Cash basis

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Potential for Abuse

Many years ago, Congress decided that taxpayers who were “related” to one another should be required to use the same accounting method with respect to transactions between them in order to prevent the allowance of a deduction to one party (using the accrual method of accounting) without the corresponding inclusion in income…

“You Made Your Bed, Now . . .”

It is a basic precept of the tax law that, for purposes of determining the tax consequences of a transaction, a taxpayer will generally be bound by the form of the transaction that the taxpayer has used to achieve a particular business goal.

The taxing authorities, however,…