Current through Register Vol. 41, No. 3, September 23, 2024
A. In general.
1. The average value of property shall be
determined by averaging the value of the beginning and end of the taxable year,
but the department may require the averaging of monthly values during the
taxable year if reasonably required to reflect properly the average value of
the corporation's property.
2.
Averaging by monthly values may be elected by the taxpayer and will generally
be required by the Department if there is substantial fluctuation in the values
of the property during the taxable year or where a substantial amount of
property is acquired after the beginning of the taxable year or disposed of
before the end of the taxable year. Taxpayer may elect to average by monthly
values whether or not the department requires it.
3. Substantial fluctuations in the values of
property will be deemed to exist if the value for any month is outside a range
of values which is the average of the beginning and ending value plus or minus
25%.
4. The taxpayer may elect to
compute the average value of rental property by one of the following methods:
a. the net annual rental rate of property
rented at the beginning and end of the taxable year may be averaged and
multiplied by eight, or,
b. the net
annual rental rate of property rented at the beginning of each month may be
averaged and multiplied by eight, or
c. the total rent paid for all property for
the taxable year may be multiplied by eight. This method is deemed equivalent
to monthly averaging, or
d. the
Department may require a taxpayer to determine the average value of property by
using method (b) and (c).
B. Example. Taxpayer reports on a calendar
year. The value of property at the end of the preceding year (and therefore the
beginning value for this year) was $1,250. The value of property at the end of
each month for this year is as follows:
January 1,300
February 1,350
March 1,500
April 1,700
May 2,000
June 3,000
July 5,000
August 7,500
September 10,000
October 12,000
November 4,000
December 2,000
The average of the beginning and ending values is
$1,625.
1,250+ 2,000 = 3,250 ÷ 2 =1,625
However, there is substantial fluctuation in the monthly
values.
1,625 - 25% = 1,218.75; 1,625 + 25% = 2,031.25
Because the property values for some of the months is outside
the acceptable range of fluctuation ($1,218.75 to $2,031.25) the department
requires that the property be averaged monthly.
The total of the 12 monthly values is $51,350 and the average
value is $4,279.
