TreatiseAnswer Book

Transfer Pricing Answer Book (2017 Edition)

 by David B Blair
 
 Copyright: 2017

 Product Details >> 

Product Details

  • ISBN Number: 9781402428456
  • Page Count: 704
  • Number of Volumes: 1
  •  

The phenomena of increasingly global business enterprises with valuable intangible property expose companies to transfer pricing enforcement by different countries around the world. Many of these countries are increasingly aggressive in enforcing their local transfer pricing rules, as they attempt to protect their tax revenue base. To avoid double taxation of the same income in this environment, companies often are required to deal with the highly specialized, bilateral treaty-based competent authority process developed to prevent double taxation at a time when trade mainly involved only two established countries. Even more challenging today, companies and tax authorities increasingly are faced with the potential for multiple taxation of the same income, as supply chains cross many borders and as the tax authorities of emerging countries become players in the global taxation process, and the resulting stresses, strains, and limitations of the bilateral treaty-based competent authority process have become more apparent.

In light of the high-dollar risks presented by the increased enforcement efforts of tax authorities worldwide, the complexity of the ever-changing, inherently uncertain transfer pricing standards, and the continually evolving business models of businesses adapting to the constantly changing global economy, companies need practical guidance to permit them to develop and defend their transfer pricing strategies.

Transfer Pricing Answer Book gives companies such guidance by discussing all aspects of transfer pricing, from initially planning a transfer pricing strategy, to alternative ways to defend the strategy from attack by two or more tax authorities, to resolving a case before competent authorities, to bringing a transfer pricing case to court. It also provides an overview of the IRS’s approach to transfer pricing enforcement. The book’s non-technical discussion is presented in a question-and-answer format that will appeal to readers regardless of their prior level of experience or familiarity with taxes in general and transfer pricing in particular.

Transfer Pricing Answer Book is an invaluable resource for company executives and their advisors who are seeking to better understand this important area of tax law that has become such an important economic facet of so many businesses.
  Table of Contents
  Foreword
Chapter 1: The Transfer Pricing Challenge
  • : The Transfer Pricing Challenge2
  • Q 1.1 : What is the transfer pricing “challenge”?2
  • Q 1.2 : Why are taxing authorities like the IRS so focused on transfer pricing?3
  • Q 1.3 : What can the IRS do to address perceived transfer pricing abuses?5
  • Q 1.4 : Why should MNEs focus on transfer pricing?5
  • Q 1.5 : Can taxpayers avoid disputes by simply “playing it straight” with their transfer pricing?6
  • : Elements of a Transfer Pricing Strategy7
  • Q 1.6 : What are the basic elements of a transfer pricing compliance strategy?7
    • : Education, Investigation, and Issue Spotting8
    • Q 1.6.1 : What is involved in the first phase: education, investigation, and issue spotting?8
    • : Development or Evaluation of Explicit Transfer Pricing Policies9
    • Q 1.6.2 : What is involved in the second phase: development or evaluation of explicit transfer pricing policies?9
    • : Evaluation of Potential Transfer Pricing Methodologies10
    • Q 1.6.3 : What is involved in the third phase: evaluation of potential transfer pricing methodologies?10
    • : Using Comparable Transactions to Establish an Arm’s-Length Price10
    • Q 1.6.4 : What is involved in the fourth phase: searching for and evaluating comparable transactions that can help establish an arm’s-length price?10
    • : Adopting and Reporting a Transfer Pricing Methodology12
    • Q 1.6.5 : What is involved in the fifth phase: adoption of a transfer pricing methodology and reporting the results on the tax return?12
    • : Documentation Requirements13
    • Q 1.6.6 : What is involved in the sixth phase: documentation of process and analysis used in selecting transfer pricing methodology?13
    • : Preparing a Defense of Your Transfer Pricing14
    • Q 1.6.7 : What is involved in the seventh phase: preparing to defend the return position in the event of an IRS audit or challenge?14
  • : Compliance As a Practical Matter15
  • Q 1.7 : Do companies typically create a full-blown transfer pricing study for every controlled transaction?15
  • Q 1.8 : What resources are available to a company for preparing its transfer pricing compliance strategy?15
  • Q 1.9 : Does compliance with U.S. transfer pricing rules protect the taxpayer from a foreign taxing authority’s transfer pricing adjustment?16
  • Q 1.10 : What procedures are available for resolving transfer pricing disputes?17
  • Q 1.11 : How will this book help me develop a transfer pricing strategy for my company?19
Chapter 2: The Players: The IRS and Foreign Tax Authorities, the OECD, and the Tax Treaty Network
  • : The Internal Revenue Service22
  • Q 2.1 : Who are the important players at the IRS with respect to transfer pricing cases?22
  • : Foreign Taxing Authorities23
  • Q 2.2 : Does the IRS coordinate with foreign taxing authorities on transfer pricing issues?23
  • Q 2.3 : What is the role of the OECD on transfer pricing issues?24
  • : Congress and Treasury25
  • Q 2.4 : Who are the players on Capitol Hill and in Treasury with respect to transfer pricing issues?25
Chapter 3: The U.S. Legal Framework
  • : Section 482 of the Internal Revenue Code30
  • Q 3.1 : What are the statutes governing U.S. tax disputes over transfer pricing?30
  • : The Treasury Regulations32
  • Q 3.2 : What regulatory guidance is available under section 482?32
  • : The Arm’s-Length Standard33
  • Q 3.3 : What is the arm’s-length standard?33
  • Q 3.4 : What does the arm’s-length standard measure?35
  • Q 3.5 : What method is used to compare the results of controlled and uncontrolled transactions under the arm’s-length standard?36
  • Q 3.6 : What level of precision does the IRS require in determining the “arm’s-length price” of a controlled transaction?38
  • : The Commensurate With Income Standard39
  • Q 3.7 : How does the “commensurate with income” standard interact with the arm’s-length standard?39
  • : Taxpayers’ Affirmative Use of Section 48240
  • Q 3.8 : Can taxpayers use section 482 affirmatively to change the prices of transactions to lower their U.S. tax bill?40
Chapter 4: Conducting a Transfer Pricing Analysis; and Appendices 4A-4B
  • : The Best Method Rule47
  • Q 4.1 : How does a taxpayer select a transfer pricing method to evaluate whether a controlled transaction is at arm’s length?47
    • Q 4.1.1 : How does a taxpayer select one transfer pricing method over other potential transfer pricing methods?47
    • Q 4.1.2 : What determines the reliability of a transfer pricing method?47
