If the taxpayer does not discover the mistake before filing its return for the year of sale (and accrues
the incorrect amount), it has to file a refund claim (i.
In the case of the CFT, absent section 461(d), the 1972 change in the CFT law would have caused both the 1971 and the 1972 CFT to accrue
for federal tax purposes in 1972.
This regulation, known as the "noncontingent bond method" allows an issuer to accrue
an original issue discount (OID) deduction at a yield "comparable" to that of a fixed-rate instrument with similar terms and conditions, but without contingencies.
0 million which will initially accrue
interest at 325 basis points over LIBOR and a five-year term loan for $50.
Instead, it accrues
$15,000 in gross sales and includes that amount (less the corresponding cost of goods sold) in its 2002 gross income.
Dividend Rate: Dividends accrue
on the Series A Preferred
1942) ("where interest actually accrues
on a debt of a taxpayer in a tax year the statute plainly says he may deduct it.
Letter Ruling (TAM) 9538007 held that taxpayers must continue to accrue
original issue discount (OID) on debt instruments even when the issuer's financial condition is such that there is no reasonable expectation that the accrued OID win be collected.
In these cases, interest accrues
only until the filing date for the tax year giving rise to the carryback.
Thus, for example, an accrual method payor normally cannot deduct an item that it accrues
as a liability to a related cash method recipient until the item is paid, at which time the recipient must include it in income.
Example 1: BA, an accrual-basis partnership, accrues
an otherwise deductible expense to partnership CA, which is on the cash basis.
Accounting method change: If a company is not currently deducting interest as it accrues
with respect to existing deferred compensation agreements that fit the profile in this case, the company most likely will have to request a change of accounting method from the IRS for current and new plans.