No Sec. 199 deduction for these activities


The IRS Large Business & International (LB&I) Division issued guidance to its employees in memo LB&I-04-0315-001 listing activities performed “at the retail level” that it said do not produce property that is “manufactured, produced, grown, or extracted” (MPGE), as defined by Regs. Sec. 1.199-3(e), in whole or significant part in the United States that could qualify for the domestic production deduction of Sec. 199. They are:

  • Cutting blank keys to a customer’s specification;
  • Mixing base paint and a paint coloring agent;
  • Applying garnishments to cake that is not baked where sold;
  • Applying gas to agricultural products to slow or expedite fruit ripening;
  • Storing agricultural products in a controlled environment to extend shelf life; and
  • Maintaining plants and seedlings.

Other similar activities may also be non-MPGE, depending on the facts and circumstances, the memo stated.

RESOURCES

Keeping you informed and prepared amid the coronavirus crisis

We’re gathering the latest news stories along with relevant columns, tips, podcasts, and videos on this page, along with curated items from our archives to help with uncertainty and disruption.

SPONSORED

Building process maps: Template and instructions

Documenting your financial close process and finding opportunities for automation are more important than ever. Our customizable slide deck has instructions, a risk assessment questionnaire, and bonus checklists that will help you map out your process.