Background and Issues Relating to Research and Experimentation Expense Source Allocation Rules: Scheduled for Hearings Before the Subcommittee on Oversight of the Committee on Ways and Means on October 26, and November 3, 1983
U.S. Government Printing Office, 1983 - Foreign tax credit - 38 pages
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30 percent abroad activities addition allocation allow amount application apportioned apportionment argue arises Assume base basic research basis benefit Code conducted Congress connected considered controlled corporation costs definition determining domestic R&D earns effect example excess credits expected firms foreign country foreign income foreign sales foreign subsidiary foreign tax credit foreign-source income gross income gross income methods grouping incentives income tax increase incurred intangible investment issue license manufacturing million moratorium operations parent payments percent performed permits person place-of-performance portion present product categories proposed provides R&D deduction R&D expense R&D Regulation R&D rules reasonably reduce Regulation's requirements research and development result royalty sales method sold source income suspended tax credit limitation tax liability tax rate taxable income theory tion transfer Treasury treated U.S. and foreign U.S. corporation U.S. income U.S. tax U.S. taxpayers U.S.-source income United yield
Page 11 - research or experimental expenditures", as used in section 174, means expenditures incurred in connection with the taxpayer's trade or business which represent research and development costs in the experimental or laboratory sense. The term includes generally all such costs incident to the development of an experimental or pilot model, a plant process, a product, a formula, an invention, or similar property, and the improvement of already existing property of the type mentioned.
Page 13 - This exclusive apportionment reflects the view that research and development is often most valuable in the country where It is performed, for two reasons. First, research and development often benefits a broad product category, consisting of many individual products, all of which may be sold in the nearest market but only some of which may be sold in foreign markets. Second, research and development often is utilized in the nearest market before it is used in other markets, and in such cases, has...
Page 9 - ... a ratable part of any expenses, losses, or other deductions which cannot definitely be allocated to some item or class of gross income...
Page 24 - Service that the arrangements or transactions, or the terms thereof, giving rise to the section 482 allocation did not have as one of their principal purposes the avoidance of Federal income tax.
Page 5 - States and of a domestic corporation, the amount of any income, war profits, and excess profits taxes paid or accrued during the taxable year...
Page 9 - Income, expenses, losses and deductions, other than those specified in subsections (a) and (c) of this section, shall be allocated or apportioned to sources within or without the United States, under rules and regulations prescribed by the Commissioner with the approval of the Secretary.
Page 23 - As a result, the United States usually does not impose a tax on the foreign source income of a foreign corporation even though it is owned or controlled by US persons. Instead, the...
Page 15 - Regulation section 1.482-2(dX4)) with the taxpayer for the purpose of developing intangible property, then that corporation is not reasonably expected to benefit from the taxpayer's share of the research expense. A controlled corporation's sales of products within a product category are taken into account to the extent of the greater of (1) the amount of sales that would have been taken into account if the controlled corporation were an uncontrolled party and if any intangible property contributed...
Page 11 - ... is an inherently speculative activity, that findings may contribute unexpected benefits, and that the gross income derived from successful research and development must bear the cost of unsuccessful research and development.
Page 10 - A deduction shall be considered definitely related to a class of gross income and therefore allocable to such class if it is incurred as a result of, or incident to, an activity or in connection with property from which such class of gross income is derived.