Bayer v. United States (2012)

Main Issue:

• Statistical sampling / Documentation

Facts:

• 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

Conclusion:

• 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