    • Q 4.1.3 : What if the application of two or more methods produces inconsistent results?48
  • : The Standards for Determining Comparability50
  • Q 4.2 : Why does comparability matter?50
  • Q 4.3 : How is comparability determined?51
  • Q 4.4 : When is an uncontrolled transaction considered comparable to a controlled transaction?51
    • Q 4.4.1 : What is a material difference?51
    • Q 4.4.2 : How do taxpayers make adjustments for material differences?52
    • Q 4.4.3 : What if adjustments for material differences cannot be made?52
  • Q 4.5 : How can you locate comparables?52
  • : TABLE 4-1 Common Sources of Comparables for APAs Executed in 201553
  • : Functions53
  • Q 4.6 : What functions are relevant when comparing controlled and uncontrolled transactions?53
  • Q 4.7 : What considerations should a taxpayer be aware of with respect to the IRS’s conduct of a functional analysis?55
  • : Contractual Terms56
  • Q 4.8 : What contractual terms are relevant when comparing controlled and uncontrolled transactions?56
  • Q 4.9 : How are contractual terms identified?56
    • Q 4.9.1 : How is economic substance determined?57
  • Q 4.10 : What contractual documents might the IRS request from the taxpayer during audit?57
  • : Risks58
  • Q 4.11 : What is risk?58
  • Q 4.12 : What risks are relevant when comparing controlled and uncontrolled transactions?58
  • Q 4.13 : Which controlled taxpayer bears a particular risk?59
    • Q 4.13.1 : Can taxpayers use allocations of risk to optimize their transfer pricing position?60
    • Q 4.13.2 : What factors are relevant in considering the economic substance of the allocation of risk under a contract?60
  • : Economic Conditions61
  • Q 4.14 : What economic conditions are relevant when comparing controlled and uncontrolled transactions?61
  • : Property or Services62
  • Q 4.15 : What considerations with respect to property or services are relevant when comparing controlled and uncontrolled transactions?62
    • Q 4.15.1 : How is the comparability of embedded intangibles measured?62
  • Q 4.16 : What documents related to the comparability of property or services might the IRS request from the taxpayer during audit?62
  • : Special Circumstances63
  • Q 4.17 : Are there any special circumstances that should be considered when determining comparability?63
    • Q 4.17.1 : How does a taxpayer’s market share strategy affect comparability?63
    • Q 4.17.2 : How do different geographic markets affect comparability?64
  • Q 4.18 : What transactions ordinarily are not accepted as comparables?66
  • Q 4.19 : What are common comparability adjustments?67
  • : TABLE 4-2 Adjustments to Comparables and Tested Parties for APAs Executed in 201168
  • : Quality of Data and Assumptions69
  • Q 4.20 : What data and assumptions factors affect the reliability of a particular method?69
    • Q 4.20.1 : How does the completeness and accuracy of the data affect the reliability of a particular method?69
    • Q 4.20.2 : How does the reliability of assumptions affect the reliability of a particular method?69
    • Q 4.20.3 : How does the sensitivity of results to deficiencies in the data used and the assumptions made affect the reliability of a particular method?70
  • : Arm’s-Length Range70
  • Q 4.21 : How can you use an arm’s-length range of results?70
  • Q 4.22 : How can you determine the arm’s-length range?70
    • Q 4.22.1 : What is the interquartile range?71
  • Q 4.23 : What if a taxpayer’s results are outside the arm’s-length range?72
  • : Aggregation of Transactions74
  • Q 4.24 : When may transactions be aggregated for purposes of determining the arm’s-length consideration for such transactions?74
  • : Consistency with Economic Substance75
  • Q 4.25 : May the IRS take the economic substance of a transaction into account when evaluating the transaction?75
  • : Multiple Year Data76
  • Q 4.26 : May data on uncontrolled comparables from multiple years be used?76
    • Q 4.26.1 : When is it appropriate to use data on uncontrolled comparables from multiple years?77
    • Q 4.26.2 : May an arm’s-length range consist of results from multiple years?77
  • : Comparison to Rules Under OECD Guidelines78
  • Q 4.27 : Is the Best Method Rule consistent with the OECD Guidelines?78
  • Q 4.28 : Do the OECD Guidelines allow for the use of more than one method?79
  • Q 4.29 : How do the comparability standards under the OECD Guidelines compare to those under the section 482 regulations?80
  • Q 4.30 : Do the OECD Guidelines allow for the use of an arm’s-length range?80
  • Appendix 4A : Internal Revenue Manual Exhibit 4.61.2-685
  • Appendix 4B : Internal Revenue Manual Exhibits 4.61.3-1 through 4.61.3-495
Chapter 5: Overview of Transfer Pricing Methodologies: The Best Method Rule, Transaction-Based Methods, and Profit-Based Methods
  • : Applicability of Methods133
  • Q 5.1 : Which transfer pricing methods may be used in connection with the transfer of tangible property?133
    • Q 5.1.1 : Which transfer pricing methods may be used in connection with the transfer of tangible property with embedded intangibles?133
  • Q 5.2 : Which transfer pricing methods may be used in connection with the transfer of intangible property?134
  • Q 5.3 : Which transfer pricing methods may be used in connection with the transfer of services?134
  • Q 5.4 : How should a taxpayer select which transfer pricing method to use?135
    • Q 5.4.1 : May a taxpayer use more than one uncontrolled comparable when applying a single transfer pricing method?135
    • Q 5.4.2 : What if a taxpayer obtains inconsistent results when applying two or more transfer pricing methods?136
  • Q 5.5 : Which transfer pricing methods are most commonly used?136
  • : TABLE 5-1: Transfer Pricing Method Used for Transfers of Tangible and Intangible Property137
  • : TABLE 5-2: Transfer Pricing Method Used for Services137
  • : Transaction-Based Methods138
  • Q 5.6 : What is the relationship among the CUP, CUT, and CUSP methods?138
  • : CUP Method139
  • Q 5.7 : What is the CUP method?139
    • Q 5.7.1 : What are the key comparability factors under the CUP method?139
    • Q 5.7.2 : What level of comparability is required under the CUP method?140
    • Q 5.7.3 : What evidence may be used to determine a CUP?140
  • : CUT Method142
  • Q 5.8 : What is the CUT method?142
    • Q 5.8.1 : What are the key comparability factors under the CUT method?142
    • Q 5.8.2 : How is the profit potential of an intangible calculated?144
    • Q 5.8.3 : What level of comparability is required under the CUT method?144
  • : The CUSP Method145
  • Q 5.9 : What is the CUSP method?145
    • Q 5.9.1 : What are the key comparability factors under the CUSP method?145
    • Q 5.9.2 : What level of comparability is required under the CUSP method?146
    • Q 5.9.3 : What evidence may be used to determine a CUSP?146
  • : Resale Price Method147
  • Q 5.10 : What is the resale price method?147
    • Q 5.10.1 : What are the key comparability factors under the resale price method?147
    • Q 5.10.2 : What level of comparability is required under the resale price method?148
