Revised Automatic Change of Accounting Procedure Provided for Corporations Revoking S Status and Changing from Overall Cash to Overall Accrual Method

Congress anticipated that, due to the reduction of the corporate tax rate found in the Tax Cuts and Jobs Act (TCJA), certain S corporations would wish to terminate their election to become a C corporation.  Because of this, Congress added certain special rules that would apply to S corporations that revoked their status within two years of the date of enactment of TCJA.

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IRS Not Required, as a Matter of Law, to Adjust Each Subsidiary's Income or Break Down Adjustment in Detail in Making §482 Adjustment

The question of how much detail the IRS must provide in making an adjustment under IRC §482 was the issue decided by the Tax Court in the case of Guidant, LLC v. Commissioner, 146 TC No. 5.

IRC §482 is meant to deal with cases where taxpayers may be tempted to use transactions between related entities to manipulate a tax result by having the transactions take place under terms that are markedly different than would result from a true arms-length transaction between unrelated parties.

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IRS Regulation Requiring Use of Stock-Based Compensation Amounts in Qualified Cost Sharing Arrangements Held to be Invalid

In the case of Altera Corporation and Subsidiaries v. Commissioner, 145 TC No. 3 the issue before the Tax Court involved the question of whether the corporation in question had to include stock based compensation in its qualified cost sharing arrangement under IRC §482.  An other item of interest is the Tax Court’s analysis of its view of the IRS’s ability to use its regulatory authority to override a position taken in a prior Court decision, with the Court finding the IRS failed to justify its revised regulation.

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