Deductions are Allocated and Apportioned in Classes Existing in Year Taken (AM 2022-001, 5/6/2022)

Taxpayers argue that deferred compensation expense earned prior to the enactment of 250(b) Foreign Derived Intangible Income should not be allocated and apportioned to FDII. The Generic Legal Advice Memorandum (GLAM) does not agree with that approach.

The fact that the service period to which compensation expense is relevant straddles the effective date of section 250 does not permit a taxpayer to depart from the normal rule that the deduction for such expense must be allocated to (and apportioned to groupings within) the class of gross income for the taxable year in which the deduction may be claimed.

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