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.

SPONSORED REPORT

Solving the lease accounting challenge

The challenges of the new lease accounting standard have been pervasive to say the least. In this free, independently-written report, you'll learn effective adoption strategies as well as resources for easing the transition to the new standard.

FEATURE

Tackling TCJA changes this tax season

Return preparers must be ready for how the Tax Cuts and Jobs Act has modified many common features of individual and business returns.