The CPA Journal

The CPA Journal is a monthly refereed accounting journal. It has been published by the New York State Society of CPAs since 1930.Subjects for The CPA Journal inlcude accountants and accounting. Carolyn Morrisroe is the managing editor and Anthony H. Sarmiento is a contributing editor.

Articles from Vol. 64, No. 4, April

Beneficiary Must Report Gain or Loss on Sale of S Corporation Stock
In Rev. Rul. 24, 1932-2 CB 216, the IRS held that if a qualified Subchapter S trust (QSST) sells all or part of its S corporation stock, the beneficiary of the QSST, rather than the trust, recognizes the gain or loss on the sale of the stock. This conclusion...
Beware of Prohibited Transactions with ESOPs: A Case in Point
Employee stock ownership plans (ESOPs) have become popular qualified employee benefit plans for closely held corporations. To protect the interests of plan beneficiaries, some transactions are prohibited and subject to a two-tier excise tax.A 1991 tax...
Beyond Age-Weighted Profit-Sharing Plans
Because of their contribution flexibility, profit-sharing plans have long appealed to small-business owners and companies alike. Contributions for a year may range from zero to 15% of covered compensation. Thus, if cash is tight, contributions to a profit-sharing...
Book Review: Commercial Agreements: A Lawyer's Guide to Drafting and Negotiating
COMMERCIAL AGREEMENTS: A LAWYER'S GUIDE TO DRAFTING AND NEGOTIATINGBy Peter Siviglia, Lawyers Cooperative Publishing, 396 PagesReview by Richard S. Zimmerman, CPA, Frank and Zimmerman & Co.Peter Siviglia has written a book of model agreements that...
Buying United States Treasuries Directly
Individuals can purchase U.S. Treasury bills, notes, and bonds directly, by mail or in person, from any Federal Reserve Bank or the U.S. Treasury Department in Washington, D.C. These securities can either be purchased individually, in joint ownership...
Calculating Fraud Damage Awards
Ever since the serpent offered the apple to Adam and Eve, human society has never been, and probably never will be, immune from fraud. Broadly publicized scams and scandals in recent years have perhaps made the public more aware of such incidents and...
Case Studies in Compilation and Review
The following cases were selected from a group of 15 cases developed by the Accounting and Review Services Committee of the NYSSCPA under Chairman Steven Rubin's leadership. The purpose of the cases is to identify and help clarify some of the technical...
Charities Face More Paperwork under 1993 Tax Act
The 1993 Tax Act will be helpful to charities, but at a price. True, the higher tax rates give bigger tax incentives for charitable donations. In addition, the repeal of the alternative minimum tax restrictions has removed a significant tax disincentive...
Compilation and Review Alert-1993 Now Available
Continuing in the mold of the 1993 Audit Risk Alert, the AICPA Auditing Standards Division has produced a potentially helpful document in its Compilation and Review Alert--1993. Unless a member of PCPS (they receive a complimentary copy as part of their...
Congressional Budget Office Looks into the Future
On January 27, 1994, the Congressional Budget Office (CBO) issued its Budget Outlook for Fiscal Years 1995-1999. In a similar report issued last year, the CBO predicted the deficit would soar above $350 billion by fiscal year 1998. In the newest report,...
Consumption Taxes: A View of Future Tax Reform in America
Judging from the political rhetoric, it is highly probable that some form of Federal tax on consumer expenditures, i.e., consumption, is not far from legislative enactment. President Clinton has broached the idea more than once, and several members of...
Deduction for Accrued Interest on Deferred Compensation Allowed
A recent Court of Appeals decision (CA 9, Albertson's Inc. v. Commissioner, NO. 91-70380, 12/30/93) surprised a number of people and upset the IRS. In reversing a Tax Court decision, the Court allowed the taxpayer a deduction for interest accrued on...
Financial Information Used by Small Independent Retailers
The success of small businesses is sometimes attributed, at least in part, to the nature and quality of the financial information available to its managers and owners. But is timely and accurate financial information that important to the small business?Interviews...
Flexibility in Classifying a Foreign Partnership or Corporation
In Rev. Rul. 934, 1883-3 I.R.B. 1, the IRS modified its position in determining whether a business organization will be treated as a partnership or a corporation for U.S. tax purposes. This classification issue arises frequently with regard to foreign...
For Effective Promotion, 'Make' News
Other than advertising, an accounting practitioner's repertoire of promotional strategies is rather limited. The firm may have developed a brochure enumerating its specialties and citing the expertise of partners and principals. There's usually a push...
Foreign Students Receiving Scholarships
The Department of Treasury has issued proposed regulations that would modify the source rules for income defined as scholarships and fellowship grants [Prop. Reg. Sec. 1.863-1(d)]. Foreign recipient of scholarships and fellow ships are subject to U.S....
How Exempt Are Tax-Exempt Bonds?
The demand for municipal bonds should increase as a result of higher marginal income tax rates. However, owners of tax-exempt bonds should be aware of various provisions that cause tax-exempt interest income to increase tax liabilities.Interest received...
IRAs and the Marital Deduction
