She admitted a high pro rata
is a difficult problem to overcome, but in many cases, such as with buildings with a block of sponsor units on the market, arrangements can be made.
Yet, few would disagree the pro rata
allocation approach is inappropriate for the transactions addressed by the EITF consensus and that the relative fair value cost allocation approach generates a preferable accounting result.
These sections state that a shareholder's gross income includes his pro rata
share of the S income and the character of any item included in the pro rata
share will be determined as if the item were realized directly by the shareholder from the source from which it was realized by the corporation.
Planning idea: The debt issuer may use the new pro rata
prepayment provision to accelerate income or deductible premium, depending on the terms of the instrument and the current interest rate market, by prepaying part of the outstanding obligation.
The shareholder may purge the PFIC taint by including in income as a dividend (treated as an excess distribution) his pro rata
share of the corporation's post-1986 earnings and profits.
in that event, the pro rata
method cannot be used, and the specific accounting method is required (rather than elective).