    • Q 5.10.3 : What are the key data and assumptions factors under the resale price method?149
  • : Gross Services Margin Method150
  • Q 5.11 : What is the gross services margin method?150
    • Q 5.11.1 : What are the key comparability factors under the gross services margin method?150
    • Q 5.11.2 : What level of comparability is required under the gross services margin method?151
    • Q 5.11.3 : What are the key data and assumptions factors under the gross services margin method?151
  • : Cost Plus Method152
  • Q 5.12 : What is the cost plus method?152
    • Q 5.12.1 : What are the key comparability factors under the cost plus method?152
    • Q 5.12.2 : What level of comparability is required under the cost plus method?153
    • Q 5.12.3 : What are the key data and assumptions factors under the cost plus method?153
  • : Cost of Services Plus Method154
  • Q 5.13 : What is the cost of services plus method?154
    • Q 5.13.1 : What are the key comparability factors under the cost of services plus method?155
    • Q 5.13.2 : What level of comparability is required under the cost of services plus method?156
    • Q 5.13.3 : What are the key data and assumptions factors under the cost of services plus method?156
  • : Services Cost Method (Cost Safe Harbor)157
  • Q 5.14 : What is the services cost method?157
    • Q 5.14.1 : What services are eligible for the SCM?157
    • Q 5.14.2 : What are covered services?157
    • Q 5.14.3 : What is an excluded activity?158
    • Q 5.14.4 : When is a service precluded from constituting a covered service by the business judgment rule?158
    • Q 5.14.5 : What constitutes the adequate maintenance of books and records?160
  • Q 5.15 : Can a taxpayer use the SCM for services within the scope of a shared services arrangement?160
    • Q 5.15.1 : May covered services under a shared services arrangement be aggregated for purposes of applying the SCM?160
  • : Profit-Based Methods161
  • : General161
  • Q 5.16 : How do profit-based methods differ from transactional methods?161
  • : Comparable Profits Method (CPM)161
  • Q 5.17 : What is the CPM?161
    • Q 5.17.1 : Who is the tested party under the CPM?162
    • Q 5.17.2 : How is the profit level indicator selected under the CPM?162
    • Q 5.17.3 : What are the key comparability factors under the CPM?163
    • Q 5.17.4 : What level of comparability is required under the CPM?164
    • Q 5.17.5 : What are the key data and assumptions factors under the CPM?164
  • : Profit Split Method (PSM)168
  • Q 5.18 : What is the PSM?168
  • Q 5.19 : What is a comparable profit split?169
    • Q 5.19.1 : What are the key comparability factors under a comparable profit split?169
    • Q 5.19.2 : What are the key data and assumptions factors under a comparable profit split?169
    • Q 5.19.3 : What other factors affect reliability under a comparable profit split?170
  • Q 5.20 : What is a residual profit split method?170
    • Q 5.20.1 : What are the key comparability factors under a residual profit split method?171
    • Q 5.20.2 : What are the key data and assumptions factors under a residual profit split?172
    • Q 5.20.3 : What other factors affect reliability under the residual profit split method?172
  • : Income Method (IM)174
  • Q 5.21 : What is the income method?174
  • : Unspecified Methods174
  • Q 5.22 : When may a taxpayer apply an unspecified method?174
  • : Comparison to Methods Under OECD Guidelines175
  • Q 5.23 : What transfer pricing methods are permitted under the OECD Guidelines?175
    • Q 5.23.1 : Do the OECD Guidelines follow the Best Method Rule?176
  • Q 5.24 : How does the CPM compare to the TNMM under the OECD Guidelines?176
Chapter 6: Identification of Controlled Transactions
  • : Determination of Related Party Status182
  • Q 6.1 : What kind of common control is needed for transactions between two or more parties to be subject to the transfer pricing rules?182
    • Q 6.1.1 : Can common control exist between unrelated parties?185
    • Q 6.1.2 : Does common control necessarily exist where the parties to a transaction are controlled by family members?187
    • Q 6.1.3 : Will a contract entered into between uncontrolled parties become a controlled transaction if one party acquires the other?188
  • : Determining Whether There Has Been a Transaction or Other Transfer of Value Between Controlled Parties That Must Be Accounted for Under the Transfer Pricing Rules190
  • Q 6.2 : Assuming common control exists, what types of transactions are subject to the transfer pricing rules?190
    • Q 6.2.1 : Is it appropriate to aggregate controlled transactions for purposes of evaluating whether they are at arm’s length?193
    • Q 6.2.2 : Is an allocation of income possible in the absence of an intent to evade taxes?195
    • Q 6.2.3 : Is it possible that income can be allocated to a controlled taxpayer where the controlled group did not realize a profit?195
    • Q 6.2.4 : Similarly, can a controlled party incur a loss where the controlled group realizes an overall profit?196
  • Q 6.3 : Is an allocation of income authorized in the face of legal restrictions limiting or prohibiting payment or receipt of an arm’s-length amount?197
Chapter 7: Recordkeeping and Reporting Obligations for U.S. Taxpayers and Their Foreign Affiliates
  • : Code Section 6038 Information Reporting Obligations for U.S. Multinationals207
  • : The Basics207
  • Q 7.1 : How does the IRS collect information on a U.S. taxpayer’s transactions with foreign affiliates?207
  • Q 7.2 : What are the reporting requirements for a U.S. corporation that controls foreign affiliates?207
    • Q 7.2.1 : What constitutes “control” of a foreign corporation?208
    • Q 7.2.2 : What constitutes “control” of a foreign partnership?210
    • Q 7.2.3 : What if more than one person controls a foreign entity?211
  • Q 7.3 : What information does the U.S. person report on the Forms 5471 and 8865?213
  • Q 7.4 : When must the U.S. taxpayer file the information returns with respect to controlled foreign entities?215
  • : Potential Penalties215
  • Q 7.5 : What penalties apply for failure to make a return of the information required by section 6038?215
  • : Country-by-Country Reporting217
  • Q 7.6 : What reporting is required under Treasury’s “country-by-country” reports?217
  • : Code Sections 6038A and 6038C Information Reporting and Record Maintenance Obligations for Foreign-Based Multinationals219
  • : The Basics219
  • Q 7.7 : What information reporting and record maintenance obligations are imposed on foreign-based multinationals with transfer pricing transactions?219
  • Q 7.8 : Who is subject to the information reporting and recordkeeping obligations of sections 6038A and 6038C?220
  • Q 7.9 : What information must be reported under sections 6038A and 6038C?221
  • Q 7.10 : What records must be maintained under sections 6038A and 6038C and for how long must they be retained?222
  • Q 7.11 : Who must maintain the required records and where must they be maintained?225
  • : Exceptions226
  • Q 7.12 : Are there any exceptions from the information reporting and recordkeeping obligations of sections 6038A and 6038C?226
