Before adopting the newly reinstated expensing of research and experimental expenditures, taxpayers should first consider the strategy’s broader tax effects.
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TOPICS / CORPORATIONS
Deductions
Sec. 163(j) after OBBBA: Leveraging cost-recovery accounting methods
A variety of capitalization strategies can increase deductible interest expense now that depreciation, amortization, and depletion are again added back to adjusted taxable income in calculating the Sec. 163(j) interest limitation.
Sec. 280E bars claim for refundable portion of ERC
The employee retention credit is among those prohibited under the section for taxpayers trafficking in federally controlled substances, the Tax Court held, finding against a marijuana dispensary business.
Application of grandfathering rules under Sec. 162(m) to severance plan payments
The rules hinge on whether a corporation remains obligated since Nov. 2, 2017, to pay an amount under a written binding contract that has not been materially modified after that date.
Deductibility of transaction costs incurred by an indirectly acquired entity
Although the IRS has provided guidance on success-based fees, determining which parties are the acquirer and target can be difficult when multiple entities are involved in an M&A.
Deducting corporate charitable contributions
Some key limitations and
requirements differ from those
with respect to individuals.
Two Tax Court rulings expose overvalued conservation easements
In the cases, the Tax Court determined the value of a conservation easement donated to charity using the comparable sales method instead of the discounted-cash-flow method.
Comparing and contrasting business tax strategies
Using the correct expensing strategy for items of real and personal property enables taxpayers to obtain the maximum tax benefits.
Company’s $1.6 billion ‘break fee’ payment treated as ordinary deduction
A proposed merger agreement’s rights and obligations were in the nature of services, so a fee paid to terminate was not treated as a capital loss, the Tax Court held.
IRS ruling clarifies treatment of R&D when computing the FDII deduction
IRS rules research and development services U.S. entities provide to their foreign parent principal company may be characterized entirely as foreign-derived deduction eligible income purposes.
Sec. 181: Will 2025 be the series finale?
Sec. 181 expensing of costs of qualified film, television, and theatrical productions gives producers cause to cheer, but the curtain may be falling on this temporary provision.
IRS increases scrutiny of business aircraft use
Businesses that own, lease, or charter aircraft should prepare for increased IRS scrutiny by closely reviewing their compliance with applicable tax provisions.
A closer look at the costs of borrowing
Comparison of the accounting and tax treatment of interest expense may reveal crucial differences and lead to best practices for managing it.
On DRD, the IRS seeks to have its cake and eat it too
The plain language of Sec. 245A disallowed a dividends-received deduction for a controlled foreign corporation, the IRS Office of Chief Counsel held, contrary to the Service’s argument in a recent Tax Court case.
Payments for law violation are not deductible restitution
A recent Chief Counsel Advice memo determined that the deductions were disallowed as fines or penalties under Sec. 162(f).
Prop. regs. address expanded annual compensation deduction limitation
The regulations provide guidance on determining who is one of the “five highest compensated employees” under Sec. 162(m)(3)(C).
Taxpayer may not deduct penalties imposed for violating a law
An IRS technical advice memorandum examines a taxpayer’s fines and penalties paid to a state agency.
Burden of proof: The shoebox method and 9-martini lunch
When taxpayers claim deductions for business expenses, they must meet their burden of proof with proper recordkeeping.
Planning opportunities: Sec. 179 expensing vs. bonus depreciation
As bonus depreciation phases out, practitioners need to consider Sec. 179 expensing to maximize deductions on fixed-asset purchases.
Sec. 245A dividends-received deduction allowed for Sec. 78 dividend
In Varian Medical Systems Inc., the Tax Court found the company eligible for the deduction for 2018 despite a disqualifying change in Sec. 78, due a mismatch between the change’s effective date versus the effective date of then-new Sec. 245A.
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