Publication 553 - Highlights Of 2002 Tax Changes Page 12
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31a) Reporting companies under the Securities Ex-
change Act and related entities (as defined in
2.
sections 267(b) and 707(b) of the Internal Reve-
nue Code), or
Tax Changes for
b) Business entities that have $100 million or more
in gross assets, including the assets of all related
Businesses
entities (as defined in sections 267(b) and 707(b)
of the Internal Revenue Code).
2002 Changes
6) Transactions with brief asset holding periods.
This category includes transactions with both of the
following characteristics.
Nonaccrual-Experience Method
a) The transaction involves an asset(s) held by an
investor for less than 45 days. To determine the
Under current law, if you perform services and use an
asset’s holding period, see section 246(c)(3) and
accrual method of accounting, you do not accrue income
(4) of the Internal Revenue Code.
that, based on experience, you expect to be uncollectible.
b) The transaction results in a tax credit (including a
Beginning in 2002, this rule only applies if you perform
foreign tax credit) exceeding $250,000.
services in the fields of health, law, engineering, architec-
ture, accounting, actuarial science, performing arts, and
consulting, or your average annual gross receipts for the 3
More information. For more information and excep-
prior tax years does not exceed $5,000,000. As under
tions to these rules, see Form 8886 and its instructions.
current law, the nonaccrual-experience method will not
For the disclosure rules that apply to transactions en-
apply to amounts on which you charge interest or a late
tered into before 2003, see Tax Shelter Disclosure State-
payment penalty. For more information, see
ment under 2002 Changes.
Nonaccrual-Experience Method in chapter 11 of Publica-
At the time this publication was being prepared
tion 535, Business Expenses.
!
for print, the regulations relating to reportable
transactions were expected to be revised. The
CAUTION
Approval Process for Change of
revised regulations will permit taxpayers who entered into
Accounting Period
transactions after 2002 and before the filing date of the
revised regulations to elect to apply the revised regulations
The Internal Revenue Service has issued new rules for
instead of the rules described here.
getting approval to adopt, change, or retain an annual
accounting period (tax year). Revenue Procedure
2002 –37 contains the automatic approval procedures for
Later Change
corporations; Revenue Procedure 2002 –38 contains the
automatic approval procedures for partnerships, S corpo-
rations, and personal service corporations; Revenue Pro-
cedure 2002 –39 contains the prior approval procedures
Special Liberty Zone Depreciation
for any taxpayer that cannot get approval under automatic
Allowance for New and Used Property
procedures. These revenue procedures can be found in
Internal Revenue Bulletin 2002 –22. For more information
You can claim the special Liberty Zone depreciation allow-
on the new rules, see Publication 538, Accounting Periods
ance (an additional 30% depreciation deduction) for used
and Methods.
property that you acquire after September 10, 2001, if the
property meets the requirements for qualified Liberty Zone
Standard Mileage Rate Increased
property. You will be able to claim the allowance for both
new and used property that you acquire after September
Business-related mileage. For 2002, the standard mile-
10, 2004, provided the property meets the other require-
age rate for the cost of operating your car, van, pickup, or
ments for qualified Liberty Zone property. See chapter 3 in
panel truck is increased to 36
1
/
cents a mile for all busi-
Publication 946, How To Depreciate Property.
2
ness miles.
Car expenses and use of the standard mileage rate are
explained in chapter 4 of Publication 463, Travel, Enter-
tainment, Gift, and Car Expenses.
Page 12
Chapter 2 Tax Changes for Businesses
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