Advance Trade Discounts: A Reprise
9 Pages Posted: 14 Dec 2007
This report reviews the various possible conceptual approaches that can be applied to advance trade discounts for income tax purposes. While concerns for administrative ease make conceptual purity unlikely in this context, the author believes that we can do a far better job than is apparent in two recent cases and a revenue procedure. The key inquiry that should be made (but which was ignored in all three authorities) is whether the recipient of the cash advance trade discount paid market rate interest for the time value of deferring inclusion.
Keywords: taxation of advance trade discounts, taxation of loan proceeds
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