Interest Expense Attribution IRC § 864(e)

Under IRC §864(e), members of an affiliated group are required to allocate interest expense against foreign-source income as if they are one taxpayer rather than separate entities. This must be achieved by multiplying the group’s total interest expenditures by the ratio of its foreign assets to its total assets. Under the regulations, taxpayers may elect either a tax book value basis or a fair market value basis on which to perform this allocation. Relying on the fair market value method may provide the corporate taxpayer significant savings.

HSSK’s skilled professionals possess the requisite understanding of the regulations as well as the valuation expertise to provide a fair market valuation of the affiliated group as a whole as well as its underlying domestic and foreign assets. Our studies are designed to fully satisfy the IRC regulations governing this election and withstand the scrutiny of the Internal Revenue Service. Our extensive experience with the Service ensures that our methods and findings are supportable.