Bayer v. United States (2012)

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Main Issue:

  • Statistical sampling / Documentation


  • Taxpayer took cost center approach to qualification refusing to identify each business component so that a statistical sampling approach could be proposed
  • Taxpayer proposed a sampling approach (selecting 8 of 49 divisions) of R&D locations, this was denied by the court


  • Court rejected the taxpayers approach and stated that they must identify the business components and then the government will consider a sampling method

Take-Away Point:

  • Business component identification is critical in defending a credit and companies are more likely to get court support in approaches to sampling if basic documentation standards are met

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