Federal Claims Court case on leased asset sale could benefit taxpayers

August 2012

Overview

Companies that have sold assets at a gain which have been used to generate foreign sales corporation commissions or extraterritorial income exclusions may restore a portion of the basis of the underlying assets and decrease the amount of gain reported on the sale. For those companies, the US Court of Federal Claims' May 11, 2012 decision in the case of CBS Corporation v. United States could provide a significant cash and earnings benefit. As the court ruled, depreciation allocable to excluded or exempt income may not be deducted and should therefore not reduce the adjusted basis at the time of sale for leased assets that have generated excluded or exempt income.

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