With the recent issuance of Internal Revenue Service and U.S. Treasury Department guidance on capitalization, a drawn out conflict with the fund industry over the tax treatment of fund start-up costs appears to be drawing to a close. The Investment Company Institute has not issued an official comment on the issue, but it has indicated that the new rules do not go far enough in terms of the costs that can be expensed.

While the general interpretation is that the new guidance signifies a victory for the industry, it only addresses part of the issue. According to John Collins, an ICI spokesman, the ICI wants fund sponsors to be allowed to expense all costs associated with launching a fund, not merely the internal costs, as the new guidance provides. External costs would cover fees paid to consulting firms, outside lawyers and other experts and should also be covered, Collins said.

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