Clarification: IRS couldn’t agree on consistentapproach to tax affecting

Last week’s item on the IRS indicated that one of its managing groups developed a “single approach” to tax affecting. “I believe that is misleading,” writes Michael Gregory, the former IRS territory manager whom we quoted in the piece.

“I want to clarify that the IRS Engineering function (where the business appraisers are located) developed a consistent approach on how to approach S-Corp tax affecting issues,” Gregory says. That group developed a “reasonableness” approach, depending on the particular facts of the case, after considering “a host of issues for applying specific methods.” But this approach “was not adopted across the IRS uniformly,” Gregory says, and “there are those in the IRS that view the issue as a legal issue rather than factual,” which they believe—based on existing Tax Court precedent—would foreclose tax affecting in any case.