In an IRS Large and Mid-Size Business (LMSB) Division memorandum (LMSB-4-0509-019), the IRS notified LMSB executives of an emerging issue relating to the recharacterization of costs associated with tangible assets previously capitalized under Sec. 263(a) as currently deductible repairs under Sec. 162.
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Topics
Tax Accounting
The Effect of IFRS Implementation on Tax
The primary goal of this article is to explain how the implementation of IFRS (whether through convergence or adoption) would affect tax.
Automatic Accounting Method Change Procedures Modified
The IRS has modified the procedures for obtaining automatic consent to change an accounting method.
Indefinite-Lived Assets in Tax Provision
Indefinite-lived assets can cause unexpected results related to the determination of a valuation allowance and its impact on the effective tax rate.
Guidance on Electing Not to Take 50% Bonus Depreciation
The IRS released guidance on how taxpayers can elect not to claim 50% bonus depreciation under Sec. 168(k)(1) but instead increase their credit limitation under Sec. 38(c) and their AMT credit limitation under Sec. 53(c) (Rev. Proc. 2009-33). The revenue procedure gives guidance on what property is eligible is for
Maneuvering Through the Proposed Rules for Post-Transaction Accounting Methods
Proposed regulations address the process for determining and changing methods of accounting following certain corporate reorganizations and liquidations.
Method Changes Within the Nonaccrual Experience Method
A nonaccrual experience method of accounting, as described in Sec. 448(d) (5), allows certain service providers to except from accrual the portion of revenue they have determined will not be collected, based on their own experience and through the use of formulas allowed under this section and the regulations.
When Cost Segregation Costs Extra
Cost segregation is a popular tax planning technique for owners of depreciable real property. While it is a legitimate and sometimes beneficial technique, some taxpayers have adopted it without considering the potential adverse consequences that can occur upon disposition of the property.
Adopting or Changing a Foreign Corporation’s Accounting Method
Many companies are experiencing decreased cashflow during the present economic downturn and as a result are evaluating options to raise cash to fund ongoing business operations. One option that U.S. multinational corporations may consider is repatriation of earnings from related foreign corporations.
Electric Utility Refunds Qualify for Sec. 1341 Tax Mitigation
In a recent private letter ruling, the IRS determined that a publicly regulated utility is entitled to claim benefits under Sec. 1341 for amounts paid to a purchaser of electricity to settle claims asserted against predecessor members of the publicly regulated utility’s affiliated group.
To Capitalize or to Expense: How Sec. 263A Treats Royalties
The tax treatment of royalty payments—to capitalize or to expense—depends on the terms of the royalty agreements and, in some situations, the Sec. 263A uniform capitalization rules.
Unit of Property for Network Assets
Treasury issued proposed regulations under Secs. 162 and 263(a) providing guidance on the capitalization and deduction of costs relating to tangible property. Included in these regulations are the “repair regulations,” a comprehensive set of rules for determining whether costs incurred for tangible property are deductible repairs or capital improvements.
Tax Court Addresses Claim of Offset Against Deferred Payments
The Tax Court required the taxpayer to accrue in income, in the year it is earned, the total contract price for the sale of barges—including amounts withheld by customers against deferred payments because of a commercial contract dispute.
IRS Continues to Challenge Deferral of Revenue from Gift Cards
In recent years, due to the increasing use of gift cards and the disparity between the federal tax accounting and financial accounting treatment of advance payments, there has been inconsistency among taxpayers and confusion as to the proper timing of recognizing income from gift cards.
Prop. Regs. Broaden Scope of Home Construction Contract Exemption
The IRS issued proposed regulations expanding the types of contracts eligible for the home construction contract exemption from the percentage of completion method and amending the rules for taxpayer-initiated changes in methods of accounting to comply with Sec. 460 and the regulations thereunder.
IFRS and Your Tax Practice
International financial reporting standards (IFRS) are coming, and tax advisers need to understand the implications for their clients.
When Is a Rebate Liability Fixed and Eligible for the Recurring-Item Exception?
In recent guidance, the IRS has been scrutinizing the timing of the deduction of rebate payments (expenditures generally eligible for the recurring-item exception) and focusing on whether the related liability is actually fixed by year end and therefore eligible to be deducted even if paid within 8½ months of year end.
S Corporation Tax Year Rules
The use of a fiscal year defers reporting of the S corporation’s passthrough income to the shareholders and facilitates year-end tax planning.
Must LIFO Go to Make Way for IFRS?
Currently, IFRS do not allow for the use of the LIFO inventory method, jeopardizing its use for U.S. tax purposes due to the LIFO conformity requirement in Sec. 472. The disallowance of the use of LIFO for tax purposes would result in a large current tax bill for many of the companies that use the method.
Taxpayers Should Be Proactive When Filing Accounting Method Changes
This item discusses the difficulties that arise when trying to determine whether an issue is under consideration for purposes of the 90-day or 120-day windows; it examines a recently released technical advice memorandum that illustrates the complex nature of this problem in the context of a nonautomatic accounting method change request.
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.
