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Foreign divisional consolidations

Interest Expense Base Building and Apportionment

Base 511

  1. On the
    E&P By Source Code – After LT Interest
     report on line
    TOTAL GROSS INCOME
    , sum the amounts in the column for system code
    61 Passive, FPHCI
    and the columns for any user-defined source codes with
    FTC Type
    :
    3 – Passive Income
     and
    Subpart F Type
    :
    2 – FPHCI
     in the
    Source Code Definition Chart
     for the total Passive, FPHCI gross income for the divisional consolidation or subsidiary.
    1. If
      Division
       is selected in the divisional consolidation in
      Binder Properties
       tab
      International
       under
      Divisional Consolidation Data
      , calculate the amount in each division.
  2. On the
    E&P By Source Code – After LT Interest
     report on the line for the
    Intercompany Interest Expense
     in column
    [0] TOTAL
     identify the amount for the subsidiary or divisional consolidation.
    1. If
      Division
       is selected in the divisional consolidation in
      Binder Properties
       tab
      International
       under
      Divisional Consolidation Data
      , calculate the amount in each division.
  3. For the subsidiary or division or divisional consolidation, allocate the Intercompany Interest Expense to the
    Passive, FPHCI
     source codes to a maximum of the amount of
    TOTAL GROSS INCOME
     for each source code of the subsidiary, division, or divisional consolidation.
  4. If the
    Intercompany Interest Expense
     is less than the
    Passive, FPHCI TOTAL GROSS INCOME
     and more than one source code has
    Passive, FPHCI TOTAL GROSS INCOME
    , for each
    Passive, FPHCI
     source code, divide the
    Passive, FPHCI TOTAL GROSS INCOME
     by the total
    Passive, FPHCI TOTAL GROSS INCOME
     in each subsidiary, divisional consolidation, or division to calculate the ratio for each source code.
    1. Multiply the
      Intercompany Interest Expense
       by the ratio for each source code in each subsidiary, divisional consolidation, or division to calculate the amount of
      Intercompany Interest Expense
       allocated to each
      Passive, FPHCI
       source code.
  5. If
    Division
     is selected in the divisional consolidation in
    Binder Properties
     tab
    International
     under
    Divisional Consolidation Data
    , and the
    Passive, FPHCI
    TOTAL GROSS INCOME
     of the divisional consolidation includes amounts from divisions and the elimination that don’t have Intercompany Interest Expense, sum the
    Passive, FPHCI
    TOTAL GROSS INCOME
     of the divisions and elimination without Intercompany Interest Expense to calculate the remaining
    Passive, FPHCI
    TOTAL GROSS INCOME
     of the divisional consolidation.
    1. In the divisional consolidation, subtract the
      Intercompany Interest Expense
       allocated to the
      Passive, FPHCI
      TOTAL GROSS INCOME
       of the divisions with
      Intercompany Interest Expense
       from the
      TOTAL Intercompany Interest Expense
       of the divisional consolidation to calculate the remaining
      Intercompany Interest Expense
      .
    2. In the divisions with Intercompany Interest Expense, subtract the
      Intercompany Interest Expense
       allocated to the
      Passive, FPHCI
      TOTAL GROSS INCOME
       from the
      TOTAL Intercompany Interest Expense
       of the division to calculate the remaining
      Intercompany Interest Expense
      .
    3. Divide the remaining
      Intercompany Interest Expense
       in each division by the remaining
      Intercompany Interest Expense
       in the divisional consolidation to calculate the ratio for each division.
    4. Multiply the remaining
      Passive, FPHCI
      TOTAL GROSS INCOME
       of the divisional consolidation by the ratio for each division to calculate the additional amount of Intercompany Interest Expense for each division.
  6. If the remaining
    Intercompany Interest Expense
     is more than the remaining
    Passive, FPHCI TOTAL GROSS INCOME
     and more than 1
    Passive, FPHCI
     source code has remaining
    Passive, FPHCI
    TOTAL GROSS INCOME
     at the divisional consolidation or subsidiary, for each
    Passive, FPHCI
     source code, divide the remaining
    Passive, FPHCI TOTAL GROSS INCOME
     by the total
    Passive, FPHCI TOTAL GROSS INCOME
     in each subsidiary, divisional consolidation, or division to calculate the ratio for each source code.
    1. Multiply the additional amount of
      Intercompany Interest Expense
       by the ratio for each source code in each subsidiary, divisional consolidation, or division to calculate the additional amount of
      Intercompany Interest Expense
       allocated to each
      Passive, FPHCI
       source code.
  7. If the remaining
    Intercompany Interest Expense
     is more than the remaining
    Passive, FPHCI TOTAL GROSS INCOME
     in the subsidiary, divisional consolidation, or division, subtract the Total additional amount of Intercompany Interest Expense from the Total remaining amount of Intercompany Interest Expense to calculate the
    Total Intercompany Interest Expense
     for base
    512
    .
  8. If the remaining
    Passive, FPHCI TOTAL GROSS INCOME
     is more than the remaining
    Intercompany Interest Expense
     in the subsidiary, divisional consolidation, or division, subtract the Total additional amount of Intercompany Interest Expense from the Total remaining amount of
    Passive, FPHCI TOTAL GROSS INCOME
     for each source code to calculate the remaining
    Passive, FPHCI TOTAL GROSS INCOME
     for base
    513
    .

