Accounting method changes to be allowed in corporate reorganizations

BY ALISTAIR M. NEVIUS, J.D.

The IRS on Wednesday announced a change in its policy on automatic accounting method changes in corporate reorganizations (Rev. Proc. 2012-39). Taxpayers that engage in a tax-free reorganization or liquidation under Sec. 381(a) after Aug. 31, 2011, will be allowed to make automatic accounting method changes in the tax year they engage in the transaction.

The policy change follows the issuance last year of final regulations that simplified accounting method rules in corporate reorganizations. For prior coverage, see “Final Regulations Simplify Accounting Rules in Corporate Reorganizations.”

Under previous guidance (Rev. Proc. 2011-14), a taxpayer was not allowed to use the automatic change of accounting method procedures for a tax year in which it engaged in a Sec. 381(a) transaction. (However, such a taxpayer could request permission to change accounting method under Rev. Proc. 97-27.) The IRS has now modified Section 4.02(4) of Rev. Proc. 2011-4 to permit taxpayers to make automatic accounting method changes in the year of the Sec. 381(a) transaction.

Wednesday’s revenue procedure also modifies Rev. Procs. 2011-14 and 97-27 to waive the scope limitation that precludes taxpayers who are under examination from seeking consent to change to an accounting method other than the principal or carryover method. 

Alistair M. Nevius ( anevius@aicpa.org ) is the JofA’s editor-in-chief, tax.

SPONSORED REPORT

How the election may affect taxation of business income

This report summarizes recent proposals to reform the U.S. business income tax system and considers the path to enactment of any such legislation.

VIDEO

How to Excel pivot a general ledger

The general ledger is a vast historical data archive of your company's financial activities, including revenue, expenses, adjustments, and account balances. J. Carlton Collins, CPA, shows how to prepare data for, and mine data with, PivotTables.

QUIZ

Did you follow 2016’s biggest accounting news?

CPAs will remember 2016 as a year of new standards and new faces. How well did you follow the biggest accounting events? The 7 questions in this quiz will help you find out