IRS clarifies when economic performance is met by accrual-basis taxpayers

Article Abstract:

The IRS has issued Proposed Regulations IA-258-84 to help taxpayers identify when economic performance occurs under the all events test. Proposed Regulation 1.461-4(d)(5)(ii) states that taxpayers may either deduct costs or add them to basis if they have reason to believe property or services will be provided by the other party within three-and-a-half months after payment. Proposed Regulations 1.461-4(g)(2) through 1.461-4(g)(7) define the liabilities under which economic performance can occur. Payment must be made for certain types of liabilities, including refunds, prizes, and liabilities resulting from a breach of contract. Section 468B states that economic performance has occurred when payments are made to a specified settlement fund.

Liabilities (Accounting)

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Can IRS revalue a gift after statute has run on gifts?

Article Abstract:

The Tax Court has ruled that the IRS can revalue gifts after the statute of limitations on gifts has run out when prior taxable gifts are being revalued by the IRS for the purpose of computing estate taxes. Section 2504(c) of the Internal Revenue Code does not allow the revaluing of prior taxable gifts by the IRS for the purpose of computing the gift tax, but the Tax Court ruled that it is permissible for making computations for estate taxes. The Tax Court limited the extent of the IRS victory by ruling that the amount of the gift tax payable on prior gifts should be recomputed to take into account any rise in the value of the gift.

Cases, Transfer taxes, Gift tax, Tax courts

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