Posted by Stacy (AZ) on January 16, 2000 at 16:16:52:
Thanks again, Rick. I understand better, now, about the potential impact. I finally was able to get the status of the bill. The last action was that it passed the Senate by unanimous consent, without amendment, on 10/29/99. So, at least for now, it’s alive.
Stacy
History:
S.1792
Sponsor: Sen Roth, William V., Jr. (introduced 10/26/1999)
Latest Major Action: 10/29/1999 Passed Senate
Title: An original bill to amend the Internal Revenue Code of 1986 to extend expiring provisions, to fully allow the nonrefundable personal credits against regular tax liability, and for other purposes.
Jump to: Titles, Status, Committees, Related Bill Details, Amendments, Cosponsors, Summary
TITLE(S): (italics indicate a title for a portion of a bill)
SHORT TITLE(S) AS INTRODUCED:
Tax Relief Extension Act of 1999
OFFICIAL TITLE AS INTRODUCED:
An original bill to amend the Internal Revenue Code of 1986 to extend expiring provisions, to fully allow the nonrefundable personal credits against regular tax liability, and for other purposes.
STATUS: (italics indicate Senate actions) (Floor Actions/Congressional Record Page References)
10/20/1999:
Committee on Finance ordered to be reported an original measure.
10/26/1999:
Committee on Finance. Original measure reported to Senate by Senator Roth. With written report No. 106-201.
10/26/1999:
Placed on Senate Legislative Calendar under General Orders. Calendar No. 346.
10/29/1999:
Measure laid before Senate by unanimous consent.
10/29/1999:
Passed Senate without amendment by Unanimous Consent.
Rick Vesole: Continuation of Installment Sale Senate Bill - Posted by Stacy (AZ)
Posted by Stacy (AZ) on January 16, 2000 at 13:48:20:
Because the previous posts were falling off the bottom of the newsgroup, I’m posting a continuation, here. Jen NE posted that she had also been warned by her investment club that the bill was still alive, and that it could be a concern for Installment Sales. Rick Vesole has stated that the bill would only affect accrual method taxpayers, and that most RE investors use the cash method of accounting.
The bill Jen was referred to is Senate bill S. 1792, not HR 2488, which was vetoed in September. The following link points to the Congessional interpretation of the bill. The installment sale issues and explanations are in this file, under Title II, section J. I have been unable to verify the status of this bill…whether it was already vetoed, or if it is still active.
Rick, could you explain to this “Tax for Dummies” reader what the accrual method is versus the cash method? Also, if I have a Corp for my deals, isn’t the corp supposed to use the accrual method?
Sorry to have to continue this thread, but I think there are probably others that are aware of the bill and a little confused besides me.
Cash v. Accrual methods of accounting - Posted by Rick Vesole
Posted by Rick Vesole on January 16, 2000 at 14:45:12:
I am not at all an expert in this area, but the following is taken (with some modifications for purposes of brevity) from CCH’s Master Tax Guide.
The cash basis is the method of accounting used by most individuals. Income is reported in the year actually or constructively received and deductions or credits are taken in the year in which actually paid.
Under the accural method of accounting, income is accounted for when the right to receive it comes into being. It is not actual receipt but the right to receive that governs. (i.e. for merchandise sold on credit - income is recognized in year of sale, not year payment is actually received). Similarly, expenses are deductible in the year incurred - not the year actually paid.
Taxpayers that are required to use inventories must use the accrual method to account for purchases and sales. Also, the following taxpayers must generally use the accrual method of accounting for tax purposes: C Corporations, partneships that have a C corporation as a partner, trusts that are subject to the tax on unrelated trade or business income on such income (charitable trusts), and tax shelters.
As exceptions to the above rule, the following are not required to use accrual method: If the entity is not a tax shelter and (1) is engaged in farming or tree-raising business, or (2) is a qualified personal service corporation, or (3) meets the $5 million or less goss income test for all prior tax years beginning after 1985 (this means that the entity had less than $5 million in average gross receipts for the previous 3 years).
There are other exceptions to this rule, but the bottom line is that most real estate investors will not have to worry about accrual method reporting.
Re: Oops, didn’t see the posts below - Posted by Stacy (AZ)
Posted by Stacy (AZ) on January 16, 2000 at 14:09:59:
I didn’t see that the discussion regarding this thread were restarted a page below. Sorry if there’s redundancy.
Just to let you know, I contacted Jon Richards, and he has been in communication with Rick and myself about printing a “clarification” in next month’s NoteWorthy Newsletter, so I just want to be sure I can stand behind any conclusions about this bill.