Washington, D.C. (August 17, 2021) – The American Institute of CPAs (AICPA) submitted a letter today to the Internal Revenue Service (IRS) providing details and examples of both the section 473 safe harbor method and the need for expedited relief to elect the section 473 safe harbor method. The AICPA submitted a separate letter earlier this year recommending a safe harbor method that alleviates the burden of paying additional taxes on the related income and eliminates the need to file amended tax returns to obtain section 473 relief.
The examples provided in the letter detail common accounting scenarios seen by businesses that require the relief proposed in the AICPA’s recommendations.
Allowing a section 473 safe harbor method and expedited relief would help U.S. businesses, especially small businesses, alleviate unanticipated tax increases and administrative burdens caused by trade disruptions related to COVID-19.
The AICPA has recommended a section 473 safe harbor method providing that, if a taxpayer has experienced a qualified liquidation for a liquidation year, the taxpayer would disregard the liquidation for that year and would retain the last-in, first-out (LIFO) layers related to the opening inventory of the liquidation year.
Additionally, the AICPA urges the IRS to expedite publication of guidance providing the section 473 safe harbor method we proposed so that affected taxpayers who have not already filed their federal income tax return for the liquidation year can include the section 473 safe harbor election statement with their timely filed (including any extension) original federal income tax return.
Contact: Veronica Vera