- 37 - 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. InPage: Previous 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 Next
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