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.
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TOPICS / CORPORATIONS
Deductions
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.
Establishing the “Fact of the Liability” for Bonus Compensation
A recent IRS legal memorandum serves as a reminder to business taxpayers to consider modifying or updating their employee bonus plans to enable a deduction for bonus compensation accrued in the year of the related services, as provided in Rev. Rul. 2011-29.
Appeals Court Reverses Claims Court, Disallows LILO Deductions
The Federal Circuit issued a decision reversing and remanding a case to the Court of Federal Claims, which had upheld a LILO transaction.
IRS Issues Prop. Regs. on Allocation of Costs Under Simplified Sec. 263A Methods
The IRS has issued proposed regulations on allocating costs to property produced or acquired by a taxpayer for resale.
Prop. Regs. Provide Guidance on Meals and Entertainment Expenditures
Proposed regulations clarify the definition of a reimbursement or other expense allowance arrangement and provide guidance on the applicability of the Sec. 274(e)(3) exception under various circumstances including employer/employee, two-party, and multiparty arrangements.
Nonrefundable Milestone Fees Do Not Qualify as Success-Based
A business can expense 70% of “success-based fees,” meaning amounts that are contingent on the successful closing of a covered transaction. It is important to remember this safe-harbor election can apply to both sides of the transaction.
Controlled Groups and Deductibility of Patronage Dividends
CCA 201228035 addresses specifically the tax treatment of patronage dividends among related parties and/or controlled groups.
Final Regs. Issued on Entertainment Use of Business Aircraft
The IRS issued final regulations relating to the disallowance under Sec. 274 of deductions for the use of business aircraft for entertainment (T.D. 9597).
Corporate Equity Reduction Transaction Guidance Issued
The IRS issued proposed regulations governing the availability of NOL deductions that are attributable to corporate equity reduction transactions.
Deductibility of LEED Certification Costs
Tax professionals may be in the best position to support their clients or company in identifying LEED certification costs and determining the appropriate tax treatment as either a current-period expense or a capital expenditure.
A Cautious Approach to Sec. 163(l) in Common Private-Equity Lending
Fund financing can carry with it the potential for unintended tax consequences under Sec. 163(l)’s “disqualified debt” rules.
Investors’ Dilemma on Purchasing Distressed Obligations
This article discusses the purchaser’s perspective of an investment in distressed obligations that are secured by leases on tangible property.
Proposed Regs. Would Clarify Who Is Subject to Sec. 274(n) Limit on Meal Expenses
The IRS released proposed regulations clarifying which party is subject to the rule that limits the deduction for meals to 50% of the expenses incurred.
Regulations Finalize Rules on Entertainment Use of Business Aircraft
The IRS issued final regulations relating to the disallowance under Sec. 274 of deductions for the use of business aircraft for entertainment.
Guidance Clarifies When Dividends Are Qualified Performance-Based Compensation
The IRS ruled on whether dividends paid on restricted stock were qualified performance-based compensation excluded from the applicable employee remuneration to which the $1 million limitation on the deduction for compensation by publicly held corporations applies.
Golden Parachute Calculations: 10 Misunderstood Aspects of Secs. 280G and 4999
When a company experiences a change in control, the golden parachute rules are intended to discourage excessive compensation for “disqualified individuals” by imposing adverse tax consequences on both the company and the disqualified individuals.
LB&I Guidance on Benefits-and-Burdens-of-Ownership Analysis Under Sec. 199
The IRS LB&I Division issued guidance to field examiners in determining whether a taxpayer conducting production activities under a contract manufacturing arrangement with an unrelated third party meets the benefits-and-burdens-of-ownership requirement outlined in the domestic production activities deduction rules under Sec. 199.
Timing of Deduction for Bonus Accruals Under Pooled Arrangements
Rev. Rul. 2011-29 favorably upholds the current deductibility of a bonus pool that is determined based on a formula or board-approved amount by year end with employment required on a payment date within 2½ months of year end.
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
