Tax Accounting

Topics

June 1, 2007

Deducting Payroll Taxes on Deferred Compensation

Editor: Mary Van Leuven, J.D., LL.M. The IRS recently determined that Sec. 461, rather than Sec. 404, governs the timing of the deduction for payroll taxes on deferred compensation by an accrual-basis taxpayer. Background Generally under Sec. 461(a), a deduction is taken into account in the proper tax year under

June 1, 2007

Deducting Executory Contract Expenses

Editor: Mary Van Leuven, J.D., LL.M. On Dec. 21, 2006, the IRS released Rev. Rul. 2007-3, which provides guidance on whether the execution of a contract for services or insurance (an executory contract liability) establishes the “fact of the liability” under Sec. 461. The determination of whether a contract for

June 1, 2007

IRS Will No Longer Challenge Negative Additional Sec. 263A Costs

Editor: Mary Van Leuven, J.D., LL.M. Negative additional Sec. 263A costs generally arise when taxpayers capitalize certain expenses for financial accounting purposes, but are not required or permitted to capitalize them for tax purposes. The Service recently issued Notice 2007-29 to provide interim guidance on this issue. Until further guidance

May 1, 2007

Treatment of Capitalized Costs of Intangible Assets (Part II)

Executive Summary This two-part article provides an overview of cost recovery for intangible asset expenditures. Part II covers the income- forecast and units-of-production methods, computer software, transaction costs and Sec. 195 deductions. This two-part article examines how capitalized costs of intangible assets are recovered. Part I, in the April 2007

May 1, 2007

FIN 48 and R&D Tax Credits

Editor: Terence E. Kelly, CPA Under Financial Accounting Standards Board Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxes, claims for research and development (R&D) credits are tax positions that companies following GAAP must evaluate to determine whether (and the extent to which) they may be recorded as a

May 1, 2007

Must a Valuation Allowance Be Recorded against a Deferred Tax Asset?

Editor: Terence E. Kelly, CPA Companies are facing more scrutiny than ever about whether a valuation allowance should be recorded against their deferred tax assets and, if so, when. Auditors face challenges when evaluating the appropriateness of a company’s position on these allowances. A valuation allowance should be recorded against

May 1, 2007

Depreciation Method Changes

Editor: Terence E. Kelly, CPA The IRS recently released final, temporary and proposed regulations specifying when changes in depreciation and amortization will be considered accounting-method changes under Sec. 446 (TD 9307, 12/22/06). The rules also reflect the Service’s attempt to provide more consistent treatment and increased certainty for taxpayers on

May 1, 2007

Depreciating MACRS Property in Tax-Free Exchanges

Final regulations (TD 9314, 2/26/07) explain how to depreciate certain property acquired in a like-kind exchange under Sec. 1031. The rules address how to determine annual depreciation allowances using the modified accelerated cost recovery system (MACRS) under Sec. 168 for replacement property acquired in a like-kind exchange. The guidance also

April 1, 2007

Accrued Payroll Tax Liability Is Deductible Even If Compensation Is Deferred Under Sec. 404

A recent ruling states that accrual-method taxpayers may deduct payroll tax liability incurred in the current year, for compensation deferred and deductible in the following year, under Sec. 404, provided the all-events test and recurring-item exception of Sec. 461 are met. Facts X, a corporation, uses an accrual method of