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August 2009 |  Article

The IRS on Thursday modified the procedures for obtaining automatic consent to change an accounting method. Revenue Procedure 200939 amplifies, modifies and clarifies various earlier pieces of guidance that had established the general procedures for taxpayers to secure advance IRS consent to an accounting method change. Last year, the IRS released comprehensive accounting method change guidance in Revenue Procedure 200852.

June 2009 |  BY PHILIP GARRETT PANITZ |  Article

When a corporate client seeks words of wisdom regarding tax planning, most CPAs go through the litany of suggestions related to acceleration of deductions and deferral of income. Yet one of the biggest and potentially most dangerous tax issues facing corporations is the compensation paid to the top executives and whether the IRS will allow the company to deduct the full compensation paid.

March 2009 |  BY Jeff Borghino, Andrew Cordonnier |  Article

Due to the recent turmoil in the credit markets, creditors and borrowers alike are evaluating the tax treatment of interest accruals related to troubled loans. Generally under Treas. Reg. § 1.4462(a), interest is taken into account by a taxpayer according to the taxpayer’s regular method of accounting. Beyond the specific rules for accrualmethod taxpayers, there are established rules for determining Whether interest related to troubled loans is a deductible expense to the borrower (the issuer of a note) as it accrues and Whether interest related to troubled loans is income to the lender

February 2009 |  BY Robert Bloom |  Article

The IRS now considers a rollingaverage method of inventory costing used for financial statements to be acceptable as well for income tax reporting, assuming the taxpayer satisfies one of two safe harbors. Additionally, the IRS furnishes automatic consent to change to a rollingaverage method. Companies in various industries view the rollingaverage method to be a reliable approach to estimation of inventory and cost of goods sold and therefore use it for financial reporting.

February 2009 |  BY Tom Sehman |  Article

A mistake made in a taxpayer’s lastin, firstout (LIFO) computation may repeat in lateryear returns if staff preparing the computation take a “same as last year” approach. When the mistake ultimately is detected, there is a question of whether the mistake represents a method of accounting or an error.

January 2009 |  BY Robert Bloom, William J. Cenker |  Article

Few differences between IFRS and U.S. GAAP loom larger than accounting for inventories, particularly the disallowance of the lastin, firstout (LIFO) method in IFRS. The proposed shift of U.S. public companies to IFRS could affect many companies currently using LIFO for both financial reporting and taxation. This is because the conformity rule of IRC § 472(c) requires taxpayers who apply LIFO for tax purposes to also apply it for income measurement in financial reporting, and IFRS does not permit LIFO for book accounting.

October 2008 |  BY Larry Maples |  Article

EXECUTIVE SUMMARY The IRS has attempted for many years to categorize rebates as deductions rather than exclusions so that the restrictions of IRC § 162 can be applied. But the courts have allowed exclusion treatment for direct sellertobuyer rebates. Though the IRS has had some success in the courts challenging rebates to third parties, recent rulings indicate it is pulling back and may be willing to allow exclusion treatment.

October 2008 |  BY Robert Bloom, William J. Cenker |  Article

EXECUTIVE SUMMARY Hedge documentation is important in both financial reporting and income taxation.For financial accounting purposes, on the date of the hedge, an entity must identify the hedged item, the instrument used, the type of risk hedged, the means of assessing hedge effectiveness, and the risk management objective and strategy.

September 2008 |  BY Edward J. Schnee |  Article

The Tax Court required an auto parts remanufacturer to include in income charges it normally waived in exchange for used parts from its customers. In so ruling, the court underscored that where a taxpayer’s accounting method does not clearly reflect income, the government can require it to use a different method.

September 2008 |  BY Gerald P. Weinstein, Robert Bloom |  Article

The Tax Court rejected an attempt by credit card issuer Capital One to retroactively defer its recognition of income from fees for late payments of card balances. Capital One sought to do so by taking advantage of a law change allowing such payments to be characterized as changes to original issue discount (OID).