Magazine article The CPA Journal

Accrual of Real Estate Taxes -- Elections Required

Magazine article The CPA Journal

Accrual of Real Estate Taxes -- Elections Required

Article excerpt

In Rev. Proc. 32-28, the IRS has spelled out how accrual basis taxpayers can elect to ratably accrue real property taxes. Absent an election, taxpayers will be governed by the economic performance rules.

The economic performance regulations, effective for taxable years beginning after December 31, 1991, provide that a deduction is allowed for real property taxes only as the tax is paid, unless an election has been made under IRC Sec. 461(c) to accrue the tax over the period to which it relates. The Sec. 461(c) election doesn't require IRS consent in the first year in which proper taxes are incurred; subsequent elections do and must generally be made within 180 days after the beginning of the election year. Revocations of prior Sec. 461(c) elections also require IRS consent.

In light of the economic performance rules, Rev. Proc. 92-28 allows taxpayers who have not previously elected under Sec. 461(c) to automatically do so with IRS consent. …

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