Taxation
Ca. Tax Lawyer OCTOBER 2018, VOLUME 27, NUMBER 3
Content
- 2018 Annual Meeting of the California Tax Bar and California Tax Policy Conference Sponsor Guide
- 2018 Meeting Eagle Lodge West
- A Cultural Compulsion to Share All Gives Way to a Passion for Confidentiality and Non-Disclosure in Tax Matters Section 7525 Federally Authorized Practitioner Privilege and the Work-Product Doctrine in Today's World
- Advisors and Liaisons
- Amendment of Internal Code Section 152(e) in Order to Better Reflect Taxpayer Reality and Ensure Taxpayer Saftey
- An Uncertain Future: How the Potential Clawback Muddies the Estate and Gift Tax Waters
- Cla Staff
- Contents
- Executive Committee
- Helpful Suggestions for Improving Compliance with Information Regarding Beneficiaries Acquiring Property from a Decedent (Form 8971) and the Associated Basis Consistency Requirements
- Masthead
- Message from the Chair
- Standing Committees
- Tax Business
- Taxation Section 2017-2018 Leadership Directory
- Visiting the Committees
- A Request for Guidance and Relief from the Timely Reporting Requirement of Section 1.482-1(a)(3) of the Internal Revenue Regulations
A Request for Guidance and Relief from the Timely Reporting Requirement of Section 1.482-1(a)(3) of the Internal Revenue Regulations1
By William H. Quealy, Jr.2
I. EXECUTIVE SUMMARY
Unless otherwise authorized by statute or regulation, taxpayers generally are bound to account for the income realized from transactions with commonly controlled entities based on the form and terms of the transactions as executed.3 Section 482 of the Internal Revenue Code of 19864 grants the Secretary the discretion to reallocate the income, expense or credits from transactions among commonly controlled entities where necessary to prevent the evasion or avoidance of tax or to more clearly reflect income.5 The Secretary and the courts are in agreement that Section 482 does not authorize taxpayers to depart from the terms of their controlled party transactions when reporting taxable income nor does it grant taxpayers a right to compel the Secretary to do so.6
The Secretary promulgated Section 1.482-1(a)(3) which allows taxpayers to disregard the terms of their controlled party transactions if necessary to report an arm’s length result. Under the terms of the delegation of Section 482 authority, taxpayers may report an increase to the income from controlled party transactions at any time, but they may only report a decrease to the income from controlled party transactions on a timely original return. This is referred to herein as the "timely reporting requirement" and is imposed solely by regulation. The timely reporting requirement may be waived at the Commissioner’s discretion.