Do you agree with the ruling of the tax court

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Reference no: EM131500253

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?

Reference no: EM131500253

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