  • : Potential Penalties228
  • Q 7.13 : What penalties apply for failure to comply with the information reporting and recordkeeping obligations of sections 6038A and 6038C?228
Chapter 8: Penalties for Transfer Pricing Adjustments and Contemporaneous Documentation Requirements
  • : The Basics238
  • Q 8.1 : What is the transfer pricing penalty and how is it applied?238
  • Q 8.2 : When does the transactional penalty apply?239
  • Q 8.3 : When does the net adjustment penalty apply?240
    • Q 8.3.1 : How is the “net section 482 transfer price adjustment” calculated?240
  • Q 8.4 : What if both penalties apply?244
  • : Exceptions247
  • Q 8.5 : Are there any exceptions from the transactional penalty and/or net adjustment penalty?247
  • : The Contemporaneous Documentation Safe Harbor249
  • Q 8.6 : What are the requirements for the contemporaneous documentation safe harbor?249
    • Q 8.6.1 : What are the requirements to qualify for the contemporaneous documentation safe harbor where the taxpayer uses a specified method?250
    • Q 8.6.2 : What are the requirements to qualify for the contemporaneous documentation safe harbor where the taxpayer uses an unspecified method?251
    • Q 8.6.3 : How is “reasonableness” evaluated for purposes of meeting the specified method requirement or unspecified method requirement?252
    • Q 8.6.4 : What documentation is required to qualify for the contemporaneous documentation safe harbor?254
    • Q 8.6.5 : How might a cost sharing agreement affect the taxpayer’s ability to satisfy the contemporaneous documentation safe harbor?257
    • Q 8.6.6 : How might an advance pricing agreement affect the taxpayer’s ability to satisfy the contemporaneous documentation safe harbor?257
    • Q 8.6.7 : Can a taxpayer satisfy the contemporaneous documentation requirement through transfer pricing documentation developed for a foreign jurisdiction?258
  • : Best Practices259
  • Q 8.7 : What are best practices to avoid application of the transfer pricing penalties?259
Chapter 9: Transfer Pricing Planning and Taxpayers’ Affirmative Use of Section 482
  • : Transfer Pricing Planning265
  • Q 9.1 : How can taxpayers advantageously structure their controlled transactions in light of transfer pricing regulation?265
    • Q 9.1.1 : Can MNEs plan into a structure that has a good chance of surviving a challenge on audit?266
    • Q 9.1.2 : How does a taxpayer identify a structure that has a good prospect of withstanding a challenge on audit?268
    • Q 9.1.3 : How can a taxpayer identify tax planning strategies to avoid?269
    • Q 9.1.4 : How should taxpayers approach planning a transfer pricing strategy?270
    • Q 9.1.5 : What are examples of functions to be examined?270
    • Q 9.1.6 : What are examples of risks to be examined?271
    • Q 9.1.7 : What is the role of contracts in the transfer pricing planning process?272
    • Q 9.1.8 : How can taxpayers take into account intangibles in the tax planning process?273
    • Q 9.1.9 : What are some other considerations that go into the transfer pricing planning process?273
  • : Getting It Right on the Return273
  • Q 9.2 : When can a taxpayer use section 482 affirmatively to report the results of a controlled transaction under the arm’s-length standard?273
    • Q 9.2.1 : If section 482 requires arm’s-length pricing, why restrict a taxpayer’s ability to report its income on that basis, even on an amended return?274
  • : Setoffs275
  • Q 9.3 : How can a taxpayer use section 482 after the return has been filed?275
    • Q 9.3.1 : How and when can a taxpayer raise a setoff claim?275
Chapter 10: Manufacturing and Distribution of Goods
  • : Overview280
  • Q 10.1 : What Treasury Regulations predominately govern the transfer pricing of goods?280
  • Q 10.2 : What methods are typically used to determine the appropriate transfer pricing for the sale of goods between related parties?280
  • : CUP Method281
  • Q 10.3 : What are the factors to take into account in determining whether a goods transaction with an unrelated party is comparable enough to the related party transaction for the unrelated transaction price to be considered a CUP?281
  • Q 10.4 : What adjustments are appropriate to make to an imperfect comparable transaction to make it more comparable for CUP purposes?281
  • Q 10.5 : Can public data inform adjustments to or the comparability of a CUP?283
  • : Resale Price Method284
  • Q 10.6 : What are the key issues in determining whether to apply a resale price method to a sale of goods?284
  • Q 10.7 : What are the key issues in applying an RPM to a sale of goods?284
  • : Cost Plus285
  • Q 10.8 : What are the key issues in determining whether to apply a cost plus to a sale of goods?285
  • Q 10.9 : What are the key issues in applying the cost plus method to a sale of goods?285
  • : Sales by Commissionaires or Contract Manufacturers286
  • Q 10.10 : Can an RPM or cost plus analysis be used to price transactions involving commissionaires or contract manufacturers?286
  • : The Comparable Profits Method (CPM)287
  • Q 10.11 : What are the key issues in determining whether to apply a CPM to a sale of goods?287
  • Q 10.12 : What are the key issues in applying a CPM to a sale of goods?287
  • : Other Methods288
  • Q 10.13 : What sorts of other methods can be used to price a sale of goods?288
  • : Transfer of Goods Along with Intangible Property288
  • Q 10.14 : How does the interrelationship between the sale or exchange of goods and the use of intangible property to support that sale of goods manifest itself in transfer pricing practice?288
Chapter 11: Provision of Services
  • : Overview292
  • Q 11.1 : What Treasury Regulations predominately govern the transfer pricing of services?292
  • Q 11.2 : What methods are typically used to determine the appropriate transfer pricing in connection with controlled services transactions?292
  • Q 11.3 : What is a controlled services transaction?293
    • Q 11.3.1 : When is an activity performed?293
    • Q 11.3.2 : When is a benefit received?293
    • Q 11.3.3 : When may a controlled services transaction be analyzed as two separate transactions (disaggregated) for purposes of determining the arm’s-length price?295
  • : Services Cost Method297
  • Q 11.4 : What is the services cost method?297
    • Q 11.4.1 : What are total services costs?297
    • Q 11.4.2 : What types of services are eligible for the SCM?297
  • Q 11.5 : What is a shared services arrangement?299
    • Q 11.5.1 : What are the requirements of a shared services arrangement?300
    • Q 11.5.2 : How are the costs of covered services allocated among the participants in a shared services arrangement?300
    • Q 11.5.3 : What documentation does the IRS require for a shared services arrangement?301
    • Q 11.5.4 : May covered services be aggregated when applying the SCM to an SSA?302
    • Q 11.5.5 : What if the taxpayer is a participant in both an SSA and a cost sharing arrangement?302
  • : Comparable Uncontrolled Services Price Method302
  • Q 11.6 : What is the CUSP method?302
