A Parent Company
A parent company paying expenses of a subsidiary cannot deduct them, the IRS said.
The IRS made the statement in an internal memo to an IRS international examiner that was made public in late July. The memo is Chief Counsel Advice 20153101F.
A US corporation participated in an offshore joint venture. An IRS examiner said on audit that some payments that the US corporation deducted were really payments for the benefit of the joint venture so that the deduction, if any, had to be taken at the joint venture level. The amounts were capital contributions by the US corporation to the joint venture.
The IRS said the only circumstance where a deduction can be claimed by a joint venture participant directly is where the participant can show the payments are for its sole benefit rather than for the benefit of the joint venture.