Reserves For Contingencies


Joined
Nov 29, 2014
Messages
19
Reaction score
0
Country
United States
Tax guy says Reserves are deductible from business income. Pub. 535 says "Not". Tax guy argues it is income not available to conduct ordinary business.
 
Ad

Advertisements

kirby

VIP Member
Joined
May 12, 2011
Messages
2,071
Reaction score
281
Country
United States
You are correct. Get another tax guy.
 
Joined
Aug 29, 2015
Messages
25
Reaction score
1
Country
United States
Ill fouth that...further, not only is it not deductible in the same manner as a warranty accrual, if you put an unreasonable amount in your risk reserve (contingency) and you are taking revenue based on percent of completion that is driven by cost, you risk a reclass of part or all of your reserve as income
 
Last edited:
Ad

Advertisements

Joined
Aug 29, 2015
Messages
25
Reaction score
1
Country
United States
.. also, having a risk reserve does not mean there is a cash outlay, it means a percent of your budgeted expenses is for unforseen costs somewhere down the road. A contingency is an unknown and therefor not reasonably measured...that alone would lead to the conclusion it is not deductible....i hope your tax guy has good malpractice insurance
 
Ad

Advertisements


Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads

USA Recognition of sale involving a future contingent consideration 1
USA Contingent Asset 1
USA Contingent Liabilities 2
reservation 1
Australia Current or Contingent? 3
Reserve Account 2
LIFO Reserve Adjustment? 0
Canada Contingent Liabilities Question 5

Top