Taxpayers can deduct an accrued expense
for tax purposes only after the all-events test has been met and economic performance has occurred.
Because the insurer's liability for the dividends was contingent, the circuit court held, it did not satisfy the regulatory requirements for deduction of an accrued expense
To deduct an accrued expense
, an accrual-basis taxpayer must satisfy an all-events test.
Unless separate sub-accounts are used to capture the accrued expense
versus the payments and other adjustments to an accrued liability account, the only way to compute the expense versus the payments would be to review every transaction (journal entry) that was made to the accrued liability accounts.
A loan only exists if there is a note in writing and interest is imputed and is shown on the books of the corporation as an expense or an accrued expense
. In the absence of this, IRS will treat the "loans" as additional paid-in capital.
In our model, pay-as-you-go cost, retiree health benefit liability, retiree health benefit liability to pay-as-you-go cost index (hereafter, the liability-to-cost ratio), accrued retiree health benefit expense (hereafter, accrued expense
) and accrued expense
to pay-as-you-go cost index (hereafter, expense-to-cost ratio) are calculated for the different AAAC demographic groups.
For the fiscal year ended March 31, 2005, VECO attached a Form 3115, Application for Change in Accounting Method, to its federal income tax return proposing to change its accounting method to accelerate deductions for prepaid and accrued expense
liabilities attributable to periods after the close of its fiscal year that were incurred in connection with service contracts, insurance premiums, and real property and equipment leases.
The IRS argued that once section 267(a)(2) disallowed a deduction for an accrued expense
for a given tax year, the expense could not be deducted until it was paid.
The company in this example generates $13,588,000 in pre-tax income in the year of settlement and entirely eliminates the accrued expense
on its books.
The income is treated as ordinary to the liquidated partner, but the related accrued expense
Is there a greater need to pre-fund, now that income statements and balance sheets will show the current and accrued expense
for postretirement benefits?
Thus, the accrued liability on the balance sheet would reflect the difference between cumulative accrued expense
and amounts paid (or funded).