Base 512

  1. On the
    E&P By Source Code – After LT Interest
     report on line
    TOTAL GROSS INCOME
    , sum the amounts in the columns for source codes not included in base 511 for the subsidiary or divisional consolidation for the base
    512 TOTAL GROSS INCOME
    .
    1. If
      Division
       is selected in the divisional consolidation in
      Binder Properties
       tab
      International
       under
      Divisional Consolidation Data
      , on line
      TOTAL GROSS INCOME
      , sum the amounts in the columns for source codes not included in base 511 for the base
      512 TOTAL GROSS INCOME
       in each division with amounts on line
      Intercompany Interest Expense
       of
      Total Intercompany Interest Expense
       for base
      512
       or amounts on line
      Interest Expense
      .
  2. If the subsidiary, divisional consolidation, and division, sum the amount of
    Total Intercompany Interest Expense
     for base
    512
     and the amount of
    Interest Expense
     in column
    [0] TOTAL
     to calculate the
    Total Interest Expense
     for base
    512
    .
  3. If more than one source code is not included in base 511 for the subsidiary, divisional consolidation, or division, on line
    TOTAL GROSS INCOME
    , divide the amount for each source code not included in base 511 by the sum of all source codes not included in base 511 to calculate the base
    512 TOTAL GROSS INCOME
     ratio for each source code.
  4. If the remaining
    Passive, FPHCI TOTAL GROSS INCOME
     for base
    513
     is
    0
    , in the subsidiary, divisional consolidation, and each division, multiply the base
    512 TOTAL GROSS INCOME ratio
     for each source code by the
    Total Intercompany Interest Expense
     for base
    512
     to calculate the base 512 Intercompany Interest Expense to allocate to each source code.
    1. In the subsidiary, divisional consolidation, and each division, multiply the base
      512 TOTAL GROSS INCOME ratio
       for each source code by the
      Interest Expense
       in column
      [0] TOTAL
       to calculate the interest expense to allocate to each source code.
  5. If the remaining
    Passive, FPHCI TOTAL GROSS INCOME
     for base
    513
     is greater than 0 and the
    Total Interest Expense
     for base
    512
     is less than the base
    512 TOTAL GROSS INCOME
    , in the subsidiary, divisional consolidation, and each division, multiply the base
    512 TOTAL GROSS INCOME ratio
     for each source code by the
    Total Intercompany Interest Expense
     for base
    512
     to calculate the base 512 Intercompany Interest Expense to allocate to each source code.
    1. In the subsidiary, divisional consolidation, and each division, multiply the base
      512 TOTAL GROSS INCOME ratio
       for each source code by the
      Interest Expense
       in column
      [0] TOTAL
       to calculate the interest expense to allocate to each source code.
  6. If the remaining
    Passive, FPHCI TOTAL GROSS INCOME
     for base
    513
     is greater than 0 and the
    Total Interest Expense
     for base
    512
    is more than the base
    512 TOTAL GROSS INCOME
    , in the subsidiary, divisional consolidation, and each division, divide the
    Intercompany Interest Expense
     for base
    512
     by the
    Total Interest Expense
     for base
    512
     to calculate the base
    512 Intercompany Interest Expense
     ratio.
    1. In the subsidiary, divisional consolidation, and each division, divide the
      Interest Expense
       in column
      [0] TOTAL
       by the
      Total Interest Expense
       for base
      512
       to calculate the base
      512 Interest Expense
       ratio.
    2. In the subsidiary, divisional consolidation, and each division, multiply the base
      512 TOTAL GROSS INCOME
       ratio for each source code by the
      Total Interest Expense
       for base
      512
       and by the base
      512 Intercompany Interest Expense
       ratio to calculate the base
      512 Intercompany Interest Expense
       to allocate to each source code.
    3. In the subsidiary, divisional consolidation, and each division, multiply the base
      512 TOTAL GROSS INCOME
       ratio for each source code by the
      Total Interest Expense
       for base
      512
       and by the base
      512 Intercompany Interest Expense
       ratio to calculate the base
      512 Interest Expense
       to allocate to each source code.
  7. If the remaining
    Passive, FPHCI TOTAL GROSS INCOME
     for base
    513
     is greater than 0 and the
    Total Interest Expense
     for base
    512
     is more than the base
    512 TOTAL GROSS INCOME
    , in the subsidiary, divisional consolidation, and each division, for each source code, subtract the base
    512 Intercompany Interest Expense
     from the
    Intercompany Interest Expense
     for base
    512
     to calculate the
    Intercompany Interest Expense
     for base
    513
    .
    1. In the subsidiary, divisional consolidation, and each division, for each source code, subtract the base
      512 Interest Expense
       from the
      Interest Expense
       in column
      [0] TOTAL
       to calculate the
      Interest Expense
       for base
      513
      .

