Taxpayer has benefits and burdens of ownership for Section 199

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July 2020

Overview

The court in Meredith Corporation v. U.S., 2020 WL 1330240 (S.D. Iowa March 20, 2020), has entered an order after trial concluding that the taxpayer had the benefits and burdens of ownership of qualified production property and is entitled to the Section 199 deduction.

The takeaway

A taxpayer that performed a qualifying activity under contract with another party was allowed the Section 199 deduction only if the taxpayer bore the benefits and burdens of ownership of the property.  Benefits and burdens of ownership is an important concept relevant to a number of issues under federal tax law, such as whether a taxpayer is a producer under Section 263A and whether a transaction is a sale or a lease.  A taxpayer considering whether it has the benefits and burdens of ownership should apply a facts and circumstances test and analyze a variety of factors.

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Christine Turgeon

Partner, Federal Tax Services Leader, PwC US

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