Taxpayers must capitalize
the costs of creating, originating, entering into, renewing, or renegotiating five specific types of financial interests: (i) ownership interests in certain entities (e.
This brings us to NAFTA's second overlooked benefit: it accepts and capitalizes
on the global economy's evolution.
One outstanding issue for taxpayers is whether a buyer should deduct or capitalize
amounts it later pays on a liability in excess of the original amount capitalized.
The IRS requires businesses to capitalize
reengineering costs (see TAM 9544001 on reengineering in a conversion to just-in-time manufacturing).
Such guidance will afford taxpayers much greater certainty than the nebulous more than incidental future benefit" test set forth in INDOPCO -- a test that can all-too-easily be misapplied to capitalize
routine, on-going, or recurring expenditures.
As most taxpayers probably do not capitalize
these internal costs, the regulations will not change the current practice.
The government wanted it to capitalize
the entire purchase price.
Commissioner,(6) the Third Circuit, in affirming a Tax Court decision, held that a corporation must capitalize
consulting fees, legal fees, and other expenses incurred in deciding whether to accept a friendly takeover bid.
The regulations generally require a taxpayer to capitalize
costs incurred in the process of "investigating or otherwise pursuing" one of several types of enumerated transactions.
One of the most difficult questions a company faces is whether it must capitalize
an expenditure or whether it can deduct it.
42) Finally, "although taxpayers generally must capitalize
the costs of acquiring intangible assets from another person (such as the cost of acquiring a customer list or goodwill), taxpayers generally may deduct the costs incurred to develop or maintain such intangible assets.