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Frequently Asked Questions for I.R.C. § 475

 

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Questions

Answers

1.

Is a taxpayer eligible for the I.R.C. § 475 Industry Director Directive related to Mark-to-Market Valuation (IDD) if:

i) the taxpayer uses the same mark-to-market values reported on its qualified financial statements for all securities and/or commodities that are subject to the tax valuation requirement of I.R.C. § 475, but

ii) the taxpayer has made Schedule M adjusting entries or other book to tax adjusting entries, or has reported deferred tax assets, deferred tax liabilities, or valuation allowances (under FAS 109/ASC 740) with respect to such securities and/or commodities?

A taxpayer is eligible for the IDD if:

i) the taxpayer uses the same mark-to-market values reported on its qualified financial statements for all securities and/or commodities that are subject to the tax valuation requirement of I.R.C. § 475, and

ii) the taxpayer has made Schedule M adjusting entries or other book to tax adjusting entries, or has reported deferred tax assets, deferred tax liabilities, or valuation allowances (under FAS 109/ASC 740), with respect to such securities and/or commodities that are not related to any inconsistencies in value between the mark-to-market values reported on its qualified financial statements and the I.R.C. § 475 mark-to-market values reported for Federal income tax purposes.

2.

Is a taxpayer eligible for the IDD if the taxpayer does not have mark-to-market values reported on its qualified financial statements for some of its securities and/or commodities?

Yes. The taxpayer is eligible for the IDD for all other securities and/or commodities that are subject to the tax valuation requirement of I.R.C. § 475 and for which mark-to-market values are reported on its qualified financial statements, as long as the mark-to-market values of those other securities and/or commodities reported on the taxpayer’s qualified financial statements are used for securities and/or commodities that are subject to the tax valuation requirement of I.R.C. § 475.  For those securities and/or commodities that the taxpayer does not have mark-to-market values reported on the qualified financial statements, traditional valuation audit procedures will apply. 

3.

Is a taxpayer required to use the same mark-to-market values reported on its qualified financial statements for all of its securities and/or commodities that are subject to the tax valuation requirement of I.R.C. § 475 to be eligible for the IDD?

Yes. If the taxpayer has mark-to-market values for securities and/or commodities reported on its qualified financial statements and does not use those values for some of its securities and/or commodities that are subject to the tax valuation requirement of I.R.C. § 475, then the taxpayer is ineligible for the IDD for all of its securities and/or commodities and traditional valuation audit procedures will apply.

Page Last Reviewed or Updated: 27-Jan-2014