    • Q 11.6.1 : What are the factors to take into account in determining whether a services transaction with an unrelated party is comparable enough to the related party transaction for the unrelated transaction price to be considered a CUSP?303
  • Q 11.7 : What adjustments are appropriate to make an imperfect comparable transaction more comparable for CUSP purposes?303
  • Q 11.8 : Can public data inform adjustments to or the comparability of a CUSP?304
  • : Gross Services Margin Method305
  • Q 11.9 : What is the gross services margin method?305
  • Q 11.10 : What are the key issues in applying a gross services margin to the performance of services?305
  • : Cost of Services Plus Method306
  • Q 11.11 : What is the cost of services plus method?306
  • Q 11.12 : What are the key issues in applying a cost of services plus method to the performance of services?306
  • : Comparable Profits Method308
  • Q 11.13 : What is the CPM?308
  • Q 11.14 : What are the key issues in applying a CPM to the performance of services?308
  • : Profit Split Method309
  • Q 11.15 : What is the PSM?309
    • Q 11.15.1 : What are the key issues in determining whether to apply a profit split method to the performance of services?309
  • : Unspecified Methods309
  • Q 11.16 : What other methods can be used to price the performance of services?309
  • : Contingent-Payment Arrangements310
  • Q 11.17 : What are contingent-payment arrangements?310
  • Q 11.18 : When is payment required under a contingent-payment arrangement?310
    • Q 11.18.1 : May the IRS impute a contingent-payment arrangement?310
  • : Allocation of Costs311
  • Q 11.19 : How are costs allocated where the services benefit more than one member of a controlled group?311
  • : Coordination Rules311
  • Q 11.20 : What is the best method for a controlled services transaction that is combined with a non-services transaction?311
  • Q 11.21 : How do the coordination rules interact with the disaggregation rule?313
Chapter 12: Development and Transfer of Intangible Property
  • : Overview318
  • Q 12.1 : What Code provisions and Treasury Regulations predominately govern the transfer pricing of intangible property?318
  • Q 12.2 : What methods are typically used to determine the appropriate transfer pricing for the sale of intangible property between related parties?319
  • : Definition of Intangible319
  • Q 12.3 : What is an intangible for purposes of the U.S. transfer pricing regulations?319
    • Q 12.3.1 : Can the IRS require a payment for the allocation of a “business opportunity”?320
  • : CUT Method320
  • Q 12.4 : What are the factors to take into account in determining whether an intangibles transaction with an unrelated party is comparable enough to the related party transaction for the unrelated transaction price to be considered a CUT?320
  • Q 12.5 : What adjustments are appropriate to make to an imperfect comparable transaction to make it more comparable for CUT purposes?322
  • : CPM and Profit Split Methods323
  • Q 12.6 : When can taxpayers use profit-based methods to price intangibles?323
  • Q 12.7 : How can taxpayers use the CPM method to price intangibles?323
  • Q 12.8 : How can taxpayers use the PSM to price intangibles?324
  • : Other Methods325
  • Q 12.9 : What sorts of unspecified methods can be used to price intangibles?325
  • Q 12.10 : What is the “market capitalization method” for valuing intangible property transfers and is it legitimate?326
  • : Interrelationship with the Sale or Exchange of Goods327
  • Q 12.11 : How does the interrelationship between the sale or exchange of goods and the use of intangible property to support that sale of goods manifest itself in transfer pricing practice?327
  • : Commensurate with Income328
  • Q 12.12 : What is “commensurate with income” and how is it applied?328
  • : Ownership of Intangible Property328
  • Q 12.13 : What rules determine which party owns an intangible for transfer pricing purposes?328
  • : Assorted Valuation Issues329
  • Q 12.14 : How are the contributions of one party to the value of intangible property owned by another party determined for transfer pricing purposes?329
  • Q 12.15 : Can the IRS lump intangible property items together for purposes of preparing a unified valuation?330
  • Q 12.16 : When testing income projections in the valuation of intangibles, how much credibility will a court give to the taxpayer’s business projections?331
Chapter 13: Cost Sharing Arrangements, Including Their Interrelationship with Intangibles Transfers
  • : Overview of Cost Sharing Arrangements334
  • Q 13.1 : What is a cost sharing arrangement?334
    • Q 13.1.1 : How are cost sharing arrangements treated under the tax laws?336
    • Q 13.1.2 : What are the risks from entering into a cost sharing arrangement?337
    • Q 13.1.3 : Should my company consider cost sharing intangible development?338
  • Q 13.2 : Do the IRS regulations extend these tax benefits to all cost sharing arrangements?338
    • : The Cost Sharing Regulations340
    • Q 13.2.1 : What are the basic substantive requirements for cost sharing arrangements under the regulations?340
    • Q 13.2.2 : What are the basic administrative requirements under the regulations?341
  • : Cost Sharing Arrangements and the Buy-In Problem343
  • Q 13.3 : What is the buy-in problem?343
    • Q 13.3.1 : How are buy-in transactions treated under the tax laws?345
    • Q 13.3.2 : How is arm’s-length compensation determined for buy-in transactions?350
    • Q 13.3.3 : What is the CUT method?350
    • Q 13.3.4 : What is the acquisition price method?351
    • Q 13.3.5 : What is the market capitalization method?352
    • Q 13.3.6 : What is the income method?353
    • Q 13.3.7 : What is the residual profit split method (RPSM)?354
    • Q 13.3.8 : How does the commensurate with income standard of section 482 apply to buy-in transactions?355
  • Q 13.4 : How are modifications of cost sharing arrangements treated under U.S. tax laws?355
  • : Cost Sharing Arrangements and IRS Enforcement Activity357
  • Q 13.5 : What aspects of cost sharing arrangements have attracted the most attention from the IRS?357
    • Q 13.5.1 : What are the concerns with the migration of intangibles through cost sharing arrangements?357
    • Q 13.5.2 : What are the concerns with determining the pool of costs to be charged out to participants in a cost sharing arrangement?358
    • Q 13.5.3 : What are the concerns with respect to intangibles not covered by the list in section 936(h)(3)(B)?360
    • Q 13.5.4 : What are the concerns with respect to arrangements with terms that do not conform to the contractual terms, risk allocations, and other material terms covered by the cost sharing rules?360
Chapter 14: Loans and Rentals
  • : Loans370
  • Q 14.1 : What is the fundamental principle governing the transfer pricing of loans?370
  • Q 14.2 : To what loans do the transfer pricing rules apply?370
  • Q 14.3 : Over what period must arm’s-length interest be charged?370
  • Q 14.4 : What is an “arm’s-length” interest rate?371
