- 13 -
proposed INDOPCO12 regulations), which contain the 12-month rule
described above, and make it generally applicable to “amounts
paid to create or enhance an intangible asset”. Sec. 1.263(a)-
4(f)(1), Proposed Income Tax Regs., 67 Fed. Reg. 77719 (Dec. 19,
2002). The proposed regulations also permit a deduction in the
year incurred for all “compensation paid to employees (including
bonuses and commissions paid to employees)”. Sec. 1.263(a)-
4(e)(3)(i), Proposed Income Tax Regs., 67 Fed. Reg. 77717 (Dec.
19, 2002).
The final regulations under section 263(a) (the final or
final INDOPCO regulations), published in the Federal Register on
January 5, 2004, include both rules. Sec. 1.263(a)-4(e)(4)(i)
and (ii), Income Tax Regs. (“employee compensation * * *
including salary, bonuses and commissions” treated as
deductible), and sec. 1.263(a)-4(f)(l), Income Tax Regs. (12-
month rule, applicable to “amounts paid to create (or to
facilitate the creation of)” an intangible). Pursuant to section
1.263(a)-4(o), Income Tax Regs., the final regulations apply to
“amounts paid or incurred on or after December 31, 2003", which
is in accord with the statement in the proposed regulations that,
as proposed, section 1.263(a)-4 would apply to “amounts paid or
12 So named for the U.S. Supreme Court decision that was
the genesis of the regulations project that ultimately resulted
in the final regulations. See INDOPCO, Inc. v. Commissioner, 503
U.S. 79 (1992).
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