Academic journal article Journal of Accountancy

Line Items

Academic journal article Journal of Accountancy

Line Items

Article excerpt

Company Safe on Home-Expense Deductions

* To encourage employee transfers, a computer manufacturer engaged the services of a relocation company to buy relocated employees' residences. A transferred employee could then buy a replacement home before the old residence was sold. In Amdahl Corp. v. Commissioner, 108 TC no. 24 (1997), the corporation was allowed to deduct any losses and expenses related to such sales as ordinary and necessary business expenses. The IRS had argued that such losses were capital losses and could be offset only against capital gains (see revenue ruling 82-204, 1982-2 CB 192). The court disagreed because the relocated employee retained legal title to the residence and remained legally responsible for the mortgage and real estate tax payments until a sale to a third party took place.

No Looking Back

* In accordance with the Taxpayer Relief Act of 1997, the IRS issued final regulations (TD 8775) effective July 2, 1998, that allow manufacturers and construction contractors with long-term contracts subject to the look-back method--and completed in tax years ending after August 5, 1997--to elect not to apply that method in de minimis cases. To make the election,, a manufacturer or contractor simply attaches the statement to a return (including extensions) that is filed on time and writes on the statement "Notification of Election Under Section 460(b)(6)." In the final regulations, the choice not to apply the look-back method automatically revokes an election under regulations section 1.460-6(e) to use the delayed reapplication method.

Ad Designs Currently Deductible

* RJR Nabisco, Inc., spent $1.8 million to develop graphic designs for its cigarette products. …

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