Allocation of research and experimentation expenditures between U.S.-source and foreign-source income - final regulations

Article Abstract:

Final IRS regulations released under IRC section 861 describe the methods available for allocation of research and experimentation expenses incurred by taxpayers calculating foreign tax credit limitations. The US and foreign members of the affiliated group are treated as a single corporation for purposes of the regulations. After legally mandated expenditures are excluded, the expenses are allocated by apply the sales method or the gross income method. The rules of the final regulations are more favorable than prior regulations but less favorable that the former section 864 rules.

United States, Accounting and auditing, Affiliated corporations, Foreign source income taxation, Foreign tax credit, international

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Letter Ruling 9133034 adds additional appeal to the fair market value approach to the allocation of interest expense

Article Abstract:

Multinational corporations can use the fair market value election on a retroactive basis to determine the amount of interest expense that is allocated to foreign service income. IRS Letter Ruling 9133034 makes the fair market value method an important means of achieving savings. Firms most likely to benefit from the method include those with an excess of foreign tax credits, capital-intensive firms, firms whose stock price is rising, and firms whose net income before interest and taxes is greater than their asset ratio.

Interest deductions

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Taxation of foreign dividends

Article Abstract:

The US Supreme Court ruled in Kraft Foods v Iowa Department of Revenue that Iowa's tax on dividends received by domestic corporations from foreign subsidiaries violated the Constitution's Foreign Commerce Clause. The Jun 18, 1992 ruling also declared that Iowa's taxation of foreign but not domestic dividends amounted to illegal discrimination. Multinational corporations may now seek the return of the taxes they paid under Iowa's invalidated law.

Interpretation and construction, Foreign operations, Cases, Dividends, Corporations, Corporation law

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