Closing Deferred Revenue

8 Pages Posted: 9 Dec 2009

See all articles by Calvin H. Johnson

Calvin H. Johnson

University of Texas at Austin - School of Law

Date Written: November 24, 2008

Abstract

The closing deferred revenue proposal would require a taxpayer to close ‘‘deferred revenue’’ as if the taxpayer received cash equal to the amount of the deferred revenue account when it is closed. Deferred revenue accounts arise because the taxpayer receives cash (or ‘‘debit-side’’ benefits) but does not then pay tax because the cash or other benefit is not yet earned or because of offsetting obligations. The accounting will not reflect the cash and the books will not balance unless the deferred revenue is closed into revenue or reduced cost. Current law has to be confirmed, however, because KPMG LLP sold billions of dollars of son-of-BOSS shelters that rested on the assumption that deferred revenue accounts could disappear without tax consequences.

The proposal is made as a part of the Shelf Project, a collaboration by tax professionals to develop and perfect proposals to help Congress when it needs to raise revenue. Shelf Project proposals are intended to raise revenue, defend the tax base, follow the money, and improve the rationality and efficiency of the tax system. The tax community can propose, follow, or edit proposals at http://www.taxshelf.org. A longer description of the Shelf Project can be found at ‘‘The Shelf Project: Revenue-Raising Projects That Defend the Tax Base,’’ Tax Notes, Dec. 10, 2007, p. 1077, Doc 2007-22632, 2007 TNT 238-37.

Shelf Project proposals follow the format of a congressional tax committee report in explaining current law, what is wrong with it, and how to fix it.

Copyright 2008 Calvin H. Johnson.

Keywords: tax reform,deferred revenue

JEL Classification: H20

Suggested Citation

Johnson, Calvin Harsha, Closing Deferred Revenue (November 24, 2008). The Shelf Project, Tax Notes, Vol. 121, p. 965, November 24, 2008, Available at SSRN: https://ssrn.com/abstract=1520737

Calvin Harsha Johnson (Contact Author)

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
512-232-1306 (Phone)
512-232-2399 (Fax)

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