Characters: Insiders & Outsiders

Characters
Identify/Generate the principle
Time: 10-15 minutes

This is a quick activity to familiarize students with the notion that writers manipulate characters depending on their sense of their audience's expertise.
Read the passages on the handout aloud. Ask students which one is for accountants and which is for laypeople. How do they know? (If they're stumped, ask them to circle the key characters in each passage and compare.)
Scroll down for the handout:
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The following text is the opening of a "Tax Action Memo" published by the Tax Laws Publishing Company, Inc., which distributes information on federal income tax laws and procedures not only to accounting firms but also to individuals filing their own returns. Which of these passages is designed to be read by individuals? Which by accountants? How do you know?
 
a.
Previously, a five-year amortization period was required for computer software, absent proof of a shorter useful life (Rev. proc. 69-21, 1969-2 CB 303). However, under a new provision included in the RRA 1993 legislation, 36-month amortization is allowable if acquisition occurs after August 10, 1993 [IRC Sections 197(e)(3)(A) and 167(f)(1)(A) are applicable].

Also, for acquisitions after July 25, 1991 but before August 11, 1993, 36-month amortization is possible by retroactive application of Section 197. Retroactive election of Section 197 requires evaluation of the impact on the tax treatment of all intangibles acquired after July 25, 1991, but before August 11, 1993. [The amendment notes regarding IRS Section 197 in RRA '93 Act Section 13261(g)(2) and (3) are applicable.]
 
b.
Previously, taxpayers were required to write off purchase costs of computer software over a five-year period, unless they could prove that the software had a shorter useful life (see Rev. proc. 69-21, 1969-2 CB 303). However, under a new provision included in the RRA 1993 legislation, you can now write off software costs over a 36-month period. To do this, you must have acquired the software after August 10, 1993. [See IRC Sections 197(e)(3)(A) and 167(f)(1)(A).]

Also, for software you acquired after July 25, 1991 but before August 11, 1993, you may elect to apply Section 197 retroactively and write off the software over a 36-month period. When determining whether to apply Section 197 retroactively, you should evaluate how this would affect the way you treat all intangibles you have acquired after July 25, 1991 but before August 11, 1993. [See the amendment notes on IRS Section 197 in RRA 1993 Act Section 13261(g)(2) and (3).]