The critical emerging tax issue in preparation for the Year 2000 is whether the staggering costs of assessing, remediating, testing, and maintaining non-compliant software will be currently deductible and ordinary and necessary business expenses, or will constitute capital improvements to be written off over a period of years. Unfortunately, the Y2K issue arises at a time the IRS has aggressively pursued a wide range of potential capitalization issues following its victory in the 1992 Supreme Court decision in INDOPCO. The IRS, to its credit, published a solution (Rev. Proc. 97-50) in an effort to head off a major controversy. This article analyzes this pronouncement, concluding that in certain ways it is very helpful. Yet it essentially trades one set of issues (under Section 162) for another set (under Section 174) and in the process raises a number of tax policy issues and traps for the unwary.