Customer Reward Programs: Deducting Fulfillment Costs

Under the premium coupon method provided by Regs. Sec. 1.451-4, however, the taxpayer would deduct $462,500 in the first year ($125,000 redeemed premiums + [90% experience redemption rate × $375,000 outstanding balance]). The deduction in year 1 exceeds the deduction under the economic performance rules allowed in the first four years.

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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 guidance offers useful reminders about employee

IRS guidance offers useful reminders about employee discount plans. By Allen F. Tobin, J.D., New York City, and David J. Holets, CPA, Indianapolis. The IRS recently released Field Attorney Advice 20171202F, which provides guidance on the taxability of an employee discount plan. Under the discount plan as described (with identifying details

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Deducting Losses on Worthless Investment Securities

Sec. 165. The general rule for deducting losses on worthless investment securities is found in Sec. 165 (g), which permits a loss deduction for a security that becomes worthless during the tax year, but only if the security is a capital asset in the taxpayer’s hands. The loss amount is determined by treating it as having resulted from a

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Taxation of Worthless and Abandoned Partnership Interests

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IRS Issues Guidance on Treatment of Gift Cards

Rev. Proc. 2011-17. Rev. Proc. 2001-17 establishes a safe-harbor method of accounting for the treatment of gift cards issued to customers in exchange for returned merchandise. The revenue procedure states that—to avoid disputes about the proper characterization of gift cards issued for returned goods, provide better matching of income and

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IRS finds future costs of fuel rewards are subtracted from

More recently, in Giant Eagle, Inc., T.C. Memo. 2014-146, rev'd on other grounds, 822 F.3d 666 (3d Cir. 2016), the Tax Court ruled that discount coupons are not premium coupons subject to Regs. Sec. 1. 451-4 and, therefore, the taxpayer in Giant Eagle could not offset current-year sales revenues by its estimated future cost of redeeming

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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

IRS issues Q&A guidance on Sec. 965 transition tax issues for 2018 returns. 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

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