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Accounting Method

Accounting change to reflect tangible property regs brings prior year audit protection

Accounting change to reflect tangible property regs brings prior year audit protection

Chief Counsel Advice 201614037 In emailed Chief Counsel Advice, IRS has concluded that a taxpayer that makes an accounting method change to reflect the 2013 tangible property regs rule regarding non-incidental materials and supplies, and does so via the “limited Code Sec. 481(a) adjustment,” is protected from IRS auditors making a prior year change to […]

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IRS provides new accounting method change form and transition period from old form

IRS provides new accounting method change form and transition period from old form

Ann. 2016-14 Form 3115, Application for Change in Accounting Method (Rev. December 2015) Instructions for Form 3115, Application for Change in Accounting Method (Rev. December 2015)) IRS has issued a revised Form 3115, Application for Change in Accounting Method, instructions to that form, and an announcement about the form that provides for a transition from […]

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CCA rejects S corp’s attempt to convert worthless stock capital loss to ordinary loss

CCA rejects S corp’s attempt to convert worthless stock capital loss to ordinary loss

Chief Counsel Advice 201552026 In Chief Counsel Advice (CCA), IRS has rejected an S corporation’s attempt to claim an ordinary loss deduction under Code Sec. 165(g)(3) for losses incurred in connection with its qualified subschapter S subsidiary’s (QSub’s) conversion to a C corporation, which was effective one day before the S corporation’s termination of its […]

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Seismic studies bought along with proven oil and gas properties aren’t amortizable

Seismic studies bought along with proven oil and gas properties aren’t amortizable

Chief Counsel Advice 201552024 In Chief Counsel Advice (CCA), IRS concluded that the costs of seismic data acquired as part of an asset acquisition weren’t geological and geophysical (G&G) exploration costs eligible for amortization under Code Sec. 167(h). The seller used the seismic data to locate and identify productive oil and gas properties, which it […]

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Percentage-of-completion method look-back interest isn’t eligible for netting

Percentage-of-completion method look-back interest isn’t eligible for netting

Program Manager Technical Advice 2015-016 In Program Manager Technical Advice, IRS has concluded that look-back interest that either the taxpayer owes IRS or IRS owes the taxpayer, at the conclusion of a contract accounted for under the percentage-of-completion method (PCM), is not eligible for interest netting, but that any underpayment/overpayment interest arising from look-back interest […]

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IRS memo shows potential pitfalls in calculation of structural component disposition loss

IRS memo shows potential pitfalls in calculation of structural component disposition loss

Legal Advice Issued by Field Attorneys 20154601F In Legal Advice for Field Attorneys (LAFA), IRS has pointed out errors in a taxpayer’s calculation of the amount of loss it should be able to take with respect to structural component dispositions (SCDs). Background. Final Code Sec. 168 regs issued in 2014 apply to tax years beginning on […]

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Safe harbor for retail and restaurant businesses on when to deduct/capitalize remodeling costs

Safe harbor for retail and restaurant businesses on when to deduct/capitalize remodeling costs

Rev Proc 2015-56, 2015-49 IRB In a Revenue Procedure, IRS has provided a safe harbor method that taxpayers engaged in the trade or business of operating a retail establishment may use to determine whether costs paid or incurred to refresh or remodel a qualified building are deductible under Code Sec. 162(a), must be capitalized as […]

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Revision to accounting method change Rev Proc provides liberal transition rule

Revision to accounting method change Rev Proc provides liberal transition rule

Rev Proc 2015-13, 2015-5 IRB 419   IRS has issued a revised version of Rev Proc 2015-13, which provides the general procedures under which taxpayers obtain IRS consent to change a method of accounting. The revised version provides taxpayers with a more liberal transition rule than was provided in the original version of Rev Proc […]

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IRS issues new draft of accounting method change Form 3115

IRS issues new draft of accounting method change Form 3115

IRS has issued a draft of a revised Form 3115, Application for Change in Accounting Method, which contains a few changes from the current version. It is anticipated that the bulk of the changes with respect to the form will be contained in the instructions to the form, a draft of which has not yet […]

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No refunds due to car dealership that changed accounting method without consent

No refunds due to car dealership that changed accounting method without consent

Hawse, TC Memo 2015-99 The Tax Court has upheld IRS’s denial of refunds to a car dealership that claimed them on the basis that its attempted accounting method change to a method that it then used consistently for the next seven years, was defective due to lack of IRS consent. While the Court agreed with […]

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Change was accounting method change despite increase in partnership property basis

Change was accounting method change despite increase in partnership property basis

