Whether a purported loan between affiliated or commonly controlled entities will be recharacterized as equity can depend on the 13 Mixon factors.
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TOPICS / CORPORATIONS
Deductions
Sec. 163(j) planning considerations
Businesses can explore several options to mitigate the interest deduction limitation under the Tax Cuts and Jobs Act.
Electing the UNICAP historic absorption ratio under the modified simplified production method
To avoid contending with the complex and time-consuming calculations of the uniform capitalization rules under Sec. 263A, taxpayers may want to consider electing the historic absorption ratio with this method.
Regs. cover green energy incentive wage and apprenticeship requirements
Under new final regulations issued by the IRS, taxpayers can generally increase the base amount of certain credits or deductions by five times when they meet prevailing wage and apprenticeship requirements.
Lease termination payments: Considerations for the lessor
The payments are subject to capitalization, but the period and manner are unclear. The 12-month rule under Regs. Sec. 1.263(a)-4(f)(2) may help.
Interim guidance for SRE expenditures
An IRS notice and revenue procedure provide greater clarity on the treatment of specified research or experimental expenditures while practitioners wait to see whether Congress will repeal or delay recent changes.
The de minimis and routine maintenance safe harbors
Two potentially valuable provisions can allow a business to currently deduct rather than capitalize expenses related to repair, acquisition, or production of tangible property.
Success-based fees safe harbor: A ruling raises concerns
The Service’s denial of regulatory relief to elect a 70% immediate deduction of the fees contradicts previous rulings and Rev. Proc. 2011-29’s policy goals.
R&E expenses: Amortization if the company ceases to exist
In Notice 2023-63, the IRS offered guidance on deducting remaining amortized specified research or experimental expenditures when applicable property is retired, abandoned, or disposed.
Apportioning tax benefits among members of a controlled group
A controlled group can choose how it apportions tax benefits and other items among its members, with rules for certain credits and for pension and profit-sharing plans.
How compensatory intent affects compensation deductions
For a corporation to deduct a payment made to a shareholder/employee as compensation, compensatory intent must exist.
Home office and other business expenses denied
It is essential to emphasize the importance of substantiation to clients and to make sure they understand the substantiation requirements and to educate clients on how to maintain accurate recordkeeping and to record transactions in real time.
Navigating around limits on meals and entertainment
Deductions may be claimed for business-related meals and entertainment if taxpayers heed these rules and limitations.
Substantiation of business expenses: A review of the basics
A recent Tax Court case highlights the fact that taxpayers bear the burden of substantiating not only the amount of the deduction but also that the purpose underlying the deduction is ordinary and necessary to operating their trade or business.
Sec. 174(d) in M&As: Risks and opportunities
Taxpayers and advisers should focus on understanding the risks and maximizing the benefits of Sec. 174 when involved in M&A transactions.
FDII deduction: Options for determining taxable income
This discussion highlights uncertainties that may arise in determining a corporation’s taxable income for purposes of calculating its foreign-derived intangible income deduction under Sec. 250.
Defining software development costs
Until guidance is issued, taxpayers seeking to determine the fundamental characterization of software costs in order to evaluate what expenditures fall within the scope of new Sec. 174 may find other sources helpful, including those that have historically governed this area.
Not all employee parking lots are created equal
An employer will have to make some effort to document that the parking available at an employee parking facility has no value, many employers will find that this burden is worth bearing because it allows deducting the full expenses of operating and maintaining the facility.
State conformity to federal treatment of Sec. 174 R&E costs
This item explores which states likely conform to the amendments to Sec. 174, which states likely decouple from those changes, and the issues raised by conformity to or decoupling from the changes.
Deducting costs that are usually capitalized
Certain environmental cleanup costs, restaurant ‘smallwares,’ and certain vehicle replacement tires have expensing options that business owners may be unaware of.
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.
