Printer Friendly

IRS scrutinizes basis studies.

The Internal Revenue Service has shown increasing interest in taxpayer compliance with Revenue Procedure 81-70, which provides guidance on determining the basis of stock acquired in stock purchase transactions (mainly stock swaps). This topic was the subject of an article in the March-April 2003 issue of The Tax Executive, where Juliane L. Keppler of KPMG discussed the requirements of the revenue procedure, the perhaps-not-stringent adherence to those requirements by some taxpayers and advisers, and the IRS's efforts to assess the degree and significance of any compliance problems. In recent weeks, many large case taxpayers have reportedly received information document requests from their audit teams, requesting information on whether the company had conducted a basis study in respect of any transaction occurring during the audit period.

Based on the TTE article and subsequent events, the following points seem relevant:

* Although the regulations contemplate the determination of stock basis at or near the time of a transaction, it is never too late to conduct a Revenue Procedure 81-70 study.

* The determination of target stock tax basis in many, if not most, stock swaps is based on information received (or accessible) from the previous stock owners of the acquired company; the longer a company has to wait to retrieve and analyze the information, the more difficult it may be.

* The IRS is scrutinizing the methodologies used to perform basis studies to assess compliance with the requirements of Revenue Procedure 81-70. Comments from IRS officials and practitioners suggest that some studies are viewed as more in compliance with the rules than others. Basis studies are not all created equal.

TEI understands that the IRS will soon issue a notice soliciting comments on the revenue procedure (including whether it should be revised). When the IRS request is issued, the Institute's Federal Tax Committee will consider whether TEI should file a submission and, if so, the scope and direction of any comments. If you have received an IDR about your company's basis study or otherwise wish to contribute to any forthcoming TEI project, please send an email message to advocacy@tei.org.
COPYRIGHT 2004 Tax Executives Institute, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2004, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Recent Activities
Publication:Tax Executive
Date:Jan 1, 2004
Words:346
Previous Article:Pending technical projects--your participation is invited.
Next Article:Plan to attend 2004 Midyear Conference, Washington, D.C., March 21-24.


Related Articles
IRS determinations present challenges to physician compensation mechanisms.
IRS says certain associate member dues could be UBI.
The postmasters case: taxation of associate member dues.
How much is enough? Lessons on transfer pricing documentation from the recent IRS report.
The IRS reviews revenue procedure 81-70: the stakes for taxpayers are high.
Trust's material participation not limited to trustee's activity.
Executive compensation compliance initiative.
Tax-exempt and commercial organization joint ventures.
Basis studies are given red flags Revenue Procedure 81-70: past, present and future.

Terms of use | Privacy policy | Copyright © 2021 Farlex, Inc. | Feedback | For webmasters