Program Goals: Policy Statement P-5-100 explains the objective of the OIC as a collection tool. This Internal Revenue Manual (IRM) section provides the fundamental knowledge and procedural guidance for offer examiners and offer specialists engaged in the investigation of offers. The procedures in this IRM include guidance so employees will be able to complete offer investigations and initiate taxpayer contact, when appropriate. By following the procedures in this IRM, employees will be able to conduct an appropriate financial analysis to support an offer in compromise determination.
Certain income is not reported via Form 1099 unless a specific dollar amount or number of transactions are met. The OE/OS must question the taxpayer when the potential exists they receive income from the gig economy (also called sharing or access economy in which on demand work/services are provided). In these instances, question the taxpayer about additional income sources. These questions are necessary in certain situations such as when the CIS includes expenses which exceed income by a considerable amount or taxpayer does not have a bank account and uses digital payment network e.g. Paypal, Zelle, Venmo, etc.
The Bank Credit Analysis Handbook:.rar
When a taxpayer owns or indications are they may own assets outside the country the OE/OS must include those assets in the calculation of RCP. Assets may include, real property, bank accounts, other personal property, or income sources. Information is available in IRM 5.21.3, Collection Tools for International Cases to assist in locating and valuing assets outside the country. In some instances, it may be appropriate to contact an International or Abusive Tax Avoidance Transaction group for assistance in valuing or locating these assets.
A critical part of the financial analysis is to determine what degree of control the taxpayer has over assets and income in the possession of others. This is especially true when the offer will be funded by a third party.
Review checking account statements over a reasonable period of time, generally three months for wage earners and six months for taxpayers who are non wage earners. Look for any unusual activity, such as deposits in excess of reported income, large withdrawals, transfers to other accounts, or checks for expenses not reflected on the CIS. The review may also determine mortgage or car payments listed on the CIS are not reflected on the bank statement. Discuss any inconsistencies with the taxpayer.
When investigating the RCP for an offer that includes business assets, an analysis is necessary to determine if certain assets are essential for the production of income. When it has been identified that an asset or a portion of an asset is necessary for the production of income, it is appropriate to adjust the income or expense calculation for that taxpayer to account for the loss of income stream if the asset was either liquidated or used as collateral to secure a loan to fund the offer.
Evaluation of a business as a going concern is sometimes necessary when determining RCP of an operating business owned individually or by a corporation, partnership, or LLC. This analysis recognizes that a business may be worth more than the sum of its parts, when sold as a going concern.
Generally, the difference between what an ongoing business would realize if sold on the open market as a going concern and the traditional RCP analysis is attributable to the value of these intangibles.
(3) Substantial amount withdrawn from bank accounts. Taxpayer provided supporting documentation that funds were used to pay for medical or other necessary living expenses. This amount will not be included in the RCP calculation
Future income is defined as an estimate of the taxpayer's ability to pay based on an analysis of gross income, less necessary living expenses, for a specific number of months into the future. See IRM 5.8.5.25, Calculation of Future Income, table for calculation.
Exercise good judgment when determining future income. The history must be clearly documented and support the known facts and circumstances of the case and include analysis of the supporting documents. Each case needs to be evaluated on its own particular set of facts and circumstances. The history must clearly explain the reasoning behind our actions.
When the taxpayer can provide documentation that income is not mingled (as in the case of roommates who share housing) and responsibility for household expenses are divided equitably between cohabitants (as documented by rental agreements, bank statement analysis, etc.), the total allowable expenses should not exceed the total allowable housing standard for the taxpayer, plus any allowable dependents.
Future income is defined as an estimate of the taxpayer's ability to pay based on an analysis of gross income, less necessary living expenses, for a specific number of months into the future. The number of months used depends on the payment terms of the offer.
Reported income must be verified by the OE/OS. This financial review should include bank statements and may include income tax returns, or other financial documents available to the taxpayer. In circumstances in which entity information is being reviewed in conjunction with an offer submitted by an individual, a determination should be made whether the entity is retaining earnings which should be distributed to the taxpayer which would increase FIV or RCP of the individual submitting the offer.
As with any closely held entity, the OE/OS should determine if income or assets of the individual and LLC are being commingled. If necessary, bank statements or other financial information may be requested from owner/member to determine appropriate RCP.
The Risk Assessment Reports provide an annual update on risks and vulnerabilities in the EU banking sector. They describe the main developments and trends that affect the EU banking sector and provide the EBA's outlook on the main micro-prudential risks and vulnerabilities.
Besides its Risk Assessment Report, the EBA also publishes annual reports on asset encumbrance and funding plans. Other thematic reports are not published on a regular basis. These other reports cover specific topics that are of general interest as part of the general risk assessment of the EU banking sector.
Since at any given time, depositors only withdraw a small fraction of their deposits, the bank does not need to keep all those deposits as cash on hand and can instead maintain only a small reserve while loaning out the remainder of those deposits.
Additionally, each loan must clear an investment or lending return hurdle which ensures that the bank is getting an acceptable return on its capital. Key lending ratios used to ascertain returns include return on assets, return on equity, and return on risk weighted assets.
If these profitability calculations or ratios meet the hurdle for the lending product, the banks can approve the loan assuming other criteria are met from a risk perspective such as exposure to the same client, exposure to the industry at large and expected losses from the loan.
As such, RoRWA is a good way to normalize how the corporate bank evaluates profitability on the loan. While ROA uses assets as the denominator in the formula, RoRWA will adjust the amount of assets based on their perceived risk.
When a bank makes a loan, it will take its safest asset (cash) and give that cash to a borrower, now creating a new (riskier) asset. If banks do this unchecked, their balance sheets will become riskier and riskier, endangering deposits.
Revolving credit facilities in particular are considered a loss leader product for corporate banks because they tend to run an economic loss for the bank as the bank sets aside capital for creditors, while borrowers instead of drawing on the revolver prefer the longer-dated capital of bonds and use cash and commercial paper for short term credit needs.
The Office of the Comptroller of the Currency (OCC) is the primary regulator of banks chartered under the National Bank Act (12 USC 1 et seq.) and federal savings associations chartered under the Home Owners Loan Act of 1933 (12 USC 1461 et seq.). You will find the OCC's regulations, derived from these acts, in the Electronic Code of Federal Regulations (click on 1-199 in the Browse Parts column of the table).
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Overview of financial accounting reporting, with a primary focus on the analysis of economic events and their effect on the major financial statements (balance sheet, income statement, and statement of cash flows). Learn the nature and purpose of accounting methods. Letter grades only. Students may not receive credit for both MGTF 401 and MGT 404. Prerequisites: restricted to master of finance program or by consent of instructor and department stamp.
Bridging the gap between theoretical financial models and the real world. Covering the major accomplishments of empirical finance. Empirical exercises and analysis of real financial data will help students to truly appreciate the content of the course. Letter grades only. Prerequisites: restricted to master of finance program or by consent of instructor and department stamp.
Covering the fundamentals of corporate finance and their application to valuation (including the WACC approach, APV approach, multiples, and real option valuation). We focus on important areas of corporate finance, including capital structure, real options, and financial distress and bankruptcy. Letter grades only. Prerequisites: MGTF 402; restricted to master of finance students, MBA students, or by consent of instructor. 2ff7e9595c
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