Central Washington Appraisal, Economic & Forensics, LLC  

 Experienced Appraisal, Economic and Litigation Support Services  

Serving Central Washington's Businesses, Legal Community, and Lenders.. 


Greybull Stewardhip and Murphy Business Tie the Knot!

Posted on May 1, 2014 at 4:25 PM Comments comments (0)

Greybull Stewardship, LP and Murphy Business announced today that they have (my words) "tied the knot".  It is an Evergreen investment, which means this is a long term deal and that PE is interested in the deal flow (SASS, software, IT services companies coming through the Murphy pipeline are potential big winners). Wow!  I am happy for Roger Murphy and the original founders, they stay on and get additional resources to remain at #1.

It was interesting to hear Greybull remark that hands down, in his opinion, Murphy offers the top-rate business brokerage services in the industry and that the willingnesss to co-broker, provide additional education to brokers, and HQ support were reasons for the investment.  It is a two-way street and the benefits will flow to clients and to Greybull Stewardship, which has a long-term view and investment.  Bravo!

If you are a small company in the software or IT industry, I think that Murphy is the place to go to!  To learn more, contact [email protected] or call 509-679-3668 to learn more about this development and have us evaluate the company.

So, what kind of courses does a Certified Machinery & Equipment Appraiser take to remain current?

Posted on April 19, 2014 at 1:40 PM Comments comments (0)

I have taken a review course (1 hr) in April 2014 for machinery and equipment through NEBB Institute, which tests candidates before conferring the CMEA.  In May 2014 I am taking a course.  This will provide an overview of what one is exposed to and necessary to remain current (not all Machinery & Equipment professionals will take this course) (which is being offered through the ASA, a NEBB Institute competitor)


This course provides an overview of the Life-Cycle Process commonly used by economic life experts to objectively estimate the economic life of property, plant, and equipment. Additionally, the student will be exposed to the two life analysis techniques most commonly used by economic life analyst: Actuarial Analysis - (e.g. Iowa Survivor Curves) commonly used to quantify physical depreciation and ordinary obsolescence; and Technology Substitution Analysis - typically used to quantify the abnormal or excessive obsolescence brought about by rapid technological advancement, government mandates, evolving/changing consumer expectations, as well as many other obsolescence drivers we have seen in recent years.


Recommended Reading:

"Survivor Curves and Equipment Life Expectancy", MTS Journal, Volume 24 - Issue 4, Volume 25 - Issue 1.

Course Outline:



  • Depreciation Tables and the Age/Life Concept
  • How are they developed
  • Average Life Development
  • Introduction to Survivor Curves (a\k\a: Actuarial Analysis )
  • Life-Cycle Analysis
  • The Life-Cycle Curve
  • How Life-Cycle Curves Define the Economic Life
  • Introduction to Technology Substitution Analysis
  • Combining multiple forces/drivers impacting the economic life


There you have it .... it appeals to one's quantitative inclinations.

Central Washington Appraisal, Economic & Forensics, LLC prepares USPAP reports for buyers, sellers, lenders, CPAs, and attorneys in connection also with estate and gift tax returns and Purchase Price Allocation.  Using a depreciation schedule as the basis for the latter two is just wrong!  We are generalists (which means we are not valuing Boeing aircraft or Power Plants ...); we are generalists valuing small business machinery and equipment, including physician practices and medical equipment, breweries, wineris,  .... and when the need arises, we bring in others to assist us in the valuation of machinery and equipment.  

Give us a call at 509-953-3668 and visit us at www.cwa-appraisal.com.

Machinery & Equipment: New Regs Effective January 1, 2014

Posted on April 10, 2014 at 3:00 PM Comments comments (0)

This is my first blog for Central Washington Appraisal ... the website is finally up.

The appraisal of tangible business assets is not the sexiest of topics.  While pursuing my MS in Taxation, the professors focused on depreciation and to a lesser extent why tax and financial reporting differ. Those are important subjects ... and actually interesting.  That said, the appraisal of machinery and equipment whch focuses on other values, such as fair market value, fair market value - removal, fair market value - continued use, orderly liquidation value, forced liquidation value, etc are not mentioned.  They are still important, in fact, just as important as these new regs.

Today, I am focusing on the new regs involving tangible property.  See http://www.irs.gov/irb/2013-43_IRB/ar05.html to read Internal Revenue Bulletin: 2013-43, October 21, 2013, T.D. 9636, Guidance Regarding Deduction and Capitalization of Expenditures Related to Tangible Property. This is a must read and know,  not only for CPAs, but also for real estate developers and RE counsel.

Here are the highlights (in my opinion):


