Mark-to-Market and the Widening Gap between Financial and Tax Accounting

In the wake of the recent financial meltdown, financial reporting under both North American generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) has involved renewed attention to the structures and constraints of “mark-to-market” and similar expressions of fair value accounting. Despite some significant opposition by banks and other financial institutions (and their political champions), mark-to-market has enjoyed a relatively high level of support by securities regulators and by the accounting profession. Meanwhile, mark-to-market as a tax accounting concept has recently been subjected to a sustained attack by the Internal Revenue Service, courts, and legislators. This paper examines the recent Treasury regulations, revenue rulings, court cases, legislative proposals and other legal regulatory and administrative promulgations and pronouncements that comprise this renewed opposition to mark-to-market, in an effort to identify and articulate this widening gap between financial and tax accounting in the United States. Inductive research methods include legal research and analysis, and case studies