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Expense Apportionment (861-8)

The allocation and apportionment of deductions affects the calculation of the foreign tax credit, the various export tax incentives and the domestic production activities deduction (“DPAD”). These tax benefits and others are limited by the amount of income from U.S. and non-U.S. sources. The firm works closely with its clients to understand the factual relationship between its deductions and the various statutory grouping of income (FTC and DPAD) and working within the statutory and regulatory guidelines systematically identify those methods of apportionment that will produce the most favorable overall results.

USTA’s VantagePoint software uniquely positions the firm to assist clients in optimizing a wide range of allocation and apportionment methodologies that are consistent with client facts. Some examples include:

• Fair market value asset base for interest expense apportionment;
• Alternative book value method for interest expense apportionment;
• R&D sales and optional gross income bases;
• Divisional apportionment; and
• Activity based costing.

Few firms match USTA’s detailed knowledge and IRS examination experience to support identifying, documenting and sustaining the most optimal expense apportionment methodologies.