Base 513

  1. For apportionment base code
    56 – Gross Income – Absolute Value
    , in the subsidiary, divisional consolidation, and division, sum the
    Passive, FPHCI TOTAL GROSS INCOME
     for base
    513
     and the base
    512 TOTAL GROSS INCOME
     to calculate the
    TOTAL GROSS INCOME
     for base
    513
    .
    1. In the subsidiary, divisional consolidation, and division, divide the
      Passive, FPHCI TOTAL GROSS INCOME
       for base
      513
       or the base
      512 TOTAL GROSS INCOME
       for each source code by the
      TOTAL GROSS INCOME
       for base
      513
       to calculate the base
      513 TOTAL GROSS INCOME – ABSOLUTE VALUE
       ratio for each source code.
  2. For apportionment base code
    55 – Gross Income
    , in the subsidiary, divisional consolidation, and division, sum the positive amounts for
    Passive, FPHCI TOTAL GROSS INCOME
     for base
    513
     and the positive amounts for base
    512 TOTAL GROSS INCOME
     to calculate the
    TOTAL GROSS INCOME
     for base
    513
    .
    1. In the subsidiary, divisional consolidation, and division, divide the
      Passive, FPHCI TOTAL GROSS INCOME
       for base
      513
       or the base
      512 TOTAL GROSS INCOME
       for each source code with positive amounts by the
      TOTAL GROSS INCOME
       for base
      513
       to calculate the base
      513 TOTAL GROSS INCOME
       ratio for each source code.
  3. In the subsidiary, divisional consolidation, and divisions with interest expense, for each non-interest expense apportioned by apportionment base code
    56 – Gross Income – Absolute Value
    , multiply the amount in column
    [0] TOTAL
     by the base
    513 TOTAL GROSS INCOME – ABSOLUTE VALUE
     ratio for each source code to calculate the expense for each source code.
    1. In the subsidiary, divisional consolidation, and divisions with interest expense, for
      Intercompany Interest Expense
       apportioned by apportionment base code
      56 – Gross Income – Absolute Value
      , multiply the
      Intercompany Interest Expense
       for base
      513
       by the base
      513 TOTAL GROSS INCOME – ABSOLUTE VALUE
       ratio for each source code to calculate the expense for each source code.
    2. In the subsidiary, divisional consolidation, and divisions with interest expense, for
      Interest Expense
       apportioned by apportionment base code
      56 – Gross Income – Absolute Value
      , multiply the
      I Interest Expense
       for base
      513
       by the base
      513 TOTAL GROSS INCOME – ABSOLUTE VALUE
       ratio for each source code to calculate the expense for each source code.
  4. In the subsidiary, divisional consolidation, and divisions with interest expense, for each non-interest expense apportioned by apportionment base code
    55 – Gross Income
    , multiply the amount in column
    [0] TOTAL
     by the base
    513 TOTAL GROSS INCOME
     ratio for each source code to calculate the expense for each source code.
    1. In the subsidiary, divisional consolidation, and divisions with interest expense, for
      Intercompany Interest Expense
       apportioned by apportionment base code
      55 – Gross Income
      , multiply the
      Intercompany Interest Expense
       for base
      513
       by the base
      513 TOTAL GROSS INCOME
       ratio for each source code to calculate the expense for each source code.
    2. In the subsidiary, divisional consolidation, and divisions with interest expense, for
      Interest Expense
       apportioned by apportionment base code
      55 – Gross Income
      , multiply the
      Interest Expense
       for base
      513
       by the base
      513 TOTAL GROSS INCOME
       ratio for each source code to calculate the expense for each source code.
  5. In divisions without interest expense, for each non-interest expense apportioned by apportionment base code
    56 – Gross Income – Absolute Value
    , multiply the amount in column
    [0] TOTAL
     by the base
    513 TOTAL GROSS INCOME – ABSOLUTE VALUE
     ratio for each source code for the divisional consolidation to calculate the expense for each source code.
  6. In divisions without interest expense, for each non-interest expense apportioned by apportionment base code
    55 – Gross Income
    , multiply the amount in column
    [0] TOTAL
     by the base
    513 TOTAL GROSS INCOME
     ratio for each source code for the divisional consolidation to calculate the expense for each source code.

This article applies to:

  • PRODUCT: ONESOURCE Income Tax
  • Return type: 1120 Corporation,international
  • Subject: Apportionment

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