January 10, 2007

Mr. Lewis J. Fernandez

Associate Chief Counsel, Income Tax and Accounting

Internal Revenue Service

P.O. Box 7604

Ben Franklin Station

Washington, DC 20044

Re:      Documentation Requirement Under Reg. Section 1.263(a)-5(f)

Dear Mr. Fernandez:

Enclosed are comments prepared by the American Institute of Certified Public Accountants (AICPA) regarding the documentation requirement under reg. section 1.263(a)-5(f). These comments were developed by the Success-Based Fees Task Force of the AICPA’s Tax Accounting Technical Resource Panel and approved by the Tax Executive Committee.

Based on recent examination experience, the IRS is taking the view that timesheets are the only acceptable form of documentation to support an allocation of an investment banker’s success-based fee between deductible and non-deductible expenses. This position is clearly inconsistent with the stated intent of IRS and Treasury in issuing reg. section 1.263(a)-5(f), thereby effectively rendering the regulations moot.

Therefore, the AICPA recommends that the IRS and Treasury consider issuing a ruling or a revenue procedure that would clarify how this regulation should be applied, and set forth safe harbor provisions to give taxpayers certainty when allocating success-based fees. Such guidance would significantly reduce controversy in this area, thereby freeing up both IRS and taxpayer resources.

We appreciate your consideration of these comments. If you have any questions, please contact me at jeffrey.hoops@ey.com; Christine Turgeon, Chair, AICPA Tax Accounting Technical Resource Panel, at christine.turgeon@us.pwc.com; or George White, AICPA Technical Manager, at gwhite@aicpa.org.

Sincerely,

Jeffrey R. Hoops

Chair, AICPA Tax Executive Committee

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