A passthrough entity business cannot use the cash method of accounting if it is classified as a syndicate. This article discusses this rule and ways a passthrough entity business that is currently not a syndicate can avoid being reclassified as one and losing the use of the cash method.
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Tax Accounting
The enduring importance of determining tax ownership
Throughout nearly a century of case law and guidance, the benefits and burdens of ownership have remained the touchstone for claiming tax attributes of tangible property.
Announcement 2024-40: A gift and a curse?
While expenditures may be qualified investments for the Sec. 48D advanced manufacturing investment credit, related grant agreements are not long-term contracts under Sec. 460, the IRS announced.
Deferred revenue: Transactional triggering events
Deferred revenue liabilities must be carefully considered in conjunction with taxable asset sales, contributions to capital, and classification elections.
Tax accounting method changes: Procedures and potential issues during an IRS exam
Tax practitioners should be familiar with the special rules that apply and issues that can arise when an accounting method change is made while a taxpayer is under IRS examination.
The closing date of an M&A transaction
The date on which a merger or acquisition closes for tax purposes depends on when the benefits and burdens of ownership transfer under the facts and circumstances.
A closer look at the costs of borrowing
Comparison of the accounting and tax treatment of interest expense may reveal crucial differences and lead to best practices for managing it.
Transfer pricing: The C-suite needs to be informed
CEOs need to understand the arm’s-length rules for transactions between commonly controlled entities because of the enormous amounts at stake in tax disputes, financial reporting risk from uncertain tax positions, and customs valuations.
Automatic consent to Sec. 174 accounting method changes modified
In a revenue procedure, the IRS amended the process for changes in tax years after 2021.
New prop. regs. limit taxpayers’ foreign currency elections
The regulations would promote consistency with filing requirements for controlled foreign corporations and limit certain elections regarding foreign currency gains and losses.
Planning opportunities: Sec. 179 expensing vs. bonus depreciation
As bonus depreciation phases out, practitioners need to consider Sec. 179 expensing to maximize deductions on fixed-asset purchases.
Universal accounting for digital assets concludes, but safe harbor available
The new safe-harbor guidance for digital asset transaction reporting in Rev. Proc. 2024-28 goes into effect Jan. 1, 2025. This article explains how taxpayers may rely on the safe harbor to allocate unused basis of digital assets to digital assets held within each wallet or account of the taxpayer.
Bonus depreciation phaseout planning
With bonus depreciation phasing out through 2027, taxpayers have an opportunity to review their accounting methods with regard to fixed assets to ensure they are using the best methods.
Card reward liabilities are eligible for the recurring-item exception
A Chief Counsel Advice memo confirms that accrual-method credit card issuers may use the favorable method, distinguishing the situation from that of Giant Eagle.
Electing the UNICAP historic absorption ratio under the modified simplified production method
To avoid contending with the complex and time-consuming calculations of the uniform capitalization rules under Sec. 263A, taxpayers may want to consider electing the historic absorption ratio with this method.
Automatic accounting method changes list updated by IRS
The IRS on Tuesday provided a comprehensive list of changes in tax accounting methods to which the automatic change procedures in Rev. Proc. 2015-13 apply. The list includes 21 changes described as significant.
Recognizing transactions that trigger built-in gains or losses
Various types of transactions can cause an S corporation to incur built-in gains or losses, including Sec. 481 adjustments from a change in accounting method.
Increased U.S. transfer-pricing enforcement: What’s at stake?
Multinational enterprises can expect an IRS encouraged by a string of court victories in recent years to more closely scrutinize transfer pricing and perhaps assert hefty penalties.
IRS updates list of automatic changes
the IRS has updated the list of accounting method changes for which the automatic change procedures of Rev. Proc. 2015-13 (as modified) apply.
Defining software development costs
Software development costs that historically may not have been identified as qualified research expenditures for purposes of the Sec. 41 tax credit for increasing research activities need to be identified to comply with the capitalization requirement under Sec. 174.
employee benefits & pensions
Profits interests: The most tax-efficient equity grant to employees
By granting them a profits interest, entities taxed as partnerships can reward employees with equity. Mistakes, however, could cause challenges from taxing authorities.
