Magazine article The CPA Journal

Cost Capitalization Developments

Magazine article The CPA Journal

Cost Capitalization Developments

Article excerpt

The Tax Court recently handed two cost capitalization victories to the IRS.

In FMR Corp. and Subsidiaries v. Comm'r, 110 T.C. 402 (1998), the court concluded that an investment management company was not entitled to current deductions for costs incurred to develop and launch new mutual funds. Moreover, the court agreed with the IRS that, because no useful life could be shown for the future benefits generated by those costs, the capitalized amounts were not amortizable under section 167.

In the case of U.S. Bancorp and Consolidated Subsidiaries v. Comm'r, 110 T.C. No. 10, 9/21/98, the court concluded that lease termination fees paid by a bank to terminate its interest in leased computer equipment, financed over the life of a new lease with the same lessor, were not currently deductible.

The First Victory

Fidelity Management & Research Co. (Fidelity) is an operating subsidiary of FMR Corp. Fidelity renders investment advisory services to the Fidelity family of funds. These services are rendered pursuant to management contracts entered into with each fund. …

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