Anschutz Company and Subsidiaries - Page 37

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               Indirect costs are allocated using either a specific                   
               identification method, a standard cost method, a burden                
               rate method, or any other reasonable allocation method                 
               (as defined under the principles of paragraph (f)(4) of                
               this section).                                                         
          Respondent contends that “intermediate cost objectives”                     
          distinguishes between property subject to and property not                  
          subject to section 263A.  The cited language is less than clear,            
          and the regulations do not expand on or define “intermediate cost           
          objectives” other than to offer examples “such as departments or            
          activities”.  However, when read in the context of the above-               
          analyzed regulations, we find that the phrase “intermediate cost            
          objectives” is not meant to distinguish between property subject            
          to and property not subject to section 263A.                                
               For the above reasons, we find that section 1.263A-1(g)(3),            
          Income Tax Regs., does not require that the reasonableness                  
          standard of section 1.263A-1(f)(4), Income Tax Regs., govern the            
          first level allocation.                                                     
               B.   The Language and Parallel Structure of Sections                   
                    1.263A-1 and 1.451-3, Income Tax Regs.                            
               Respondent argues that the parallel structure of sections              
          1.263A-1 and 1.451-3, Income Tax Regs., indicates that the                  
          reasonableness standard of section 1.263A-1(f)(4), Income Tax               
          Regs., should be incorporated into the undefined phrase                     
          “reasonable allocation” in sections 1.263A-1(e)(3)(i) and 1.451-            
          3(d)(6)(ii), Income Tax Regs.  However, respondent’s argument is            
          not supported by the actual structure of the regulations.  In               





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