in labor as separate line items, you still have to combine and base it off $4k (over the threshold)? Are per item deductions allowed if the line items are separated out? The main concern is that it looks like you're not able to do per item deductions if labor and materials are on the same invoice. If you're able to do per item, then can you expense related labor? My particular situation has each project with their own invoices, but each includes labor.

I also have an invoice with repair tasks and a capital expense where I was just given a total for all tasks (items) even though each item is broken out. It appears that I would have to capitalize this. Is that correct?

[Michael Plaks]

Quote from @Stan J.:

*Follow up question to my previous post

For de minimis safe harbor, are you forced to bundle labor if it's on the same invoice as materials?

"However, the final regulations also provide that a taxpayer electing to apply the de minimis safe harbor must include in the cost of such property all additional costs (for example, delivery fees, installation services, or similar costs) of acquiring or producing such property if these costs are included on the same invoice with the tangible property."

So if an invoice has $2k in materials and $2k in labor as separate line items, you still have to combine and base it off $4k (over the threshold)? Are per item deductions allowed if the line items are separated out? The main concern is that it looks like you're not able to do per item deductions if labor and materials are on the same invoice. If you're able to do per item, then can you expense related labor? My particular situation has each project with their own invoices, but each includes labor.

I also have an invoice with repair tasks and a capital expense where I was just given a total for all tasks (items) even though each item is broken out. It appears that I would have to capitalize this. Is that correct?

Stan, to your specific question: labor and materials are combined, not separated. But...

...you should pay attention to the last sentence in @Natalie Kolodij's response to you:
"Also to note, you can't separate into individual items of a combined/large project."

She is referring to a critical "anti-abuse rule" of Treasury Regulations 1.263(a)-1, the rule that you're seemingly determined to ignore, based on both of your posts.

From the rule: 
"...a taxpayer is deemed to act to manipulate transactions with an intent to avoid the purposes and requirements of this section if -(i) The taxpayer applies the de minimis safe harbor to amounts substantiated with invoices created to componentize property that is generally acquired or produced by the taxpayer (or other taxpayers in the same or similar trade or business) as a single unit of tangible property..."

Remodeling a bathroom is a single unit of property (look up the definition), so you cannot break it into separate de minimis invoices, like $2k flooring + $2k plumbing + $2k tile enclosure and so on. Such componentizing is exactly what the rule prohibits.

PS. I just realized that you already posted about it two months ago, were already told by me and my colleagues that you could not do it, but it did not deter you from bending the rules. Godspeed.
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