Although I have been in professional publishing and writing for tax practitioners for over 30 years, a good Internal Revenue Service letter ruling or a Tax Court decision still excites me. This is especially true when they are taxpayer victories that tax practitioners can use to benefit clients that are similarly situated.
Here are the two that I just came across:
It Will Be in the Mail Shortly
A company using the accrual method of accounting is engaged in the direct mail advertising business and enters into contracts with clients to print and distribute advertising materials to households and businesses. It maintains a permit-prepaid postage account with the United States Postal Service and the balance is reduced as items are mailed.
There are two types of arrangements that the company enters into with its clients, shared mailings and solo mailings. In a shared mailing, the company mails a number of clients' advertising materials together and the cost of postage is included in the contract price and is not a line item on the bill to the client. Solo mailings are conducted on behalf of a single client, and postage isn’t included in the stated contract price. Rather, postage actually used is charged as a separate line item unless the client's own postage permit is used.
The IRS, in letter ruling 2007-09003, ruled in both instances that the amount of the deposit for postage made prior to the end of its fiscal year and reasonably to be used by the company in the next 3-1/2 months are deductible by that company for that prior fiscal year.
Sailing, Sailing, and More Sailing
For approximately 27 years, from 1975 through early May 2002, Myron Struck was employed full time as a yacht captain for owners of private yachts. Thelma Struck also was worked on the yachts as a chef and stewardess. Beginning in 1991 through May of 2002, they were employed on a yacht owned by Cush Automotive, a California company, and operated primarily in foreign territorial waters. Each year, Cush Automotive paid Myron and Thelma a salary, their living expenses while on the yacht, and their vacation travel expenses back to the U.S. Except for approximately two weeks when on vacation in the United States, and even when docked in foreign ports, they lived on the yacht.
The Tax Court in Struck, inT.C. Memo 2007-42, held that the Strucks were entitled to claim the foreign earned income exclusion because they had a foreign tax home during the applicable periods, and were physically present in foreign countries for at least 330 days of the applicable periods overlapping the two years in question.
