In December 1995, the IRS issued final cost-sharing regs that are significantly more flexible and less arbitrary than 1992 proposals. For taxable years beginning in or after 1996, two or more members of a controlled group generally may develop intangible property under a qualified cost-sharing arrangement.
Taxpayers have one transitional year to adjust existing arrangements.
The IRS may allocate costs to a participant according to its share of reasonably anticipated benefits. The reliability of both the basis used to measure benefits and the projections used to estimate benefits is pivotal. Although the IRS addressed many taxpayer objections, some basic concerns with the 1992 proposals remain. The IRS need only respect cost-sharing arrangements falling strictly within the narrow rules. Taxpayers not in a cost-sharing arrangement should carefully consider the benefits of moving the ownership of intangibles offshore.