The American Institute of CPAs has urged the Internal Revenue Service to withdraw regulations the IRS and Treasury Department proposed in April for changing the open account debt rules between S corporations and shareholders.
The proposals would narrow the definition of open account debt and change how basic adjustments are made. The proposed regulations mandate that small business owners maintain a running balance of open account debt transactions and treat them as formal, written debt whenever the balance goes over $10,000 at the close of any day within the S corporation's tax year.
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