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

• Position: Advanced Pricing Agreement

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

1. 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.

3. The determination of whether amounts incurred

   for repairs or remediation costs are properly capitalized

   or deducted. (INDOPCO-related issues.)

4. 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.

1. 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.

2. The determination of permissible inventory methods

   under section 263A(e)(5).

3. The method of...