Method change gives depreciation catch-up

Article Abstract:

Revenue Procedure 96-31 provides a blanket consent allowing taxpayers to change particular erroneous depreciation methods that have generated less than the allowable depreciation. Unclaimed depreciation for closed and open years is reinstituted by making a Sec. 481(a) adjustment that lowers income in the year the change is made. Automatic changes in the method of depreciation for an item of property will be allowed by the IRS if three conditions are met. The taxpayers should not have made any claim on depreciation or have made a claim less than the allowable depreciation under its present accounting method. Also, the property should be depreciable or amortizable under Secs. 168, 167 or 197 and held by the taxpayers at the start of the year of change. The Procedure, which takes effect on May 13, 1996, is not applicable if the taxpayers are involved in a pending criminal investigation or proceeding involving tax liability.

Accounting and auditing, Depreciation

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Proposed regulations lessen confusion as to calculation of ACE adjustment

Article Abstract:

The IRS has issued Proposed Regulations under Section 56 in order to diminish the confusion of the calculation of adjusted current earnings (ACE) for the purposes of computing alternative minimum taxable income (AMTI) or the Section 59A environmental tax. ACE includes items not included in calculating the pre-adjustment AMTI: items generally are not deductible unless they are deducted in computations of both the pre-adjustment AMTI and the current earnings and profit. For items included in pre-adjustment AMTI, the expenses related to the item are deductible when computing ACE. The Proposed Regulations also address ownership changes: ownership changes occur for ACE purposes only if the change occurs for regular tax purposes.

Profits, Assets (Accounting), Corporate profits

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Restrictions on use of the cash method explained by new regulations

Article Abstract:

The IRS has published Proposed and Temporary Regulations on the limitations on utilization of the cash receipts and disbursements accounting method. A new accounting method called nonaccrual-experience has also been provided which permits the taxpayer using an accrual technique not to accrue amounts to be obtained from the performance of services. The new regulations are explained, including function and ownership test considerations.

Accrual basis accounting

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