IRS Broadens 70% Safe-Harbor Deduction for Investment Advisory Milestone Payments
Recent guidance is favorable to taxpayers and simplifies the determination of which milestone payments qualify for the 70% elective safe harbor.
Expenses & Deductions
Definitions of R&E Expenditures Are Amended Under Final Rules
The IRS issued final regulations on which amounts paid or incurred in connection with the development of tangible property, including pilot models, qualify for the Sec. 174 deduction (or amortization) for research and experimental expenditures.
Sec. 199 “Benefits and Burdens” Analysis: Key Guidance
The IRS's primary objective with respect to any contract manufacturing arrangement is ensuring that only one party to the contract can claim to have the benefits and burdens during any qualifying activity. This protects the IRS from being "whipsawed," i.e., being subject to claims by both parties to have the benefits and burdens during a qualifying activity.
IRS Issues Updated Guidance on the Examination of Milestone Payments
The IRS's Large Business and International exam division issued a directive instructing examiners not to challenge a taxpayer's application of the safe harbor to "eligible milestone payments" incurred during the course of a covered transaction if the directive's requirements are satisfied.
Retail Advertising: IRS Affirms Potential Application of Sec. 199
Retailers may be eligible to claim a Sec. 199 deduction for advertising revenue derived from producing and distributing printed fliers in cooperation with vendors. This item reviews recent IRS guidance and considers what it might mean for taxpayers that are engaged in cooperative advertising arrangements.
Tangible Property Regs. De Minimis Safe-Harbor Election: Frequently Asked Questions
The de minimis safe harbor is one of the areas of the regulations where taxpayers have significant questions. This article answers some of the most frequently asked questions.
Automobile Depreciation Limits Issued for 2014
The IRS issued the 2014 inflation adjustments to the depreciation limitations and lease inclusion amounts for certain automobiles under Sec. 280F.
Final Regs. Govern Sales-Based Royalties and Vendor Allowances
The IRS issued final regulations on sales-based royalties and vendor allowance rules.
Sec. 199 Contract Manufacturing Guidance May Encourage Taxpayers to Agree on Benefits and Burdens
Directives issued by the IRS Large Business & International Division describe circumstances in which the IRS will not challenge the taxpayer’s position that it has the benefits and burdens of ownership for purposes of the Sec. 199 deduction.
Proposed Regs. Clarify Research Expenditure Eligibility Under Sec. 174
The IRS in September issued proposed regulations clarifying the application of Sec. 174 to the costs to create “pilot models” or prototypes. The proposed rules state that the reason a taxpayer creates a prototype or other product, and not its subsequent sale or use, determines whether it qualifies under Sec. 174.
IRS Issues Repair/Tangible Property Regulations
The IRS issued long-awaited final and proposed regulations regarding the treatment of expenditures incurred in acquiring, producing, or improving tangible assets.
Sec. 199 Deduction and Contract Manufacturing Arrangements: Who Gets the Deduction?
The IRS issued new guidance to examiners in its Large Business & International Division regarding how to determine which taxpayer is entitled to claim the Sec. 199 domestic production activities deduction in a contract manufacturing arrangement.
Repair Regulations Are Finally Issued
The IRS issued long-awaited final and proposed regulations regarding the treatment of expenditures incurred in acquiring, producing, or improving tangible assets.
IRS Explains Sec. 179 Qualified Real Property Allocations and Procedures for Filing Amended Returns
The explained how the retroactive extension of the Sec. 179 rules operates when applied to qualified real property and how to allocate the portion of gain attributable to the qualified real property upon disposition or to calculate any carryover.
Proposed Regulations Change Definition of R&D Expenditures
In proposed regulations , the IRS provided guidance on the treatment under Sec. 174 of R&D expenditures incurred in connection with the development of tangible property, including pilot models.
IRS Reverses Itself on Applying 70% Safe-Harbor Deduction for Success-Based Fees to Certain Milestone Payments
The IRS offers an elective safe harbor to deduct 70% of qualified success-based fees, and while certain “milestone payments” common to acquisition transactions do not qualify for the safe-harbor election, certain “eligible milestone payments” do.
New Method for Determining Who Gets Sec. 199 Deduction Under Contract Manufacturing Arrangements
The IRS issued new guidance regarding how to determine which taxpayer is entitled to claim the Sec. 199 domestic production activities deduction in a contract manufacturing arrangement.
The Repair Regulations: Considerations for “Downstream” Oil and Gas Businesses
The oil and gas industry faces numerous challenges in applying the fact-intensive rules of the so-called repair regulations to costs incurred to repair and maintain property during its service life.
IRS Addresses Sec. 199 Requirements for Packaging Manufacturer
The exception for packaging, repackaging, labeling, or minor assembly activities does not apply to disqualify the taxpayer’s sales receipts from meeting the MPGE requirement under Sec. 199.
The Challenge of Contributing Off-Spec Food to Charity
Donations of “off-spec” food may not result in a charitable contribution deduction greater than the tax basis of the food inventory because of the difficulty of determining the proper tax basis and FMV for the food.
