In a case exploring the extent of allowable cost segregation in depreciable rental real estate, the Tax Court held that all but a small handful of items identified by the building’s owner had to be depreciated over the life of the building.
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Tax Accounting
Much-Anticipated Guidance Issued on Accounting Method Changes for Repair Regs.
The IRS issued two revenue procedures detailing how taxpayers may obtain IRS automatic consent to the accounting method changes required by the rules.
Tangible Property Costs and Repair Expenditures Regs.
The IRS issued long-awaited regulations regarding the treatment of expenditures incurred in selling, acquiring, producing, or improving tangible assets, including rules on determining whether costs related to tangible property are deductible repairs or capital improvements.
Recurring-Item Exception Clarified
The IRS clarified the application of the all-events test’s recurring-item exception under Sec. 461(h)(3) to certain fact patterns involving liabilities that accrue over more than one year and service contracts.
Determining the LLC’s Required Year
An LLC taxed as a C corporation can choose any year end as the tax year end; if an LLC is classified as a partnership for federal income tax purposes, however, its tax year is governed by Sec. 706(b).
Proposed Regs. Relating to the Retail-Inventory Method
The IRS issued proposed regulations relating to the retail-inventory method of accounting.
Fourth Circuit Rejects Retroactive Accounting Method Change
The Fourth Circuit upheld a 2008 Tax Court decision that a company could not retroactively change its method of accounting for credit card late fees even though it was on an improper method.
IRS Proposes Rules on Sec. 1256 and Notional Principal Contracts
The IRS issued proposed regulations clarifying when swap contracts and certain similar agreements will be subject to mark-to-market accounting and the other rules of Sec. 1256.
LB&I Directive on Success-Based Fees Has Tax Accounting Implications
A recent directive instructs LB&I examiners not to challenge the treatment of success-based fees incurred or paid in tax years ending before April 8, 2011, if the taxpayer capitalized at least 30% of the total success-based fees incurred on the transaction on its originally filed return.
IRS Changes Position on Current-Year Bonus Deductions for Accrual-Method Taxpayers
In a change of position, the IRS ruled that accrual-method employers in certain circumstances can currently deduct accrued bonuses paid within 2½ months of year-end despite a contingency in the bonus plan that the employee be still employed on the date the bonus is paid.
IRS Rules Energy Contract Is Not a Commodity
The IRS analyzed whether a taxpayer properly applied mark-to-market treatment under Sec. 475(e) a tolling agreement and concluded that the tolling agreement was not a commodity and that mark-to-market treatment of the agreement did not clearly reflect income.
IRS Provides Safe Harbor for Nonaccrual-Experience Accounting Method Taxpayers
The IRS issued guidance providing a book safe-harbor accounting method for taxpayers that use the nonaccrual-experience accounting method under Sec. 448(d)(5) and Regs. Sec. 1.448-2.
Regulations Issued on Repair Expenditures
The IRS issued long-awaited regulations regarding the treatment of expenditures incurred in selling, acquiring, producing, or improving tangible assets, including rules on determining whether costs related to tangible property are deductible repairs or capital improvements.
Recurring-Item Exception Clarified
The IRS issued a revenue ruling to clarify the application of the all-events test’s recurring-item exception under Sec. 461(h)(3) to certain fact patterns. The ruling addresses questions that arise when a liability accrues over more than one year or under a service contract.
Deferral of Income from Sale of Gift Cards
This item summarizes the recently released Rev. Proc. 2011-18, which provides guidance on the deferral of income from the sale of gift cards.
Some Implications of 100% Bonus Depreciation
This item discusses optimization of the 100% bonus depreciation deduction, highlighting some of its implications and peculiarities.
Accounting Rules in Corporate Reorgs. Simplified
The IRS issued final regulations (T.D. 9534) intended to clarify and simplify rules concerning continuity of accounting methods and inventory methods in certain tax-free corporate reorganizations and liquidations.
Dispute Resolution Process for the 2011 Prescription Drug Annual Fee
This item describes the exclusive process available to covered entities to dispute the preliminary calculations of the annual fee on branded prescription drugs and obtain any change to data that would be reflected in the final fee allocation.
One Reorganization, Two Tax Years, One Practical Solution
This item considers what is the proper time to report the transaction if a reorganization spans different tax years.
Request for Accounting Method Change for Prepaid Expenses Denied
The Tax Court held that the IRS’s denial of a request for a change in accounting method that the taxpayer made outside the effective dates of the relevant regulations and revenue procedure was not an abuse of discretion.
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
