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

See all articles by Thomas Purcell

Thomas Purcell

Creighton University - Department of Accounting

Annette Nellen

San Jose State University - Donald and Sally Lucas Graduate School of Business

Abstract

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.

Suggested Citation

Purcell, Thomas and Nellen, Annette, Tangible Guidance on Intangibles: New Section 263 Regulations Provide Taxpayers with Certainty. Business Entities, Vol. 6, No. 5, September/October 2004, Available at SSRN: https://ssrn.com/abstract=669067

Thomas Purcell (Contact Author)

Creighton University - Department of Accounting ( email )

College of Business Administration
Omaha, NE 68178
United States

Annette Nellen

San Jose State University - Donald and Sally Lucas Graduate School of Business ( email )

One Washington Square
San Jose, CA 95192-0066
United States

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