Third Circuit Reverses Tax Court on All-Events Test for Customer Rewards

摘要

The Third Circuit Court of Appeals reversed the Tax Court in Giant Eagle, Inc. (822 F.3d 666) and held that the corporation could deduct the estimated costs of accrued customer rewards. The Court determined that the corporation satisfied the all-events test because a liability exists when the customer earns the rewards and the seller becomes obligated to redeem, rather than when the redemption occurs. This opinion is binding on the Internal Revenue Service (IRS) for taxpayers within the Third Circuit; however, other taxpayers should note that the IRS issued a nonacquiescence indicating it will continue to fight this issue in the future.