Section 481 adjustment and related company

Feb 14, 2012 0 Replies

Client C corporation "B" is related both to an investor C corporation "A" and a new operating C corporation "D." A and B have been on a cash basis of accounting as between them, and we don't anticipate this changing. The new company D adopted the accrual basis of accounting in its first year, because it was critical to be able to benefit from the Qualified Therapeutic Discovery Program grant. D bought qualifying items from B. We are filing a Form 3115 to change the method of accounting for B's transactions with D from the cash basis to the accrual basis, so as to match income and expenses between B and D.



B would be eligible for a Section 481 4-year spread of the income difference under Rev.Proc. 2002-19, because of the size of the adjustment. My question is: does D need to abide by the same spread in reporting its purchases from B in order to comply with IRC 482?


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