Federal tax update

In Hilman v Commissioner, 114 TC No. 6 (2000), the Tax Court permitted business income generated by management fees to be offset by the taxpayer's share of management deductions in partnerships paying management fees to his S corporation.

In Von Euw & L. J. Nunes Thing v. Commissioner, TC Memo 2000-114, the Tax Court determined that a sand and gravel contractor who takes title to the materials but disposes of its inventory by the end of any day must use accrual accounting; however, the Tax Court in RACMP -Enterprises, Inc. v. Commissioner, 114 TC No. 16 (2000), did not apply this rule to a concrete contractor that performed services inasmuch as the materials were an inseparable part of the provision for services.

In Douponce v. Commissioner, TC Memo 1999398, the Tax Court determined that the IRS abused discretion in refusing to abate interest accruing after the taxpayer paid an amount represented to him by IRS as payment in full.

In David Dung Le, MD., Inc. v. Commissioner, 114 TC No. 18 (2000), the Tax Court determined that a corporation whose franchise was suspended by the state had no legal authority to file a Tax Court Petition.

Revenue Rulings, Procedures and Notices

In Revenue Procedure 2000-22, IRS announced that taxpayers with average annual gross receipts of $1 million or less, averaging the three most recent prior tax years ending on or after December 17, 1998, will not be required to use accrual basis accounting.

In Notice 2000-26, IRS offered guidance on the repeal of installment sales by accrual basis taxpayers; a target accrual basis corporation may not report gain on the installment method when a section 338(h)(10) election is made.

by

David S. De tong

Stein Sperling Bennett De Jong et al

Rockville, MD

Copyright American Association of Attorney-Certified Public Accountants 2000
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