Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 54-3

1954-1 C.B. 67

Sec. 173

IRS Headnote

Amounts paid by a newspaper publisher to a charitable organization as a result of an offer made in a telephone campaign for additional subscribers that a portion of the price of every subscription received during the campaign would be paid to such organization, plus the amount of the compensation to the contractor in charge of the solicitation, telephone costs, verifications, and other overhead connected with the campaign, constitute expenditures to maintain or increase the circulation of the newspaper and are deduction in full under section 23(bb) of the Internal Revenue Code.

Full Text

Rev. Rul. 54-3

Advice is requested relative to the proper treatment for Federal income tax purposes of certain expenditures incurred by a newspaper publisher in a circulation campaign.

In order to meet competition from a rival newspaper in the same city the taxpayer started a telephone campaign for additional subscribers to its daily and Sunday newspaper, offering as an inducement to new subscribers to make a payment of a portion of the subscription price to a charitable organization. The taxpayer entered into an agreement with the charitable organization under the terms of which it agreed that the organization would receive a certain percentage of the subscription price paid in return for the privilege of stating that fact in connection with the solicitation. All soliciting costs, such as telephone charges, mailing of acknowledgments, and the compensation of the contractor engaged to conduct the campaign, were to be paid by the taxpayer.

Section 23(bb) of the Internal Revenue Code provides that in computing net income there shall be allowed as deductions:

(bb) CIRCULATION EXPENDITURES.-Notwithstanding section 24(a), all expenditures (other than expenditures for the purchase of land or depreciable property or for the acquisitions of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical) to establish, maintain, or increase the circulation of a newspaper, magazine, or other periodical; * * *

It is held that that portion of the price of every subscription received by a newspaper publisher during a telephone campaign for additional subscriptions and paid to a charitable organization as a result of an offer made during the campaign, plus the amount of the compensation to the contractor in charge of solicitation, telephone costs, verifications, and other overhead connected, with the campaign, constitute expenditures to maintain or increase the circulation of the newspaper within the meaning of section 23(bb) of the Internal Revenue Code and are deductible in full in computing net income for Federal income tax purposes.