  • Q 14.5 : How do the interest adjustments allowed by section 482 coordinate with the other interest rate adjustments in the Code?371
  • : Rentals373
  • Q 14.6 : What is the fundamental principle governing the transfer pricing of rentals and leases?373
  • Q 14.7 : What is an “arm’s-length charge” in a lease or rental context?373
  • Q 14.8 : Is there an effective safe harbor when the lessee has a head lease?373
Chapter 15: Strategic Considerations in Transfer Pricing Planning That Drive Controversy Positions
  • : Identifying Hot Button Transfer Pricing Issues376
  • Q 15.1 : What are the key strategic decisions in the tax planning process that tend to impact the potential for tax controversies?376
  • Q 15.2 : What types of tactical decisions from the tax-planning and compliance phase tend to resurface in the controversy setting?377
  • : Developing an Audit Strategy379
  • Q 15.3 : What are the strategic considerations for a taxpayer when the IRS challenges a transfer pricing position?379
  • Q 15.4 : How does the taxpayer maintain an effective team to defend its transfer pricing?381
Chapter 16: Advance Pricing Agreements
  • : Taxpayers May Agree with the IRS on a Transfer Pricing Methodology in Advance384
  • : The APA Option384
  • Q 16.1 : What is an Advance Pricing Agreement?384
    • : Strategic Considerations in Applying for an APA386
    • Q 16.1.1 : What are the considerations in deciding whether to pursue an APA?386
    • : Administration of the APA Program388
    • : The IRS’s Advance Pricing and Mutual Agreement Program388
    • Q 16.1.2 : Who are the players in the APA process?388
    • Q 16.1.3 : What standards does APMA apply in considering an application for a bilateral APA?389
  • : Procedural Aspects of Obtaining an APA389
  • Q 16.2 : What are the procedures for obtaining an APA?389
    • Q 16.2.1 : Should taxpayers consider a pre-filing conference before filing their APA application?390
    • Q 16.2.2 : What must the taxpayer include in an APA application?391
    • Q 16.2.3 : How does APMA review APA applications?393
  • Q 16.3 : How does the APA team evaluate an APA request?394
  • : The Role of Competent Authority397
  • Q 16.4 : What is the role of the competent authority in the bilateral APA process?397
  • : Using an APA to Resolve Earlier Years398
  • Q 16.5 : Can the transfer pricing method agreed to in an APA also apply to earlier years?398
  • : Compliance Once the APA Is in Place399
  • Q 16.6 : How does the IRS monitor compliance with the APA?399
  • Q 16.7 : How long does an APA last?400
    • Q 16.7.1 : Can an APA be renewed?401
  • : Small Taxpayer Procedures401
  • Q 16.8 : Are there less burdensome APA procedures available for smaller taxpayers?401
  • Q 16.9 : Are APAs published by the IRS?402
  • Q 16.10 : Can the IRS revoke an APA?402
Chapter 17: Handling Transfer Pricing Audits by the IRS
  • : The Audit Process409
  • Q 17.1 : What are the sources of the IRS’s power to conduct audits?409
    • Q 17.1.1 : Who are the players in IRS transfer pricing audits?410
    • Q 17.1.2 : What special IRS enforcement programs relate to transfer pricing?411
    • Q 17.1.3 : What is the IRS Transfer Pricing Audit Roadmap?414
  • : Preparation for an IRS Transfer Pricing Audit416
  • Q 17.2 : What is the best way for taxpayers to prepare for an IRS audit that includes transfer pricing issues?416
    • : Ensure Effective Document Management416
    • Q 17.2.1 : What records must the taxpayer have available for the IRS examiners?416
    • Q 17.2.2 : What are the potential consequences if material evidence is destroyed?417
    • : Protect Privileged Communications418
    • Q 17.2.3 : What special considerations apply to privileged information in the tax department’s file?418
    • : Manage the Statute of Limitations419
    • Q 17.2.4 : How should the taxpayer manage the statute of limitations on tax assessments?419
    • : Decide Whether to Push Your Case to the Front of the Line420
    • Q 17.2.5 : What if my case presents a novel issue?420
    • : Working with the IRS Team421
    • : Planning Your Audit with the IRS Team421
    • Q 17.2.6 : Can taxpayers join in planning the audit with the IRS team?421
  • Q 17.3 : How does the IRS examine transfer pricing cases?421
    • Q 17.3.1 : How are the risk assessment and case planning processes described?421
    • : The IRS Audit Team’s Initial Request for Transfer Pricing Information423
    • Q 17.3.2 : What is the IRS likely to request at the outset of a transfer pricing audit?423
    • : The IRS Team’s Risk Assessment of Your Return425
    • Q 17.3.3 : How does the IE conduct the risk assessment of a taxpayer’s transfer pricing?425
    • : Time Constraints on the IRS Audit Team425
    • Q 17.3.4 : What is the IRS’s “currency initiative” and what does it mean for a transfer pricing audit?425
  • : The Opening Conference426
  • Q 17.4 : What happens at the opening conference between the taxpayer and the IRS Exam Team?426
  • : How the IRS Audit Team Develops Its Case428
  • Q 17.5 : How does the Exam Team develop the IRS’s factual case and legal theories?428
    • : Managing the IDR Process432
    • Q 17.5.1 : What are the recommended “best practices” for managing the IDR process?432
    • : The Audit Team’s Analysis of the Taxpayer’s Transfer Pricing435
    • Q 17.5.2 : How does the IRS Exam Team propose adjustments to a taxpayer’s transfer pricing?435
    • Q 17.5.3 : How does the IE find comparable transactions?437
  • : IRS Powers to Collect Information in Transfer Pricing Cases438
  • : Informal IRS Discovery438
  • Q 17.6 : How can the IRS gather documents in transfer pricing cases?438
    • Q 17.6.1 : Does the more informal IDR process work in international transfer pricing cases?438
    • : The IRS Administrative Summons Power440
    • Q 17.6.2 : If the informal IDR process is ineffective, what can the IRS do to compel the taxpayer to answer its questions, supply documents, and provide access to witnesses?440
    • : IRS Powers to Request Foreign Taxpayer Information Under U.S. Treaties441
    • Q 17.6.3 : Can the IRS go to foreign governments to gather information?441
    • : Third-Party Summonses442
    • Q 17.6.4 : How does the IRS gather information from third parties?442
    • Q 17.6.5 : What can the IRS do if the third party is concerned that answering the IRS’s questions will expose the third party to claims by the taxpayer?443
    • Q 17.6.6 : What are the procedural requirements for a valid third-party summons?443
    • Q 17.6.7 : Is the taxpayer entitled to notice of a third-party summons?444
    • Q 17.6.8 : May the taxpayer petition to quash a third-party summons?444
    • Q 17.6.9 : How does a proceeding to quash affect the statute of limitations on an IRS assessment of tax?445
    • Q 17.6.10 : What are some best practices for handling IRS requests for third-party interviews?445
    • Q 17.6.11 : How do you protect privileged materials in an IRS summons proceeding?446
  • : IRS Powers to Access Information on Foreign Affiliates and Related Sanctions446
  • Q 17.7 : How does the IRS obtain information on transactions with foreign affiliates?446
