Law360, New York ( December 3, 2013, 7:46 PM EST) -- In a case of first impression, the United States Tax Court has applied the Section 199 domestic production rules in a contract manufacturing context. In Advo Inc. & Subsidiaries v. Commissioner, the court rejected the view advocated by many taxpayers that the Section 199 regulations should be read consistently with contract manufacturing cases, including Suzy's Zoo v. Commissioner, decided under Section 263A. The Advo decision raises the bar for taxpayers who seek to claim Section 199 deductions for costs incurred in contract manufacturing arrangements. The court, however, also offered encouraging support for the announced administrative practice of the IRS's Large Business & International Division (LB&I) to accept taxpayers' certified allocations of the Section 199 deduction, which would avoid many factually intensive inquiries....