On November 5th, 2018, the Internal Revenue Service released a practice unit presentation for their Large Business & International division agents. A practice unit is a training module in presentation format used for IRS internal training purposes. This practice unit focuses on familiarizing LB&I agents with the rules and
audit steps for reviewing partial asset dispositions under the Tangible Property Regulations (“TPR”). The following bullet points highlight the interesting aspects of this document.

• The document is primarily intended for the review of large, public companies. This means that the audit steps focus on annual statements and 10-Ks. For smaller taxpayers, only the steps that focus on reviewing the fixed asset ledger are relevant.
• The document highlights the fact that there are two types of partial dispositions: mandatory and elective.
  • Mandatory partial asset dispositions include dispositions arising from step-in-the-shoes transactions, LKEs, involuntary conversions, sales, and casualties.
  • As we have discussed in prior blog postings, mandatory partial asset dispositions remain eligible for recovery through the automatic method change procedures.
• Since this practice unit is geared towards LB&I taxpayers, it entirely neglects situations in which a taxpayer adopted the TPR via the small taxpayer provisions of Rev. Proc. 2015-20.