Chief Counsel Advice 210521012 In Chief Counsel Advice (CCA), IRS has concluded that, where an adjustment would otherwise constitute an accounting method change, the fact that the adjustment permanently increases a partnership’s basis in its property by changing the adjustment required by Code Sec. 734(b) doesn’t create a change in “lifetime taxable income.” Accordingly, the […]

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CRS surveys policy considerations of tinkering with cash method of accounting rules

CRS surveys policy considerations of tinkering with cash method of accounting rules

The cash method of accounting continues to be a target of policymakers looking either to ease the burden of tax compliance for businesses or to raise revenue. A recently released Congressional Research Service (CRS) report summarizes recently advanced options for either liberalizing the cash method or further restricting its use, and how they would affect […]

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Change from deferral to current recognition of hedging gains is accounting method change

Change from deferral to current recognition of hedging gains is accounting method change

Chief Counsel Advice 201442049 In Chief Counsel Advice (CCA), IRS has determined that a change in the taxpayer’s treatment of certain hedging transaction gains, from deferring them under Reg. § 1.446-4 to recognizing them in the year of realization, constitutes a change in accounting method under Code Sec. 446. IRS further concluded that such a […]

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IRS explains limits on use of the recurring item exception in accrual accounting

IRS explains limits on use of the recurring item exception in accrual accounting

Chief Counsel Advice 201442048M In Chief Counsel Advice (CCA), IRS has concluded that a professional moving service couldn’t use the recurring item exception under Code Sec. 461(h)(3) and Reg. § 1.461-5 for its liability to pay for damaged goods. Background.Under Code Sec. 461(a), a deduction or credit must be taken for the tax year that […]

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Shift in reporting expenses of foreign oil & gas operations was accounting method change

Shift in reporting expenses of foreign oil & gas operations was accounting method change

Chief Counsel Advice 201442050 In Chief Counsel Advice (CCA), IRS has concluded that an energy company’s changes in the U.S. income tax reporting of expenses for its oil and gas operations located in a foreign country was a change in accounting methods. IRS determined that the taxpayer was required to seek and obtain IRS’s consent […]

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Court of Appeals: Sale of unrealized receivables couldn’t be reported under the installment method

Court of Appeals: Sale of unrealized receivables couldn’t be reported under the installment method

Lori M. Mingo and John M. Mingo, (CA 5 12/09/14) 114 AFTR 2d ¶ 5518   The Court of Appeals for the Fifth Circuit, affirming the Tax Court, has held that an individual couldn’t report the sale of her partnership interest as an installment sale for the portion of the proceeds attributable to the partnership’s […]

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Final reg adds margin protection payment rule to retail inventory accounting method

Final reg adds margin protection payment rule to retail inventory accounting method

T.D. 9688, 08/14/2014; Reg. § 1.471-8 IRS has issued a final reg on the retail inventory accounting method that restates and clarifies the computation of ending inventory values under this method and provides a special rule for taxpayers that receive margin protection payments or certain vendor allowances. In general, the final reg adopts the proposed […]

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Automatic accounting method change rules to reflect new retail inventory method reg

Automatic accounting method change rules to reflect new retail inventory method reg

Rev Proc 2014-48, 2014-36 IRB In a Revenue Procedure, IRS has provided the exclusive procedures by which a taxpayer obtains IRS’s automatic approval to make certain accounting method changes within the retail inventory method. These changes correspond to a recently issued final reg that clarified several aspects of computing ending inventory values under the retail […]

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Tax Court: Residential land developer couldn’t use completed contract method

Tax Court: Residential land developer couldn’t use completed contract method

Howard Hughes Company, LLC, (2014) 142 TC No. 20. In consolidated cases, the Tax Court has concluded that none of taxpayers’ contracts were home construction contracts under Code Sec. 460(e), so the taxpayers couldn’t account for them using the completed contract accounting method. However, the taxpayers’ custom lot contracts and the bulk sale agreements were […]

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New accounting method change rules for certain royalties, vendor chargebacks, etc.

New accounting method change rules for certain royalties, vendor chargebacks, etc.

In a Revenue Procedure 2014-33, 2014-22 IRB, IRS has provided exclusive procedures for a taxpayer’s obtaining its automatic consent to: (1) change its method of accounting for certain royalties; (2) change its method of accounting for “sales-based vendor chargebacks;” or (3) change its simplified production method or simplified resale method for costs allocated only to […]

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Meet Paul Raymond

Meet Paul Raymond

Mr. Raymond is a sought after speaker in tax controversy law by many attorney, accountant, and business groups and at the request of the Internal Revenue Service, has presented programs at the IRS Nationwide Tax Forum, attended by tax professionals throughout the United States.

Additionally, he continues to be an active member in the Section of Taxation, American Bar Association, where he was the Past Chair of the Employment Taxes Committee.

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Member CA Bar Member Orange County Bar US Tax Court Attorney