Tuesday, January 15, 2013

Rev. Rul. 92-80 Advertising Costs

How does INDOPCO ruling affect the treatment of advertising costs as business expenses, which were generally deductible under § 162?


INDOPCO does not affect the treatment of advertising costs under § 162. These costs are generally deductible under that section even though advertising may have some future effect on business activities, as in the case of institutional or goodwill advertising. Maintain good image with public.

Taxpayers can immediately deduct promotional material that is given out to potential customers. Same thing for package design. However, trademarks are capital costs. Remember to capitalize the cost of the trademark. Deduct the package design but capitalize the facilitation of hiring the lawyer for the trademark.  EVEN PAYING FOR MARKETING STRATEGY IS DEDUCTION.

Only in the unusual circumstance where advertising is directed towards obtaining future benefits significantly beyond those traditionally associated with ordinary product advertising or institutional goodwill advertising, must costs of that advertising me capitalized. What are benefits beyond advertising?

Advertising costs that create a separate and distinct asset must be capitalized. If there is ad campaign, but the only reason is to get admitted to a business organization. There is no other purpose but to create a separate and distinct asset. Make someone argument that you got something else.

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