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Accounting Methods

New Proposed Regulations under IRC 451 Released

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

The IRS recently issued proposed regulations under IRC § 451(b) on the tax year of income inclusion for certain accrual method taxpayers. The IRS also issued proposed reliance regulations regarding the timing of income inclusion under IRC § 451 of advance payments for goods, services, and certain other items.  The proposed regulations reflect the amendments to IRC § 451 made by the Tax Cuts and Jobs Act (PL 115-97).

The Tax Cuts and Jobs Act amended IRC § 451 to provide that, for taxpayers using an accrual method of accounting, the “all events” test with respect to any item of gross income (or portion thereof) is not treated as met any later than when the item (or portion thereof) is included in revenue for financial accounting purposes on an applicable financial statement (AFS) or other financial statement specified by the IRS. The amendments made to IRC § 451(b) did not change the time at which income subject to the all events test is taken into income for accrual method taxpayers without an AFS or other specified financial statement.

Read our expert analysis in Checkpoint Federal Tax Update. To continue your research on income inclusions for accrual method taxpayers, see FTC 2d/FIN ¶G-2472 and FTC 2d/FIN ¶ G-2540 et seq.

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