Interest Expense Allocation/Apportionment

Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 201829001
Release Date: 7/20/2018
Index Number: 9413.03-02
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[Third Party Communication:
Date of Communication: Month DD, YYYY]
Person To Contact:
---, ID No. ---
Telephone Number:
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Refer Reply To:
CC:INTL:B03
PLR-109855-18
Date:
April 25, 2018
TY:---
Corp X = ---
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Date 1 = ---
Date 2 = ---
Dear ---:
This is in response to your letter dated January 17, 2018, requesting a ruling that Corp
X and its subsidiaries be permitted to change from the fair market value method to the tax book method of asset valuation for purposes of apportioning interest expense.
Additional information was submitted in a letter dated April 19, 2018.
The rulings contained in this letter are based upon information and representations submitted by Corp X and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.
Corp X, a domestic corporation, is a fiscal year taxpayer that uses the accrual method as its overall method of accounting. Corp X is the common parent of a group of affiliated corporations that files a consolidated U.S. federal income tax return. Corp X has used the fair market value method of asset valuation since the tax year beginning Date 1.
Corp X wishes to change to the tax book value method because complying with the fair market value method requirements has resulted in Corp X incurring undue administrative burden and significant costs both in terms of professional fees and time spent by Corp X personnel.
PLR-109855-18 2
Section 864(e) provides that all allocations and apportionments of interest expense shall be made on the basis of assets rather than gross income. Treas. Reg. §§1.861-8 through 1.861-12 and Temp. Treas. Reg. §§1.861-8T through 1.861-13T set forth the rules specific to the allocation and apportionment of interest expense. Temp. Treas.
Reg. §1.861-9T(g)(1)(ii) provides that a taxpayer may elect to determine the value of its assets on the basis of either tax book value or the fair market value of its assets. Temp.
Treas. Reg. §1.861-8T(c)(2) provides that, once a taxpayer uses the fair market value method, the taxpayer and all related persons must continue to use such method unless expressly authorized by the Commissioner to change methods.
Based solely on the information submitted and the representations made, Corp X may use the tax book value method of assets valuation for purposes of apportioning interest expense, pursuant to Temp. Treas. Reg. §§1.861-8T(c)(2) and 1.861-9T(g)(1)(ii), starting from its tax year beginning on Date 2 and for all subsequent taxable years and for all operative sections, including sections 199 and 904 of the Code, pursuant to Treas. Reg. §1.861-8(f)(2).
Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.
This ruling is directed only to Corp X and its subsidiaries. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.
In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative.
A copy of this letter must be attached to any income tax return to which it is relevant.
Alternatively, if Corp X files it returns electronically it may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling.
Sincerely,
Michael I. Gilman
Senior Technical Reviewer, Branch 3
Office of Associate Chief Counsel
(International) cc: