Allocation and Apportionment of Deductions

Imagine a company earns 1 million from Canadian customers in the same year. If the company spent $500,000 on advertising, how much of that expense should reduce the U.S. tax bill and how much should reduce the Canadian tax bill? The answer is not a simple 50/50 split – it depends on which expense supported which income. This chapter is about the rules that decide to which pot of income each deduction belongs.