News: Section 199

Online Software – Latest IRS Thinking – Section 199 Domestic Production Activities Deduction

Currently the IRS is working on updating its guidance regarding online software which we expect some additional guidance early in 2016. Online software under Section 199 is generally not qualified for the Domestic Production Activities Deduction (Section 199 deduction) unless …

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Section 199 Domestic Production Deduction – New IRS Proposed Regulations – Contract Manufacturing

One area of dispute for many years under the Section 199 Domestic Production Activities Deduction was in situations where the taxpayer designs a product but a third party contract manufacturer actually produces the product under contract with the taxpayer. Prior to these new proposed regulations issued in August 2015, the benefits and burdens of ownership tests/criteria would be applied to determine which party can claim the Section 199 deduction.

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Section 199 – Online Software Ruling – Domestic Manufacturing Deduction

The IRS has recently ruled in GLAM – General Legal Advice Memorandum 2014-008 that a banking taxpayer who provides an app to access a customer’s bank accounts did not meet the exceptions to the Section 199 Domestic Production Activities Deduction …

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Online Software Regs – Section 199 Domestic Production Deduction – Taxpayer must show substantially identical software

Under existing IRS regulations on Section 199, the Domestic Production Deduction, software qualifies for 199 treatment, but online software may or may not depending upon whether certain exceptions are met. As with other qualifying domestic production property under section 199, …

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New Section 199 Domestic Production Activities Deduction Case – ADVO Tax Court Case Printer Publisher

In a new Section 199 Domestic Production Activities Deduction case, the Tax Court has ruled that a third party contract printer is entitled to the Section 199 deduction and not the publisher. ADVO, Inc. v. Commissioner, 141 T.C. 9 (2013). …

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Taxpayer Gets a Gift (Basket) – New Section 199 Case – Domestic Production Deduction

In perhaps a surprising outcome, a district court has ruled that assembling gift baskets qualifies as manufacturing for purposes of the Section 199 Domestic Production Activities Deduction (or Section 199 deduction). The company produces gift baskets from purchasing items such …

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IRS Issues Chief Counsel Advice on Section 199 Deduction

The IRS released a Chief Counsel Advice (CCA) memo on 3/29/13 on whether a publisher of books can claim a Section 199 domestic production deduction for its activities of producing books. However, the IRS segregated the activities into all activities …

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Section 199 – Online Software – New CCA IRS Guidance

This week the IRS released a new Chief Counsel Advisory Opinion (CCA) regarding Online Software and Section 199. The key issue was applying the exception for software that is ‘substantially identical’ available from third parties via download or shrink-wrap. Thus, …

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Section 199 – IRS Issues Guidance on Benefits and Burdens of Ownership

In a new Field Directive issued February 1, 2012, the IRS has provided examiners guidance on reviewing facts to determine which party to a transaction has the benefits and burdens of ownership in order to claim the Section 199 Domestic …

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First Ever Tax Court Case on Section 199 Domestic Production Deduction

In the first Tax Court case opinion on Section 199 deduction activities, the Tax Court today sided with the taxpayer in Gibson & Associates, Inc. v. Commissioner, 136 T.C. No. 10 (February 24, 2011). The taxpayer undertook three types of construction …

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