Customer Reward Programs: Deducting Fulfillment Costs

Sec. 1.451-4(c)(5) contains a safe-harbor method that uses a five-year moving average ratio of coupons redeemed to coupons issued, multiplied by a growth factor published by the IRS. Unfortunately, the IRS has not issued a new set of growth factors for purposes of Regs. Sec. 1.451-4 since the original one in 1972 (see Rev. Proc. 72-36).

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Accounting for Customer Loyalty Programs: Opportunities

The types of programs that are likely not to qualify in the retail context are those that provide customers cents-off coupons (i.e., a coupon issued for less than the value of the item for which it can be redeemed and that cannot be accumulated with other coupons toward the purchase of an item), even if the coupons are issued to a customer when

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IRS finds future costs of fuel rewards are subtracted from

Method of accounting for premium coupons and trading stamps. Under an accrual method of accounting, Sec. 461 and the regulations thereunder provide that a liability is generally taken into account in the tax year in which all the events have occurred that establish the fact of the liability, the amount of the liability can be determined with reasonable accuracy, and economic performance has

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Deducting Losses on Worthless Investment Securities

Sec. 165(g)(2) defines a security as any of the following: a share of stock in a corporation; a right to subscribe for, or receive, a share of stock in a corporation; or a bond, debenture, note, or certificate, or other evidence of indebtedness issued by a corporation or by a government or political subdivision thereof, with interest coupons or

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Taxation of Worthless and Abandoned Partnership Interests

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IRS guidance offers useful reminders about employee

Background. Sec. 132(a)(2) allows employers to provide a qualified employee discount that is excludable from an employee's taxable income. A qualified employee discount is defined under Sec. 132(c) as a discount with respect to qualified property or services that:. In the case of property, does not exceed the gross profit percentage of the price at which the property is offered to customers; or

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Losses Related to an Insolvent Corporation

The definition of a “security” in Sec. 165(g)(2) includes a share of stock in a corporation; a right to subscribe for, or to receive, a share of stock in a corporation; or a debt instrument issued by a corporation with interest coupons or in registered form. Sec. 165(g)(3) provides an exception for a …

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IRS issues Q&A guidance on Sec. 965 transition tax issues

On Dec. 12, 2018, the IRS released a new set of questions and answers (available at that provides guidance on Sec. 965 reporting and payment requirements for 2018 tax returns, including obligations resulting from amounts included in income for the 2017 tax year.. The newly released questions and answers provide updates and clarifications to the procedures for not only making the

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Revisiting at-risk rules for partnerships

The at-risk rules of Sec. 465 originated with the enactment of the Tax Reform Act of 1976, P.L. 94-455.It was a time of 70% tax rates, when tax shelters were aggressively marketed to manipulate taxable income. Originally, the rules applied only to certain narrowly defined types of activities, but subsequent amendments expanded their scope to cover all trades or businesses and other income

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IRS Issues Guidance on Treatment of Gift Cards

Tax Accounting. In recent years, the sale of gift cards, as well as the issuance of gifts cards to customers in exchange for returned merchandise, has become a widespread business practice in consumer markets industries, especially the retail industry.

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