IRS Chief Counsel - Capitalize payment for underwriting costs  

March 10: The IRS posted a “redacted” field advice memorandum* in which it concluded that the taxpayer must capitalize a payment made as compensation for underwriting costs in relation to certain debt. 20141001F (release date March 7, 2014, and dated January 29, 2014)

All of the “facts” in this field advice memo are redacted.

However, in the “law and analysis” part of the memo, the IRS stated that the issue was whether the amount had been paid as a repurchase premium or whether the amount was paid to facilitate the subsequent sale of the debt. If repaid as a repurchase premium, the IRS concluded the amount would be deductible; whereas, if the latter situation applied, the amount must be capitalized.

The IRS continued by explaining that the facts showed that the taxpayer paid the amount as compensation for costs incurred in connection with the sale of the debt, and not as a repurchase premium associated with reacquisition of other debt.

Read the field advice memo [PDF 95 KB]

*Field advice memo documents are prepared by IRS field attorneys in the Office of Chief Counsel, are reviewed by an Associate Office, and are subsequently issued to IRS field or service center employees. The memo cannot be used or cited as precedent.

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