Automatic Accounting Method Changes to Be Allowed in Corporate Reorganizations


The IRS on Sept. 5 announced a change in its policy on automatic accounting method changes in corporate reorganizations (Rev. Proc. 2012-39). Taxpayers that engage in a tax-free reorganization or liquidation under Sec. 381(a) after Aug. 31, 2011, will be allowed to make automatic accounting method changes in the tax year they engage in the transaction.

The policy change follows the issuance last year of final regulations that simplified accounting method rules in corporate reorganizations. For prior coverage, see “Final Regulations Simplify Accounting Rules in Corporate Reorganizations.”

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Under previous guidance (Rev. Proc. 2011-14), a taxpayer was not allowed to use the automatic change of accounting method procedures for a tax year in which it engaged in a Sec. 381(a) transaction. (However, such a taxpayer could request permission to change accounting method under Rev. Proc. 97-27.) The IRS has now modified Section 4.02(4) of Rev. Proc. 2011-4 to permit taxpayers to make automatic accounting method changes in the year of the Sec. 381(a) transaction.

Wednesday’s revenue procedure also modifies Rev. Procs. 2011-14 and 97-27 to waive the scope limitation that precludes taxpayers who are under examination from seeking consent to change to an accounting method other than the principal or carryover method.

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The winner of The Tax Adviser’s 2014 Best Article Award is James M. Greenwell, CPA, MST, a senior tax specialist–partnerships with Phillips 66 in Bartlesville, Okla., for his article, “Partnership Capital Account Revaluations: An In-Depth Look at Sec. 704(c) Allocations.”

 

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