Trinova Corporation and Subsidiaries - Page 20

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          as an agreement to treat this deduction in the same fashion as              
          interest expense.  We have some doubt whether the Swiss capital             
          tax would generally qualify as interest for purposes of section             
          1.861-8(e)(2), Income Tax Regs.  However, the factual foundation            
          for determination may be a critical element in resolving such               
          issue.  Such being the case, we accept the agreement of the                 
          parties for purposes of the case.  Accordingly, this item should            
          be allocated in the same manner as we have concluded is proper              
          for interest expense.                                                       



               Exchange Loss                                                          
               The parties treat the deductions for exchange loss                     
          differently.  Respondent would put the deductions in a catch-all            
          category, and would apportion these losses all at once, ratably             
          across all income.  Petitioner would deal with each item                    
          individually, based on the nature of the underlying expense.  We            
          think petitioner has the better approach.  The most accurate way            
          to treat the deductions in question, in keeping with the mandate            
          that allocations be made "on the basis of the factual                       


          10(...continued)                                                            
          the Swiss capital tax does not relate to any one class of income,           
          and thus should be allocated ratably to all AG's gross income.              
          However, respondent thereafter on brief continues to argue that             
          the asset method should be used to apportion the expense in                 
          accordance with the stipulation of the parties.                             




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