  • Q 17.8 : How can the IRS compel disclosure of information on transactions with affiliates that are outside the jurisdiction of the United States?447
    • Q 17.8.1 : How does the IRS compel foreign-based companies to cooperate in IRS discovery?448
    • Q 17.8.2 : Are there penalties for failure to file the required disclosures under sections 6038A and 6038C, or appoint the U.S. taxpayer as agent for foreign affiliates?448
    • Q 17.8.3 : What are some best practices to avoid an IRS recordkeeping penalty under sections 6038A and 6038C?449
    • Q 17.8.4 : What can the IRS do to prevent the running of the statute of limitations on tax assessments if the taxpayer encounters delays in responding to IDRs?450
  • Q 17.9 : What happens if the taxpayer waits until after the audit to produce documents?450
  • : Settlement451
  • : Settling with Your Exam Team451
  • Q 17.10 : Can taxpayers explore settlement of an issue with the Exam Team?451
    • Q 17.10.1 : What is the Exam Team’s authority to resolve issues?451
    • Q 17.10.2 : What happens if other IRS personnel become involved in settlement discussions at the Exam level?452
  • : Settling at IRS Appeals452
  • Q 17.11 : How can a taxpayer resolve its transfer pricing adjustments at IRS Appeals?452
    • Q 17.11.1 : How do you take your case to Appeals?454
    • Q 17.11.2 : How does Appeals conduct its proceedings?455
    • Q 17.11.3 : Is it necessary to coordinate an Appeals proceeding with Competent Authority?456
    • Q 17.11.4 : Can you seek settlement of an IRS-initiated transfer pricing adjustment at Appeals simultaneously with a Competent Authority proceeding?457
Chapter 18: Considerations When Settling Transfer Pricing Disputes
  • : Tactical Considerations in Settling a Transfer Pricing Case466
  • Q 18.1 : What is the impact of settlement on future years?466
  • Q 18.2 : Is the other party to the controlled transaction resident in a country that has an income tax treaty with the United States? If so, can the taxpayer invoke the treaty to obtain relief from any double taxation that might otherwise result from an IRS adjustment?466
  • Q 18.3 : Is it possible to limit the deficiency interest that accrues on the additional tax due on account of the transfer pricing adjustment?467
  • Q 18.4 : Are there secondary adjustments in addition to the base adjustment?467
    • Q 18.4.1 : Does the primary adjustment trigger correlative adjustments?467
    • Q 18.4.2 : Is there a way to bring the controlled parties’ cash accounts into conformity with the transfer pricing adjustments without incurring unnecessary tax?468
    • Q 18.4.3 : Are there available setoffs to the IRS’s transfer pricing adjustment?468
  • Q 18.5 : Can you enter into a settlement with the IRS first, and then invoke Competent Authority assistance to avoid potential double taxation?469
  • Q 18.6 : How will a settlement affect the taxpayer’s U.S. foreign tax credits?469
  • Q 18.7 : Will a transfer pricing settlement for income tax purposes affect the valuation of goods for purposes of customs?470
Chapter 19: Competent Authority
  • : The Competent Authority Process474
  • Q 19.1 : How can the competent authority process help to resolve transfer pricing disputes?474
    • Q 19.1.1 : Who are the players in a competent authority proceeding?475
  • Q 19.2 : What standard does the competent authority apply in transfer pricing cases?477
  • : Strategic Considerations in Deciding Whether to Pursue Competent Authority Relief478
  • Q 19.3 : What factors should a taxpayer consider in deciding whether or not to pursue competent authority relief?478
    • Q 19.3.1 : What are some positive features of the competent authority relief?479
    • Q 19.3.2 : What are some negative features of the competent authority process?480
    • Q 19.3.3 : Does a taxpayer have to involve competent authority in a transfer pricing dispute?481
  • : Procedural Aspects of Pursuing Competent Authority Relief481
  • : Timing of the Competent Authority Request481
  • Q 19.4 : When is it appropriate to initiate a competent authority request?481
    • Q 19.4.1 : When is it appropriate to initiate a MAP request for a U.S.-initiated adjustment?482
    • Q 19.4.2 : When is it appropriate to initiate a MAP request for a foreign-initiated adjustment?483
    • : Coordination of the Competent Authority Request with IRS Audits, Appeals, Refund Claims, or Litigation483
    • Q 19.4.3 : How do you coordinate a request for competent authority assistance with an ongoing audit or administrative appeal?483
    • Q 19.4.4 : How do you coordinate a competent authority request with a tax case that is in court?485
    • Q 19.4.5 : What are the consequences of taking a case to Appeals or court first, and then seeking competent authority relief?485
    • Q 19.4.6 : Can you seek settlement of an IRS-initiated transfer pricing adjustment at Appeals simultaneously with a competent authority proceeding?485
    • Q 19.4.7 : How do you preserve your right to seek a tax refund claim related to a competent authority proceeding?487
  • : Who Requests Competent Authority Assistance488
  • Q 19.5 : Who can file a competent authority request?488
    • Q 19.5.1 : How does the U.S. Competent Authority handle foreign-initiated competent authority cases?489
    • : Procedures for Requesting and Processing U.S. Competent Authority Assistance489
    • Q 19.5.2 : What are the procedures for initiating a request with the U.S. Competent Authority?489
    • Q 19.5.3 : Does the competent authority have to accept the taxpayer’s request for a MAP procedure?490
  • Q 19.6 : What happens during the competent authority process?491
    • Q 19.6.1 : What are the responsibilities of the Competent Authority Analyst?492
    • : Competent Authority Negotiations492
    • Q 19.6.2 : When do the competent authorities meet?492
    • Q 19.6.3 : Can the taxpayer participate in the competent authorities’ negotiating sessions?493
  • : Taxpayer Consideration of the Competent Authorities’ Proposed Resolution494
  • Q 19.7 : How does the competent authority agreement become effective?494
  • : Collateral Adjustments Arising Out of Competent Authority Agreements494
  • Q 19.8 : Are there collateral effects of a competent authority agreement? How does the IRS address collateral effects?494
  • : Accelerated Competent Authority Procedure495
  • Q 19.9 : Can taxpayers request that competent authority resolutions apply to later taxable years?495
  • : Under Certain Treaties, Mandatory Arbitration Is Available for Stalled Cases496
  • Q 19.10 : What remedies are available if the competent authorities fail to resolve a competent authority request on a timely basis?496
    • : Prudential Considerations in Requesting Competent Authority Relief498
    • Q 19.10.1 : How can the taxpayer facilitate productive discussions between the competent authority and an expeditious resolution of the case?498
  • Q 19.11 : Are there less burdensome procedures available for smaller tax cases to receive competent authority consideration?499
Chapter 20: Litigating a Transfer Pricing Case
  • : Identify and Prepare for Cases Likely to Go to Litigation505
