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

States look to unclaimed property for revenue

This free report outlines the escheat process, common types of AUP, how different states are handling it and how companies can plan for potential audits and liabilities.

PODCAST

Using drones to enhance audits

Hermann Sidhu, CPA, global assurance digital leader at EY, walks us through EY’s exciting new project to use drones to help audit large warehouses and outdoor inventories.