IRS Defends Denying Repair Deductions to US Tomato Suppliers

Suppliers for 40% of the US’s tomato paste and diced tomatoes shouldn’t be allowed to deduct restoration costs for their processing facilities before the restorations are complete, the IRS told a federal appeals court.

Liberty Packing Co. and Morning Star Packing Co. appealed when the US Tax Court decided they had overreported their accrued 2008 production costs by more than $4 million and $4.6 million, respectively. The Tax Court sustained the IRS’s determination that neither partnership was entitled to deduct the costs because refurbishments weren’t complete, meaning their liabilities weren’t fixed.

The tomato suppliers and IRS agree that the ...