Publication Title

Tax Notes International


Whirlpool Financial Corp. v. Commissioner, foreign base company sales income, FBCSI, subpart F

Document Type



I believe that Whirlpool took an untenable position on allocation in its 2009 tax filings. The Tax Court in its Whirlpool decision corrected this position using a reasonable approach that used the taxpayer’s own accounting. Now, in their article, Yoder et al. have labeled the Tax Court’s approach a “fundamental flaw” while championing Whirlpool’s position. Considering this situation, it is critical that Treasury and the IRS add appropriate guidance to reg. section 1.954-3. This would clarify that in the case of sales to related or unrelated persons, with no locally based sales personnel and where group personnel in other locations determine the timing, pricing, and other terms of sale for products manufactured by the branch, the relevant sales income will be allocated to the remainder of the CFC — not to the branch. As Whirlpool’s position has likely been taken, and will continue to be taken, by many other multinationals with similar branch structures, an amendment to reg. section 1.954-3 or other appropriate IRS guidance on this should be considered a priority.



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