Looking at the taxpayer's cost accounting systems and its method of allocating
costs to codes within specific projects based on allocation percentages established by the planning engineer who initiates the project and based on the total projected costs of the project for each code, as well as using cost pools for labor costs of supervisors and support employees that are subsequently allocated to various projects and/or codes, the Service ruled that if the agent determines that time-reporting engineers specifically track time to project codes, such labor costs are direct labor costs.
199, the taxpayer must be consistent with respect to the method of allocating
and apportioning expenses.
The proposed regulations do not address whether a taxpayer's method of allocating
costs constitutes a method of accounting.
Otherwise, a taxpayer may use "any reasonable method" of computing and allocating
the credit for tax years ending before May 24, 2005, although language contained in the preamble suggests that the gross QRE method might not be reasonable under some circumstances.
The new rules do not resolve all the issues that can arise in allocating
It requires that a company allocating
shares acquired after 1992 to participants' ESOP accounts record a compensation expense that is measured by the stock's fair market value on the allocation date.
R&D expenses also qualify for the "sub-grouping" allocating
rules described above.
In its defense, the taxpayer argued that because it had not yet incurred storage and handling costs for this merchandise (the taxpayer properly allocated freight costs), allocating
such costs would have been a distortion, violating the clear-reflection-of-income doctrine.
These factors are multiplied by compensation, and the weighted compensation amounts are used in allocating
rules when allocating
income, gain, losses and taxes.