Tax avoidance motive triggers installment resale rule

Article Abstract:

A recent Tax Court case has held that dispositions for the sole purpose of avoiding taxes will trigger the installment resale rule. Parties using the installment method to sell property must report gain in cases where there is a second disposition of the property. The exception to this rule is if the property transfer was a result of condemnation and not for the purpose of tax avoidance. Under Section 453, taxpayers can report income on an installment basis if at least one payment is received after the close of the tax year in which the disposition occurred. If the sale is to a party that makes a disposition within two years, the original party must report gain. In the case of Tecumseh Corrugated Box Co, taxpayer claimed the disposition was due to the threat of condemnation. However, the court ruled there was no evidence of threat of condemnation and that the taxpayer could not get an exception to the resale rule.

Methods, Cases, Laws, regulations and rules, Tax accounting, Tax planning, Revenue, Tax courts, Tecumseh Corrugated Box Co.

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Election to amortize start-up costs is more extensive than first appears

Article Abstract:

Congress' 1984 amendment to Section 195 significantly reduced confusion about start-up expenses and provided major taxpayer benefits. Planning is needed to make the most of these opportunities. The taxpayer must choose to amortize start-up costs in the year during which a trade or business begins, so opportunities must be recognized quickly. The tax definitions and roles of start-up, investigatory, and pre-opening expenses are described.

Analysis, Amortization

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