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Read the October Issue of Focus on Tax Strategies & Developments

The October 2017 issue of Focus on Tax Strategies & Developments has been published. This issue includes five articles that provide insight into US federal and international tax developments and trends across a range of industries, as well as strategies for navigating these complex issues.

Republican Leaders Release Tax Reform Framework
By David G. Noren Alexander Lee

M&A Tax Aspects of Republican Tax Reform Framework
By Alexander Lee, Alejandro Ruiz and Timothy S. Shuman

State and Local Tax Aspects of Republican Tax Reform Framework
By Peter L. Faber

Grecian Magnesite Mining v. Commissioner: Foreign Investor Not Subject to US Tax on Sale of Partnership Interest
Kristen E. Hazel, Sandra P. McGill and Susan O’Banion

The IRS Attacks Taxpayers’ Section 199 (Computer Software) Deductions
Kevin Spencer, Robin L. Greenhouse and Jean A. Pawlow


Read the full issue of Focus on Tax Strategies & Developments




The IRS’s Assault on Section 199 (Computer Software) Doesn’t Compute

Internal Revenue Code Section 199 permits taxpayers to claim a 9 percent deduction related to the costs to develop software within the U.S. The relevant regulations and their interpretation, however, place substantial restrictions on claiming the benefit.

Moreover, the regulations and the government’s position haven’t kept up with the technological advances in computer software.

Before claiming the deduction on your return, consider that the Internal Revenue Service has this issue within its sights, and perhaps it will be the subject of one of their new “campaigns.”

In 2004, Congress enacted I.R.C. Section 199 to tip the scales of global competitiveness more in favor of American business. The main motivation of the statute was to create jobs by encouraging businesses to manufacture and produce their products in the U.S. The tax benefit, however, isn’t available for services, a theme that pervades many of the provisions in the statute and regulations.

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Originally published in Bloomberg BNA Daily Tax Report – April 24, 2017 – Number 77




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