Tangible Guidance on Intangibles: New Section 263 Regulations Provide Taxpayers with Certainty
Business Entities, Vol. 6, No. 5, September/October 2004
Posted: 20 Feb 2005
The authors explain the history behind and operation of the final IRC section 263 regulations issued in January 2004 on when expenditures producing intangible benefits are required to be capitalized. The regulations cover two broad areas: (1) acquired and created intangibles and (2) amounts paid or incurred to facilitate acquisition of a trade or business or change in capital structure. The regulations generally apply to amounts paid or incurred on or after December 31, 2003. The final regulations simplify the tax treatment of intangible benefits by providing specific categories of such costs that are to be capitalized. In most instances, the regulations specifically state which expenditures should be capitalized, thus avoiding an analysis of whether a particular expenditure produces a "significant future benefit."
The authors note that the regulations, on balance, are taxpayer friendly. They find that the regulations provide much needed simplification for the capitalization versus expensing area, through bright line tests and simplifying conventions. The article includes examples and identifies areas of open issues and likely future guidance.
Note: This is a description of the paper and not the actual abstract.
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