Page 231 - Large Business IRS Training Guides

Allocation Rules: Excepted & Non-Excepted

Trade or Business (TOB)

Step 7: Determine if taxpayer properly allocated items of

income, gain, deduction, or loss between excepted and

non-excepted TOBs and reported the excepted TOB

assets on the ADS method of depreciation.

• Allocation rules are generally based on TP’s adjusted

tax basis of the assets used in its excepted and non-

excepted TOB.

• Taxpayer is required to attach a statement to its timely

filed tax return.

Exam tip: Request allocation workpapers.

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