  • This final regulations that provide guidance on the application of sections 162(a) and 263(a) of the Internal Revenue Code (Code) to amounts paid to acquire, produce, or improve tangible property. The final regulations clarify and expand the standards in the current regulations under sections 162(a) and 263(a). These final regulations replace and remove temporary regulations under sections 162(a) and 263(a) and withdraw proposed regulations that cross referenced the text of those temporary regulations. This document also contains final regulations under section 167 regarding accounting for and retirement of depreciable property and final regulations under section 168 regarding accounting for property under the Modified Accelerated Cost Recovery System (MACRS) other than general asset accounts. The final regulations will affect all taxpayers that acquire, produce, or improve tangible property. These final regulations do not finalize or remove the 2011 temporary regulations under section 168 regarding general asset accounts and disposition of property subject to section 168, which are addressed in this issue of the Bulletin.
  • By way of background, Section 263(a) provides that no deduction is allowed for (1) any amount paid out for new buildings or permanent improvements or betterments made to increase the value of any property or estate, or (2) any amount expended in restoring property or in making good the exhaustion thereof for which an allowance has been made. Final regulations previously issued under section 263(a) provided that capital expenditures included amounts paid or incurred to (1) add to the value, or substantially prolong the useful life, of property owned by the taxpayer, or (2) adapt the property to a new or different use. However, those regulations also provided that amounts paid or incurred for incidental repairs and maintenance of property within the meaning of section 162 and §1.162-4 of the Income Tax Regulations are not capital expenditures under §1.263(a)-1.
  • The determination of whether an expense may be deducted as a repair or must be capitalized generally requires an examination of all of a taxpayer’s particular facts and circumstances. Moreover, the subjective nature of the existing standards described above has resulted in considerable controversy between taxpayers and the IRS over many years.
  • So, what does this reg accomplish? Section 263(a) generally requires the capitalization of amounts paid to acquire, produce, or improve tangible property. Section 162 allows a deduction for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including the costs of certain supplies, repairs, and maintenance. These final regulations provide a general framework for distinguishing capital expenditures from supplies, repairs, maintenance, and other deductible business expenses. The final regulations retain many of the provisions of the 2011 temporary and proposed regulations (2011 temporary regulations), which in many instances incorporated standards from case law and other existing authorities under sections 162 and 263(a). The final regulations also modify several sections of the 2011 temporary regulations in response to comments received and to clarify and simplify the rules while achieving results that are consistent with the case law. The final regulations adopt the same general format as the 2011 temporary regulations, where §1.162-3 provides rules for materials and supplies, §1.162-4 addresses repairs and maintenance, §1.263(a)-1 provides general rules for capital expenditures, §1.263(a)-2 provides rules for amounts paid for the acquisition or production of tangible property, and §1.263(a)-3 provides rules for amounts paid for the improvement of tangible property. However, the final regulations refine and simplify some of the rules contained in the 2011 temporary regulations and create a number of new safe harbors. For example, the final regulations adopt a revised and simplified de minimis safe harbor under §1.263(a)-1(f) and extend the safe harbor for routine maintenance under §1.263(a)-3(i) to buildings. The final regulations also add a safe harbor for small taxpayers to the rules governing improvements to tangible property under §1.263(a)-3. In addition, the final regulations refine several of the criteria for defining betterments and restorations to tangible property.
  • Whether to capitalize or expense materials was an important issue and area of contention.  Here is what was decided on that vein: The 2011 temporary regulations retained the rule from the 2008 proposed regulations permitting a taxpayer to elect to capitalize and depreciate amounts paid for certain materials and supplies. Several comments noted that the requirement to elect to capitalize certain material and supply costs continued to be inconsistent with prior IRS pronouncements that distinguished certain depreciable property from materials and supplies. See, for example, Rev. Rul. 2003-37 (2003-1 C.B. 717) (permitting taxpayers to treat certain rotable spare parts used in a service business as depreciable assets); Rev. Rul. 81-185 (1981-2 C.B. 59) (concluding that major standby emergency spare parts are depreciable property); Rev. Rul. 69-201 (1969-1 C.B. 60) (holding that standby replacement parts used in pit mining business are items for which depreciation is allowable); Rev. Rul. 69-200 (1969-1 C.B. 60) (holding that flight equipment rotable spare parts and assemblies are tangible property for which depreciation is allowable while expendable flight equipment spare parts are materials and supplies); Rev. Proc. 2007-48 (2007-2 C.B. 110) (providing a safe harbor method of accounting to treat certain rotable spare parts as depreciable assets). In addition, several comments noted that the rule under the 2011 temporary regulations could lead to problematic results, such as permitting a component acquired to improve a unit of tangible property owned by the taxpayer to be treated as an asset and depreciated over a recovery period different from the unit of tangible property intended to be improved.
  • To address these concerns, the final regulations retain the rule permitting a taxpayer to elect to capitalize and depreciate amounts paid for certain materials and supplies but provide that this rule is only applicable to rotable, temporary, or standby emergency spare parts. By limiting the application of the rule to rotable, temporary, or standby emergency spare parts, the final regulations resolve the potentially problematic results arising in the 2011 temporary regulations. And while the final rule modifies Rev. Rul. 2003-37, Rev. Rul. 81-185, Rev. Rul. 69-200, and Rev. Rul. 69-201 to the extent that the regulations characterize certain tangible properties addressed in these rulings as materials and supplies, the treatment is consistent with the holdings of the revenue rulings, which permit taxpayers to treat rotable, temporary, or standby emergency spare parts as assets subject to the allowance for depreciation.
  • The final regulations also clarify the procedure for a taxpayer that wants to revoke the election to capitalize and depreciate certain materials and supplies. The taxpayer may revoke this election by filing a request for a letter ruling and obtaining the consent of the Commissioner of Internal Revenue to revoke this election. The Commissioner may grant a request to revoke this election if the taxpayer acted reasonably and in good faith, and the revocation will not prejudice the interests of the Government. In deciding whether to grant such a request, the Commissioner anticipates applying standards similar to the standards under §301.9100-3 of this chapter for granting extensions of time for making regulatory elections.

This is a lengthy document that addresses whether (and when) litigation expenses are expensed and capitalized, what are the new safe harbors, what qualifies as routine maintenance, the treatment of restorations, the treatment accorded to store refreshes, and more.  

This is an unusually lengthy Blog, sorry, but it is an important subject for valuation analysts/appraisers to know, as well as for CPAs, real estate investors, and RE counsel.