The following is not meant to be legal advice.
The Internal Revenue Service (IRS) stated it will not allow a deduction on advertising income from online software. Though, such income from traditionally purchased or downloaded software qualify under the new rules. Also, the deduction will be available in cases where the access to software is provided on a public or private network, not just the Internet.
Industry representatives sought changes to reflect a future trend of Internet-only software, but IRS stated the sale or download standard is required under the statute. With trends in the rise of ASP models and on demand software models, the IRS rules may not be considered up to date with the times, but there was much evaluation and analysis of the difficulty of making the rules to satisfy everyone.
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