Encyclopedia Britannica v. Commissioner
United States Court of Appeals for the Seventh Circuit
685 F.2d 212 (7th Cir. 1982)
Relevant factsFree
Britannica (plaintiff) paid a third-party publisher an advance against expected future royalties to help prepare a new reference book, then deducted the entire advance as an ordinary business expense in the year paid even though the book was intended to generate royalty income over a long-term period, and the Commissioner (defendant) disallowed the immediate deduction, though the Tax Court initially ruled for Britannica.
IssueFree
Whether, for federal tax purposes, expenses intended to generate future income must be capitalized.