- 2 -
income, relying on sec. 1.861-8(e)(7)(ii), Income Tax
Regs. P apportioned those deductions in the same
manner as the underlying expenses. Held: (1) Interest
expense is apportioned under the asset method by
prorating the assets between the statutory and residual
groupings based on the income they produce; (2) swap
losses are apportioned in the same manner as interest
expense; (3) Swiss capital tax is apportioned in the
same manner as interest expense; (4) sec. 1.861-
8(e)(2)(v), Income Tax Regs., does not apply to the
exchange losses involved in this case, and the
deductions are apportioned in the same manner as the
underlying expenses to which they relate.
Frederick E. Henry, Jeffrey M. O'Donnell, and Julie C. H.
Walsh, for petitioner.
Nancy B. Herbert and Reid M. Huey, for respondent.
MEMORANDUM OPINION
TANNENWALD, Judge: Respondent determined the following
deficiencies in petitioner's Federal income taxes and additions
to tax:
Additions to Tax
Year Deficiency Sec. 6661(a)
1985 $ 117,988.00 --
1986 11,630,928.00 $1,429,687.00
1987 4,924,255.00 --
1988 834,875.00 --
After concessions by the parties, the issue for decision is how
various deductions should be allocated and apportioned between
the subpart F income and non-subpart F income of petitioner's
wholly owned subsidiary for the purposes of determining
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011