Feb 04

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IRS rules on sales-based royalties treatment

The IRS has determined that for sales-based royalties for tax years ending on or after January 13, 2014, taxpayers can either

  1. allocate sales-based royalties entirely to property sold and include those costs in cost of goods sold or
  2. allocate sales-based rolaties betwen cost of goods sold and ending inventory using a facts and cirucmstances cost allocation method as described in Regs Sec. 1.263A-1(f) or a simplified method


About the author

Renee Howdeshell

Renee Howdeshell is a founding member of Fulcrum Inquiry, an accounting, finance and economic consulting firm that performs damage analyses for commercial litigation, forensic accountings, royalty & distribution audits, financial investigations, and business valuations. Ms. Howdeshell holds a degree in Finance and Marketing from the University of Virginia's McIntire School of Commerce and is a Certified Public Accountant (CPA) and a Certified Fraud Examiner (CFE). She has testified as an expert witness in federal court, CA state court and arbitration regarding the results of her work. She can be reached at (213) 787-4112 and her resume is available at www.fulcrum.com.

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