Federal Tax Accounting USA, Research Paper Example

Summary of Code Section

The current internal revenue code noted at to be found at section 197 is also known as the Amortization of Goodwill and Certain other Intangibles. This particular aspect of taxation recognizes that a tax payer is accountable to receive tax deductions with respects to the intangible elements that he is supposed to garner from a particular set-transaction. The legal clauses of this particular law insists on the fact that when it comes to determining the rights of a taxpayer, it is important to take note of how the law recognizes the right of an individual to particular allowances [especially when they are undergoing some specifically unique situations. This specifically gives way to the possibility of removing the amount of tax accounted for in relation to their amortization transactions. Being set in August 993, this legal guideline allowed the deduction to be applied on properties bought thereafter. The amount to be deducted from the amortization rate has is currently being calculated based on a fifteen year count beginning from the first month of acquiring the property under the taxpayer’s name.  Some of the amortizable intangible factors to be deducted from the said transaction payment includes goodwill, going concern value, the emergent use of business books and records as well as other patent, copyright or formulas used or applied as part of the property’s sell-off to the owner.

Federal Tax Case Sample

The case of Donald Fitch and Brenda Fitch versus the US Tax Court has been noted [for this discussion] to present a point of concentration on how the authoritative application of the clauses of the CIRC Sec 197 has been further considered by the appellant[s] as they pursue for being paid for the accounting practice that was applied to the transaction [including that of the intangible factors that were considered present alongside the completion of the transaction that the appellants were competing at the time]. In this case, the appellants pursue for the possibility of getting paid for services they have rendered towards completing a real-estate selling transaction. The couple Mr. and Mrs. Flitch both expected to be paid for their work including those of the meals that they have consumed during the process. This also includes the Net Operating Loss, which they mention to have been incurred during the transaction.

The court however decided that the meals [as claimed by the appellants have been consumed at a personal level as they have not been fully reported nor have they been properly defined to be part of the transaction. Meanwhile the NOL rate reported could not be fully accounted for as they were not the only CPAs to have handled the transaction throughout its duration. This then indicates that if not properly defined and immediately recorded into the books [thus providing strong evidence that these intangibles have actually been acquired during the transaction] such actions would not be recognized and would not be a part of the transaction fees that the property owners are to be accounted for payment later on.

Closing Statement for Taxpayer

The taxpayer in this case is given the leeway, the freedom to stay focused on vital elements of payments that should be completed in lieu of owning a new property apart from having to provide an amount of payment for particular intangibles that individuals involved in the transaction may have incurred prior to the buying of the property. This provides the taxpayer a sense of protection from the supposed additional fees that would only burden him as he takes over a particular property in concern.