Law Commons^™

When Are Capitalization Exceptions Justified?, Ethan Yale

Georgetown Law Faculty Publications and Other Works

It is a widely accepted general principle that a taxpayer should capitalize an expenditure that produces a benefit lasting beyond the current tax period. Yet rules putting this principle into practice are among the most controversial in all of federal income taxation. Many argue that a retreat from the general principle is warranted when designing capitalization rules, and even those who argue that capitalization rules ought to be sweeping usually conclude that exceptions are necessary or desirable. For instance, most commentators accept uncritically that expenses incurred to procure certain intangible capital should be expensed, as under current law, without exploring …