on Tax Accounting, Report on Capitalization Issues
Raised Under Sections 162 and 263 by INDOPCO, Inc.
It is particularly timely, given ongoing developments on capitalization issues
. (For a full discussion of the district court's decision, see Shin, Tax Clinic, "Deduct or Capitalize Aircraft Engine Maintenance Costs?," TTA, February 2004, p.
Olson's work at the Treasury Department on tax shelters, capitalization issues
, and simplification, as well as her continuing outreach to TEI and other tax organizations.
All 20 largest capitalization issues
, except for Hanvit Bank rose.
Observation: Revenue procedure 98-17 signals that it is the IRS's intention to continue addressing capitalization issues
one by one, taxpayer by taxpayer.
Although various IlLS rulings issued subsequent to INDOPCO sought to clarify that decision's scope, the IRS recognized, with the publication of Notice 96-7 (inviting the public to suggest standards for broader guidance on capitalization issues
), that its piecenieal approach to issuing specific guidance was unlikely to reduce the controversy.
Three years ago, the IRS's Large and Mid Size Business Division (LMSB) was spending 25 percent of its time on capitalization issues
(8) In public remarks, senior IRS and Treasury officials downplayed this perception, suggesting the increase in capitalization issues
was due in part to the changing nature of the American economy and the emergence of an increasing array of intangibles that had never before been scrutinized under section 263.
The ANPRM's purpose is to reduce disputes on capitalization issues
related to intangible assets.
Olson said that additional guidance on capitalization issues
would likely be issued, but the resources are not currently available for such a project.
In an advance notice of proposed rulemaking (REG-125638-01), the IRS announced its intention to issue regulations that will address capitalization issues
involving the significant-future-benefit test (see "Proposed Guidance on Capitalization" below).
Brokers said short-term funds are increasingly flowing out of large capitalization issues
to medium and small caps on the Tokyo market mainly because investors are concerned about the downside risks of international blue chips along with a slump in their U.S.