Duplicate Loss on Disposition of Subsidiary Before the Tax Reform Act of 1986 amended IRC section 336, it was possible for owners to remove assets from a corporation without a corporate-level tax. Section 336 now requires taxpayers to recognize a gain or loss on any assets they remove from a
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TOPICS
Tax
Banking
The Office of the Comptroller of the Currency issues Bulletin 2002-39, Investment Portfolio Credit Risks: Safekeeping Arrangements ( www.occ.treas.gov/ftp/bulletin/2002-39.doc ), alerting national banks to potentially significant credit risks inherent in custody relationships involving their own assets. Recently, several financial institutions suffered losses when deposit brokers (entities that broker, among other
Tax Notes
The IRS proposes regulations ( www.access.gpo.gov/su_docs/fedreg/a020802c.html ) requiring certain financial institutions to report interest payments made to nonresident aliens who reside in specified countries and maintain deposits in the U.S. offices of such entities. Currently the service mandates reporting of this interest only if a financial institution pays it to
Financial Reporting
The SEC issues final rules ( www.sec.gov/rules/final/33-8124.htm ), effective August 29, requiring a public company’s principal executive and financial officers to certify the financial and other information in their organization’s quarterly and annual reports. The commission also solicited, through October 9, public comments on the advisability of extending this requirement
Auditing
The AICPA auditing standards board issues three standards. The first, Statement on Auditing Standards (SAS) no. 98, Omnibus 2002, contains amendments to SAS nos. 1, 8, 25, 29, 47, 52, 58 and 95. SAS no. 98 also amends SAS no. 70 by rescinding Interpretation no. 6, incorporating its guidance into
The New GAO Independence Standard: What Auditors Need to Know
EXECUTIVE SUMMARY THE GAO AMENDED THE AUDITOR INDEPENDENCE provisions of its generally accepted government auditing standards (GAGAS). Originally, the amendment was to be effective for audits beginning on or after October 1, but the GAO extended the time frame to January 1, 2003. THE GAO ISSUED THE NEW STANDARD
E-Commerce Tax Imminent
TAX MATTERS Source: Forrester Research, Inc., www.forrester.com.
Special Report: The Constitutionality of the Parsonage Allowance
Constitutionality became a much discussed issue when the Ninth Circuit Court of Appeals decided reciting the Pledge of Allegiance in a public school was unconstitutional. In a less publicized opinion, the Ninth Circuit also questioned the constitutionality of the parsonage allowance, which provides a tax break to ministers. In Richard
FYI
The Association of Government Accountants honors the GAO, the National Science Foundation, the Nuclear Regulatory Commission, the Social Security Administration and the Departments of Energy, Interior, Labor and State with Certificates of Excellence in Accountability Reporting ( www.agacgfm.org/cear/index.htm ) for the fiscal year 2001 reports they issued on their financial
Trouble Ahead
TAX MATTERS Source: Tax Foundation, www.taxfoundation.org .
International
The International Federation of Accountants (IFAC) releases a paper, Financial Reporting on the Internet—Responsibilities of Directors and Managers ( www.ifac.org/Store/Details.tmpl?SID=1030393082223229 ), outlining the managerial actions necessary to ensure online financial reports are as accurate and complete as those issued in print. Among the matters the report discusses are the control
Investments
The Office of the Comptroller of the Currency reports that in the second quarter, U.S. commercial banks increased the amount of derivatives in their portfolios by $3.8 trillion to $50.1 trillion—the second highest amount ever recorded ( www.occ.treas.gov/ftp/release/2002-70.doc ). According to the OCC, bank risk managers used this strategy to
Retirement
A survey ( www.socialsecurity.org/dailys/07-29-02.html ) conducted during a week in July when the Dow Jones industrial average plummeted nearly 700 points found 68% of likely voters nevertheless favor letting workers invest part of their Social Security taxes in personal retirement accounts, say researchers at the Cato Institute.
Professional Issues
The AICPA is forming four panels (one for each of the proposed CPA examination sections) to help set standards for passing the computer-based exam. Qualified CPA volunteers are needed for a series of two-day standard-setting sessions between December 11 and 19. Participants should have three to seven years’ experience in
Phone Filing Still Popular
TAX MATTERS Source: IRS, www.irs.gov .
Financial Reporting
Most of the 947 companies whose CEOs and CFOs are required by the SEC to certify the accuracy and completeness of corporate financial statements met the commission’s initial August 14 deadline. To assist investors and others in tracking which of these large corporations have complied, the commission listed on its
Auditing
For news from the AICPA and state societies, visit www.cpa2biz.com , which also offers online CPE, AICPA professional literature, practice management aids and links to state society Web sites. President Bush signed into law on July 30 the Sarbanes-Oxley Act of 2002 (www.aicpa.org/info/sarbanes_oxley_summary.htm), establishing the Public Company Accounting Oversight Board,
Sale of Future Lottery Payments of Ordinary Income
TAX CASE Lottery winnings generally are taxed as ordinary income in the year a taxpayer receives them. But what happens if the winner sells the right to receive future lottery payments in exchange for a lump sum amount? Is the transaction eligible for capital gains treatment? In 1991 Mr. and
Tax Liens
TAX CASE One troubling aspect of tax practice that CPAs sometimes have to deal with is what to do when the IRS or some other authority attaches a tax lien to a client’s property. The issue is even more complex when the property is in joint name because it involves
Planning for Higher Education
ollege is expensive. IRC section 529 qualified tuition programs have become more popular due to Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) provisions that ended the taxing of distributions used to pay qualified higher education expenses. Prior to the EGTRRA, the earnings portion of such distributions was
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