Question several years ago rjr nabisco incurred 2 mil-lion, Ask an Expert

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Question: Several years ago, RJR Nabisco incurred $2 mil-lion in costs for package design-the physical construction of a package and its graphic design. Nabisco wanted to deduct the entire $2 million in the year it was spent; the Internal Revenue Service insisted that the $2 million be treated like a capital expenditure and depreciated over time. Eventually the Tax Corm sided with Nabisco.

a. Explain carefully why Nabisco would prefer to have the $2 million treated as a current expense rather than a capital expenditure.

b. Do you agree with the ruling of the Tax Court?

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Category:- Basic Finance
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