Potential areas suitable for resolution through extension of the "APA" process to domestic issues.

On November 25, 1992, Tax Executives Institute submitted the following comments to the Internal Re possibility of extending the Advance Pricing Agreement (APA) approach (which is now used solely in t to the resolution of domestic tax issues. The Institute's comments were made in response to an invit Triplett, Special Assistant to the IRS Chief Counsel. TEI's comments were submitted under the aegis Committee, whose chair is David F. Nitschke of Amerada Hess Corporation, and its Administrative Affa chair is W. Remi Taylor of Duke Power Co. I. Asset Basis Determination

A. Purchase and sale of assets -- especially in the

context of the sale of an entire business unit regardless

of the form of the transaction as an asset

or stock purchase and sale agreement.

1. Agreement concerning the fair market value of

        tangible and intangible assets acquired or sold
        under sections 1060(a) or 338(a)(1).

2. Agreement concerning the allocation of the purchase

        price among the target assets under section
        338(b)(5).

3. Agreement concerning the amount of liabilities

        assumed for purposes of determining the purchase
        price under 338(b)(1) and (2) and 1060(a).

4. Agreement concerning the allocation of sales proceeds

        and acquisition or disposition transaction
        costs for proper determination of gain or loss.

B. The allocation of optional basis adjustments for

partnership property under sections 734 and 754.

C. The determination of whether amounts incurred

for repairs or remediation costs are properly capitalized

or deducted. (INDOPCO-related issues.)

D. The allocation of costs between section 1245 and

1250 property on major plant or building construction

particularly where an independent evaluation

is obtained. II. Assuming that legislation is not enacted, a

determination of the useful life of various

categories of intangible assets. III. Methods of computing section 263A costs.

A. The determination of all allocable direct or indirect

costs under section 263A(a)(2)(B) (a general

ledger account-by-account analysis). After the determination

is made, the government and taxpayer

would enter into an agreement to determine a "loading

rate" (a percentage or factor amount) to apply

to the year-end inventory amount to arrive at the

book-to-tax adjustment for additional costs to be

capitalized. The loading rate agreement would

remain in force for three to five years and then be

reanalyzed.

B. The determination of permissible inventory methods

under section 263A(e)(5).

C. The method of calculating overhead and interest

to be allocated to self-constructed property. IV. The determination of "items" that will qualify for

the recurring item exception of section 461(h)(3)

(e.g., is an item material or nonmaterial?) V. In the event of a change in ownership subject to

section 382:

A. A determination of the value of the old loss corporation

under sections 382(b)(1)(A) and 382(e).

B. A determination of whether there has been an

ownership change under 382(g).

C. A determination of the amount of any built-in

gains and losses under section 382(h). VI. The determination of whether an affiliated group

exists by virtue of meeting the 80%-of-value test of

section 1504(a)(2)(B). VII. The determination of whether the stock of a subsidiary

is worthless for purposes of section 165(g),

Treas. Reg. [sections] 1.332-2(b), or Treas. Reg. [sections] 1.1502-19(b)(2)(iii),

(iv) and (v). VIII. The determination of whether a financial instrument

will be treated as debt or equity -- especially in the context of intercompany cross border loans. IX. Accounting Methods

A. A determination of whether a particular "change"

outside of the various window periods of Rev. Proc.

92-20 constitutes the correction of an error or a

change in accounting method.

B. A determination of whether a discount on a bulk

purchase of inventory is a "bargain purchase" subject

to the separate item treatment of Hamilton

Industries for purposes of LIFO inventory accounting.

(See footnote 6 of the Hamilton opinion stating

that not all "discounts" will be considered a

"bargain" purchase.) X. The determination of the fair market value for

purposes of section 170(e) (relating to charitable

contributions of property). XI. The determination of the amount of earnings and

profits for purposes of section 304 transactions. XII. The determination of the amount of value of assets

transferred for purposes of sections 367(b)

and 1491. XIII. The determination of taxpayer-specific allocation

and apportionment methods under Treas.

Reg. [section] 1.861-8. XIV. The determination of whether a particular

foreign sales corporation's activities meet the

foreign economic processes requirements of

section 924(d). (For examples, does a particular

activity involve the "making of a contract" and

if so what is the situs of the activity -- foreign

or domestic? What is the situs and

amount of the various foreign direct costs of the

activities defined in section 924(e)?)

CPE/CLE Accreditation

Tax Executives Institute has historically endeavored to provide its members with excellent educati programs. In light of the minimum requirements for continuing professional education that state CPA associations now impose, the design and conduct of TEI's conferences, seminars, and courses become e important.

To assist TEI members in satisfying their CPE requirements, TEI has contacted accrediting agencies 50 states and the District of Columbia to request information about approval for sponsorship of cont professional education programs. In addition, TEI has become a qualified sponsor of CPE programs in of IRS enrolled agents.

Boards of Accountancy. TEI is currently registered with the following Boards of Accountancy: Illin Indiana (#CE92000119, Exp. 12/93), New Jersey (#160), New York (E90-253 (1/l/91-8/31/93)), Ohio (P0087), Pennsylvania (PX613L), and Texas (#3522). TEI is also registered with the National Associat State Boards of Accountancy (Sponsor No. 91-00116-92).

Continuing Legal Education. The Institute is registered in the following states as a sponsor of co legal education programs: California (Exp. 8/93), Iowa, Kentucky (1992 47th Annual Conference - 25.5 hours, 0 Ethics credit; 1992 42nd Midyear Conference - 26.5 credit hours), Minnesota (1992 42nd Midy Conference - 18.5 credit hours; 1992 47th Annual Conference - 16.75 credit hours), Missouri, Ohio (1 Midyear Conference - 22.25 credit hours; 1992 47th Annual Conference - 21.0 credit hours; Internatio Course - 25.25 credit hours), Oklahoma (1991 46th Annual Conference - 28.5 credit hours; 1992 42nd M Conference - 26.5 credit hours), South Carolina (1990 40th Midyear Conference - 22.5 hours; 1991 46t Annual Conference - 10.58 MCLE hours, .92 Ethics), and Wisconsin (1991 41st Midyear Conference - 26. credit hours; 1991 46th Annual Conference - 26.0 credit hours).

Note. Several states, such as Wisconsin and Georgia, require the individual to submit conference m directly to the CLE Board. TEI provides a continuing professional education form for each registrant conferences, courses, and seminars, which should be completed at the conclusion of the program and r to the TEI Registration Desk for verification and signature. A copy of the form is retained and file Headquarters.