Incentive Insider

Conclusion While there are multiple elections available throughout the code that provide for various strategies and planning opportunity, the elections of §884 allow a taxpayer enough opportunities in which planning can provide some substantial benefits and make the requirements simpler and easier on the taxpayer.

Taiyo Hawaii v. Comm. In the case of Taiyo Hawaii Company, Ltd v. Commissioner (108 TC 590), Taiyo Hawaii, Ltd was a Japanese corporation, formed in 1985 that primarily conducted business in Honolulu.

Elections Normally, interest is expensed under §884 on a cash basis regardless of the taxpayer’s method. Accrual basis taxpayers will only be able to recognize the amount that was actually paid within a year, even if more was accrued during that year.

Allocable Interest Allocable interest is initially defined as “any interest which is allocable to income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States.