Abstract

http://ssrn.com/abstract=532763
 


 



Sales Price Adjustments: The Continuing Conundrum


Michael Baillif


Ernst & Young LLP


Tax Lawyer, Vol. 57, No. 2, Winter 2004

Abstract:     
The identification and treatment of sales price adjustments are among the most wide-ranging, and under-analyzed subjects in the tax law. The consequences of such classification can be substantial and far-reaching. Generally speaking, the question of whether sales allowances, rebates, refunds, trade or other discounts, or other inducements to buy (referred to collectively as "sales price adjustments") are being provided by the seller, will govern the timing, character and treatment by the seller with respect to such adjustments. They also may determine the ability of the seller to recover over time the amount of the transfer through depreciation or amortization deductions. From the perspective of the purchaser, if a sales price adjustment is received, the purchaser would not recognize this amount in current income, but instead would reduce the basis in its newly acquired property or the cost of its assets held in inventory.

The proper parameters of the nature and scope of sales price adjustments have long been a matter of contention between taxpayers and the Service, and have represented a source of substantial confusion. This area is sufficiently broad that a single article cannot do it justice. As a result, this article is devoted to an examination of the sales price adjustment inquiry from the perspective of the seller. This article also considers two other intriguing issues involving incentives from nonsellers: inducements furnished by third parties with a business interest in the transaction, and inducements taking the form of nonshareholder contributions to capital under section 118.

Accepted Paper Series


Not Available For Download

Date posted: April 20, 2004  

Suggested Citation

Baillif, Michael, Sales Price Adjustments: The Continuing Conundrum. Tax Lawyer, Vol. 57, No. 2, Winter 2004. Available at SSRN: http://ssrn.com/abstract=532763

Contact Information

Michael Baillif (Contact Author)
Ernst & Young LLP
1225 Connecticut Avenue NW
Washington, DC 20036
United States
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