Indiana disallows excess expense management fee deduction

myStateTaxOffice
In a recent Letter of Findings, the Indiana Department of Revenue disallowed a portion of management fees composed of ‘residual profits’ that were paid to an affiliated company. The Department determined that the taxpayer’s deduction for fees paid in excess of the affiliate’s actual expenses (which were returned to the taxpayer as dividends) did not result in a fair reflection of the taxpayer’s Indiana income. Indiana taxpayers should be aware that the state exercised its IRC sec. 482-like powers to disallow a portion of a taxpayer’s related company management fee expense. [Indiana Letter of Findings, Indiana Department of Revenue, No. 02-20120310, (7/31/13)]


Return to Tax research and insights
State and Local Tax