Obtaining advice from IRS is costly and may not be needed

Article Abstract:

The IRS issues written advice on tax matters in the form of letter rulings, determination letters or information letters to taxpayers who ask for it. New developments have made it more difficult to obtain such advice. Firstly, the Service is now charging fees even before dispensing advice. A schedule of current user fees and guidelines regarding user fee requirements are contained in Revenue Proclamations 93-1 and 90-17. Secondly, the IRS has started requiring that requests for written guidelines be submitted together with the appropriate and fully-completed checklists. Thirdly, the Service has expanded the list of areas in which it refuses to issue rulings. This list is released at the start of every year. Lastly, the IRS has recently undergone a reorganization which makes it necessary for taxpayers to ascertain first which branch of the Service has authority over the tax issue they are interested in.

Services, Tax administration and procedure, United States. Internal Revenue Service

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Recent developments restrict use of wrap-around mortgages, but some benefits remain

Article Abstract:

The legalities and economics of wrap-around mortgages and the deferred mortgage payments thereunder are discussed from the perspective of taxation. Recent tax regulations recognize depreciation recapture income as income currently taxable and wrap-around mortgages as installment sales, both of which make the wrap-around mortgage less desirable economically. Various methods of reporting gains from wrap-around sales are identified, and the tax breaks afforded to buyer and seller under each tax accounting method are detailed. If timing the gain recognition is critical to either buyer or seller, then the wrap-around mortgage may offer some tax advantages over assumption sales and sales 'subject to', although these advantages are available only in highly specific situations. Examples of wrap-around mortgages and tax treatments therefor are provided.

United States, Liabilities (Accounting), Mortgages, Real property taxes, Wraparound mortgages

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Income can be deferred without running the risk of constructive receipt being applied

Article Abstract:

The constructive receipt doctrine may be applied to deferred income transactions. Methods of shifting income to a later year that avoid the application of constructive receipt are discussed. No constructive receipt of income is recognized if: there are substantial limitations on the manner of payment, a valuable right is given up to receive income, the income is subject to litigation, payment is impossible because of the financial condition of the debtor, or if receipt is postponed by a pre-transaction agreement. Examples of pre-transaction agreements that are exempt include installment sales and some payroll systems in which the employees have no control over when they receive the funds. Interest and dividend income is considered constructive receipt.

Methods, Tax accounting, Income accounting

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