Cash and accrual accounting: when can the IRS require a change of method?

Article Abstract:

The IRS generally cannot force a taxpayer to use an accounting method it considers more clearly reflects the taxpayer's income, such as the accrual method, if the taxpayer's current method, such as cash accounting, is a clear reflection of its income. In the Ansley-Sheppard-Burgess case, the Tax Court ruled the taxpayer's cash method was acceptable and the IRS abused its discretion by demanding a change in method. A 1995 Technical Advice Memorandum, however, states that construction contractors must maintain inventories and must change to the accrual accounting method.

United States, Cases, Tax accounting, Accrual basis accounting, Cash basis accounting

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Without regulations passive losses do not carry over to bankrupt's estate

Article Abstract:

A bankrupt estate may not recognize passive losses under IRC section 1398(g) since there have been no relevant regulations mentioning such losses. Unsecured Creditors of D.F. Antonelli v. United States affirmed this limitation. The problem has been dealt with in proposed regulations which will apply to bankruptcies that start on or after Nov 9, 1992.

Interpretation and construction, Laws, regulations and rules, Passive activity (Taxation), Bankruptcy estates

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