  • Q 20.1 : How do you identify when the IRS is likely to pursue a transfer pricing case to litigation?505
  • Q 20.2 : How do you select counsel and assess litigation hazards?505
  • : Choice of Forum for Transfer Pricing Litigation506
  • Q 20.3 : What are the considerations for a taxpayer when choosing a court for a transfer pricing case?506
    • Q 20.3.1 : What courts are available to taxpayers in transfer pricing cases?506
    • : The Tax Court507
    • : The Court of Federal Claims508
    • : The District Courts508
    • Q 20.3.2 : How does one choose a forum for a transfer pricing case?509
  • : Developing Your Case511
  • Q 20.4 : What is the best way to develop a theme for a transfer pricing case?511
    • Q 20.4.1 : What considerations apply when control issues predominate?512
    • Q 20.4.2 : What considerations apply when characterization issues predominate?512
    • Q 20.4.3 : What considerations apply when valuation issues predominate?512
  • Q 20.5 : May the taxpayer challenge actions that the IRS took in Exam, Appeals, etc.?513
  • Q 20.6 : What is the practical effect of the heightened presumption of correctness that attaches to an IRS notice of deficiency in a transfer pricing case?514
  • : Procedures for Bringing the Transfer Pricing Case to Court515
  • : Jurisdiction, Pleading, and Pre-Trial Procedures515
  • Q 20.7 : What are the administrative prerequisites to filing suit against the IRS?515
  • : Notice of Deficiency515
  • : Perfecting a Refund Claim and Variance Doctrine515
  • Q 20.8 : How do you prepare the pleadings for a transfer pricing case?516
    • Q 20.8.1 : Can transfer pricing cases be resolved “on the papers” through dispositive motions?517
    • Q 20.8.2 : How will the court set the case for trial?517
    • Q 20.8.3 : What filings are necessary at the time of trial?517
  • Q 20.9 : How can taxpayers protect confidential trade secrets during tax litigation?518
  • : Discovery and Stipulations in Transfer Pricing Cases519
  • Q 20.10 : What are the considerations regarding discovery and stipulations in a transfer pricing case?519
  • : Discovery519
  • : Discovery of Electronically Stored Information519
  • : Spoliation520
  • : Privilege521
  • : Stipulations523
  • : Considerations in Presentation of Transfer Pricing Cases523
  • Q 20.11 : What considerations apply when presenting evidence in transfer pricing cases?523
    • Q 20.11.1 : What are the persuasive advantages of fact witnesses?524
    • Q 20.11.2 : What are the critical considerations when working with expert witnesses?524
  • : Post-Trial Procedures526
  • Q 20.12 : What happens after the court issues its opinion in a case?526
  • : Arbitration527
  • Q 20.13 : Can a tax court case go to arbitration?527
Chapter 21: Coordination with Customs Valuations
  • : Valuations of Imported Products for Customs Purposes535
  • Q 21.1 : How do valuations of imported products for purposes of U.S. customs affect transfer pricing for income tax purposes?535
  • Q 21.2 : How do importers establish prices for customs purposes?536
  • Q 21.3 : How did the law governing customs valuation develop?536
  • Q 21.4 : How is imported merchandise valued for customs purposes?537
  • Q 21.5 : How does CBP determine import values for customs purposes in related party transactions?538
    • Q 21.5.1 : What are the circumstances of sale test?539
    • Q 21.5.2 : Did the importer settle the price in a manner consistent with normal pricing practices of the industry in question?540
    • Q 21.5.3 : Did the importer settle the price in a manner consistent with the way the importer settled prices for sales to unrelated buyers?540
    • Q 21.5.4 : Has the importer shown that the price is adequate to ensure the recovery of all costs plus a profit which is equivalent to the firm’s overall profit realized over a representative period of time in sales of merchandise of the same class or kind?541
    • Q 21.5.5 : Can importers validate their related party transactions by reference to other transactions?541
  • : Interaction of Customs Valuations with Transfer Pricing Studies and APAs Developed for Income Tax Purposes543
  • Q 21.6 : What weight does CBP accord transfer pricing studies and APAs when determining the value of imported merchandise for customs purposes?543
  • Q 21.7 : What is the effect of reporting import values to CBP on the IRS’s transfer pricing analysis for income tax purposes?546
  • Q 21.8 : If my company makes an adjustment to its transfer pricing for income tax purposes, must it report that change to CBP?548
Chapter 22: Financial Accounting for Transfer Pricing Exposures
  • : Accounting for Income Tax Under U.S. GAAP559
  • : Basics559
  • Q 22.1 : What is FIN 48?559
  • Q 22.2 : Who is subject to FIN 48?559
  • Q 22.3 : How does FIN 48 work?560
    • Q 22.3.1 : What is a “unit of account” and how is it determined?560
    • Q 22.3.2 : When can a tax benefit be recognized?561
    • Q 22.3.3 : How is the tax benefit that may be recognized measured?562
    • Q 22.3.4 : What disclosures are required by FIN 48?564
  • Q 22.4 : Can the IRS ask for workpapers relating to the preparation of Schedule UTP?565
  • : Implications of FIN 48 for Transfer Pricing565
  • Q 22.5 : What issues are raised by FIN 48 for uncertain transfer pricing positions?565
  • Q 22.6 : How does FIN 48 affect the conduct of a transfer pricing controversy?566
  • : Schedule UTP567
  • : Basics567
  • Q 22.7 : What is Schedule UTP?567
  • Q 22.8 : Who must file Schedule UTP?568
  • Q 22.9 : When and how is Schedule UTP filed?569
  • Q 22.10 : What tax positions must be reported on Schedule UTP?569
    • Q 22.10.1 : What is a tax position?570
    • Q 22.10.2 : When is a reserve recorded?571
    • Q 22.10.3 : When does a position fall into the “expectation to litigate” category?572
  • Q 22.11 : What information about the relevant tax positions must be reported on Schedule UTP?572
  • Q 22.12 : Is there a penalty for failing to file Schedule UTP?574
  • Q 22.13 : How does Schedule UTP coordinate with other reporting requirements?574
  • Q 22.14 : Can the IRS ask for workpapers relating to the preparation of Schedule UTP?575
  • Q 22.15 : Will the IRS share the information on Schedule UTP with foreign tax authorities?576
  • : Transfer Pricing and Schedule UTP576
  • Q 22.16 : What issues are raised by Schedule UTP for uncertain transfer pricing positions?576
  • Q 22.17 : How common are Schedule UTP transfer pricing disclosures?577
Chapter 23: The OECD Base Erosion and Profit Shifting (BEPS) Initiative
  • : The BEPS Initiative582
  • Q 23.1 : What is the OECD’s BEPS Initiative?582
  • Q 23.2 : What does the OECD propose to do about BEPS?583
  • Q 23.3 : What are the OECD’s proposed changes to the transfer pricing rules?584
  • Q 23.4 : What is the OECD’s proposal for country-by-country reporting for transfer pricing purposes?585
  • : Implementing the OECD’s BEPS Proposals586
  • Q 23.5 : How likely is it that the OECD’s proposals to address BEPS will become law?586
  Index

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