Isda is putting its weight behind the retention of the current standard. Presently, taxpayers usually defer income inclusions and deductions attributable to contingent payments under NPCs until the contingency has been resolved. The four IRS alternatives change the timing of these inclusions and deductions in different ways, but Isda argues each method results in a tax disincentive for users of NPCs.
“All the IRS proposed methods would lead to a tax disadvantage of synthetic holders of assets through derivatives, and would therefore be a disincentive to the use of NPCs,’ says an Isda spokesman. “So we have responded to the IRS stressing that the present accounting method is preferable.”
A full discussion of Isda’s objections to the IRS’s proposed changes to NPC regulations can be found at www.isda.org.