Avoided-cost Method

Avoided-cost Method

Avoided-cost Method means:
the method required under uniform capitalization rules for capitalizing interest into the cost of manufactured or produced property. The avoided-cost method concerns the allocation of interest incurred on debt that is not directly traceable to the property's cost of production but could have been reduced if the production cost had not been incurred.

This method assumes that repayment of the debt occurs, regardless of the taxpayer's intention or the facts and circumstances surrounding the operation. The avoided-cost method must be applied regardless of whether or not the amounts used for production would otherwise have been used to repay the debt.






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