Toward Income Tax Accounting Consistency : Eliminating Accrual, Depreciation, and the Existing Tax Treatment of Borrowing

The thesis here is that inconsistent tax accounting rules undermine the individual income tax, and the best available move for improving it — given the unassailability of the realization principle — is to eliminate its accrual (and quasi-accrual) features. Specifically, the agenda is to eliminate tax accrual accounting in the conventional sense, revamp the tax treatment of borrowing to (inter alia) abolish the Crane doctrine, and eliminate depreciation deductions for indivisible productive assets. The end result would be a consistent cash realization system for (at least) individual taxpayers. The proposals made herein would upset long-standing features of the income tax and therefore are highly controversial. Nevertheless, these features create structural asymmetries that are systematically exploited to the advantage of taxpayers