LMSB Tier III Issue: Vendor Allowances |
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Vendor Allowances
Industry: Retailers, Food, Pharmaceuticals & Healthcare
The vendor allowance issue concerns the appropriate characterization of the allowance for tax reporting purposes. Vendor allowances include, but are not limited to, asset-based allowances, merchandise-based allowances, sales-based allowances, post acquisition-based allowances and can also include upfront payments.
At issue is whether the various types of vendor allowances that can be received by a taxpayer in the normal course of business constitute:
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Gross income under IRC § 61,
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Trade or other discounts reducing the invoice price of merchandise acquired during the taxable year under Regulation § 1.471-3(b), or
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Reimbursement of an expense.
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Page Last Reviewed or Updated: March 23, 2009