Page 148 - Large Business IRS Training Guides

Allocation Rules

Interest Income and Interest Expense

• Allocation is based on the relative amounts of a

taxpayer’s adjusted tax basis in the assets used in its

excepted vs. its non-excepted trades or businesses.

• A taxpayer’s adjusted tax basis in its assets is

determined quarterly and averaged across the year.

• De minimis exception: when 90%+ of a taxpayer’s

adjusted tax basis for the year is allocable to either

excepted or non-excepted trades or businesses, the

taxpayer treats all of its interest income and interest

expense as allocable to that category of trades or

businesses.

• Special rules apply when an asset is used in more than

one trade or business.

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