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National Tax Update - November 2016


CohnReznick National Tax Update Newsletter - August

 

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NOVEMBER 2016

A company's approach to tax planning is critical in helping it meet financial and operational objectives. CohnReznick's National Tax Update newsletter is designed to provide timely information to help you stay abreast of changing tax regulations and incentives on the local, federal, and international level.
 
We hope you find this useful in helping you adopt a comprehensive and proactive tax strategy.

 
ACCOUNTING METHODS

Ninth Circuit Finds Home Builder Properly Used Completed Contract Method
 
The U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) affirmed a decision by the U.S. Tax Court that residential home developers were allowed to use the completed contract method of accounting for home construction contracts under IRC §460.  Further, the Court held that the completed contract method clearly reflected the taxpayer’s income and the taxpayer could consider the entire project development costs including amenities.  The result of the Court’s ruling is that the taxpayer is able to defer recognizing income until substantially all of the project is complete. Shea Homes, Inc. v. Commissioner, No. 14-72161 (9th Cir. August 24, 2016)

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Section 199 Deduction for Marketing Materials Denied
 
In CCA201626024, the IRS addressed whether a retailer could take the section 199 deduction for marketing materials that were used to sell products that are manufactured and produced outside of the United States. The IRS concluded that none of the gross receipts derived from the sale of its products were domestic production gross receipts (DPGR) and that none of the receipts from the sale of its products were advertising income within the meaning of Treas. Reg. §1.199-3(i)(5)(ii)(A).

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CORPORATE TAX

Network Produced Game Broadcasts for Itself, Not for Sports League
 

The IRS clarified prior advice it issued in ILM 201545018 and it determined that a sports league’s share of gross receipts from a contract with a broadcasting network were not domestic gross receipts (DPGR) for purposes of the section 199 deduction. The IRS concluded that the broadcast network produced game broadcasts for its own benefit and not pursuant to a contract with the sports league. 

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INTERNATIONAL TAX

IRS Releases 2016-2017 Priority Guidance Plan
 
In August, the IRS released its 2016-2017 Priority Guidance Plan (“PGP”), highlighting a number of tax issues that the IRS will focus on over the next year or so. The PGP highlights topics on which the IRS plans to release guidance in the future. 

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TRUST AND ESTATE

Changes to the New Jersey Estate and Income Tax
 
A compromise reached between Governor Christie and Democratic leaders of the New Jersey legislature has been consummated in final legislation which will result in several tax adjustments.

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