A recent PLR again dealt with and approved the use of an IRA as qualifying for the estate tax marital deduction.IRC Sec. 205G(a) provides that the value of the taxable estate of a decedent is determined by subtracting from the gross estate (among other...
Library Gems: Relevant Source of Data for the Accountant
The typical business library has many references that can be effectively used by all accountants regardless of whether they are employed in public practice, industry, or education. Although it is not practical to describe all the possible library reference...
Looking into Windows from the High End
For several years, it looked as if the Windows software revolution might bypass the high-end accounting software market. While word-processing and spreadsheet applications have readily adapted to the graphical-user interface, for many reasons, general...
New York State Adds Non-Resident Audit Guidelines
Taxpayers filing nonresident New York State personal income tax returns have been increasingly exposed to tax examinations.In February 1933, the New York State Department of Taxation and Finance issued a 48-page Technical and Procedural Guideline addressing...
Nice Try: Buying an Annuity and Deducting the Sum of the Payments It Provides
Ford Motor Co. is doing quite well these days but is finding that you can't win them all. It recently lost a Tax Court case in which it appealed the IRS disallowance of the major portion of its deduction for the settlement of tort claims for personal...
Notice to Practitioners AICPA Auditing Standards Division
Engagements to Report on Performance Presentation Standards of the Association for Investment Management and ResearchThe Association for Investment Management and Research (AIMR) has issued a report containing performance presentation standards (PPS)...
NYS Surcharge on the S Corporation Franchise Tax
The New York State surcharge (Surcharge) of 15% on certain S corporation franchise taxes was enacted in 1990. S corporations that qualify as "small business taxpayers" with $200,000 or less entire net income are exempt from the surcharge. To qualify...
Partnership Agreements and Tax Returns: Opportunities to Add Value to Client Services
[Editor's note: In the December 13 issue of The CPA Journal the authors presented opportunities for CPAs to Provide additional tax services based upon a review of partnership agreements and tax returns. This month they offer their thoughts on non-tax...
Preserving Cost-Recovery Deductions
In its Proposed 1993 Business Plan, the IRS indicated that it is considering whether to reverse its historical position concerning how to treat certain correctly depreciated property. This proposed change can have a negative impact on a taxpayer's ability...
Reporting on Investment Advisor Performance
To take the hype out of past performance statistics of many investment managers, the Association of Investment Management and Research has developed standards for historical performance reporting. A second aspect of this performance reporting is a suggested...
Revision to Yellow Book According to Schedule
The Government Auditing Standards Advisory Council, appointed by the Comptroller General of the U.S., met in early February to finalize the revisions to Government Auditing Standards, often referred to as the "yellow book." An exposure draft (ED) of...
Some Say the States Can't Handle the Combination
Based on an unscientific phone-in poll Accounting Today reported in January 1994 that there was doubt expressed by some practitioners about the ability of state societies of CPAs to handle the combined peer review/quality review program at the same high...
Straight-Line Deduction for OID Not Allowed
In a recent case (Peerless Industries Inc., DC EPa, No. 92-2163, 1/1/9/94), the court ruled against a taxpayer who took a straight-line interest deduction for original interest discount on a bond issued to a tax-exempt private school. In following the...
Tax Court Disallows Deduction for Employee's Home Computer
TAX COURT DISALLOWS DEDUCTION FOR EMPLOYEE'S HOME COMPUTERBy Peter Barton, JD, CPA, and David Remmele, PhD, CPA, University of Wisconsin--WhitewaterIn Bryant v. Commissioner, TC Memo 1993-597 (December 16, 1993), the Tax Court disallowed a deduction...
Tax Court Provides Guidance in Applying the Export Source Rule
The Tax Court's decision in Intel Corp. v. Commissioner, 100 T.C. 39 (1993), sheds light on example 1) of Reg. Sec. 1.863-3(b)(2), relating to when a cross-border sale is to be sourced. The court held "the plain language of example (1) requires that...
The New CPA Examination
The focus of the CPA examination is "on the knowledge and skills that new CPAs in public accounting need to have early in their careers to protect the public." After much study and input from firms, changes have recently been made in the AICPA Uniform...
The U.S. Health Care System in Transition
Debate over health care reform has focused largely on President Clinton's proposals and other Federal and state legislative initiatives. The dramatic changes occurring in the health care delivery system are driven not just by politics, however, but by...
Those Monstrous Damage Awards against Accountants
News releases describing huge damage payments by accountant defendants have been fast and furious. The club of accountants who suffered judgments over $200 million in 1992 includes the following:* Ernst & Young agreed to pay $400 million to various...
Trustee's Amendatory Powers Defeats QTIP Marital Deduction
The marital deduction on Form 706 may be claimed by the surviving spouse for a qualified life income interest related to qualified terminal interest property (QTIP). To qualify, the surviving spouse must be entitled to all the income payable from the...
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