Identifying the period when a business benefits from advertising expenditures has proven to be difficult. Because of the difficulty in allocating expenses to a particular period, tax authorities provide for the current deduction of advertising expense even though it is reasonable to expect future benefits from the activities. In 1998, citing case history, administrative pronouncements, and the definition of advertising, the Tax Court allowed the immediate deduction of the costs for the graphic design of cigarette packaging incurred by R. J. Reynolds Tobacco Co. The Internal Revenue Service did not acquiesce to the Tax Court's decision, and we can expect the deduction of advertising expense, especially graphic design, to remain an interesting and challenging issue.

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