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IRS Revenue Procedure 2004-34
May 13, 2004:
Good News from IRS on Prepaid Contract Payments
[View original IRS document here]
The Internal Revenue Service has just released Revenue Procedure
2004-34, which dramatically expands the eligibility of advance payments
for future services for tax deferral. This documents supersedes an
earlier procedure, Rev. Proc. 71-21.
While the period of income deferral is limited to one year, one of the
most important aspects of Rev. Proc. 2004-34 is that it applies to all
advance payments regardless of how far into the future the services will
be performed.
This deferral will be most useful in circumstances where
the advance payments are not otherwise eligible for deferral either
because of trusting provisions or as a result of the application of the
Perry Funeral Homes ruling (involving cancellation rights by
purchasers). As a result, the deferral would apply to the services
portion of preneed merchandise contracts, as well as to the portion of
advance payments received on preneed funeral contracts in circumstances
where not all of the customer's payments are placed in a funeral trust.
Parts of Rev. Proc. 2004-34 are eligible to be implemented as an
automatic consent method change for the 2003 taxable year with the 2003
tax return filing. Other parts of Rev. Proc. 2004-34 are only eligible
for deferral using the advance consent method change procedures, meaning
that such changes may not be implemented until the 2004 taxable year.
Rev. Proc. 2004-34 can be viewed on the ICFA web page at
http://www.icfa.org/docs/IRSrevproc2004-34.doc
(or members should call ICFA headquarters at 1-800-645-7700 to request a copy of Rev. Proc. 2004-34.)
Any questions that ICFA members may have regarding Rev. Proc. 2004-34
can be discussed without charge by calling tax attorney Leslie J.
Schneider at 202-393-7600. The ICFA recently announced a new benefit
whereby ICFA members in good standing may call Mr. Schneider with tax questions for a
free consultation up to 20 minutes with out obligation.
Les Schneider is a member of the ICFA Government and Legal Tax Subcommittee and a long
time advisor on tax issues to the Association.
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