 |
 |
 |
|
|
Getting to Yes This company, the U.S. subsidiary of a specialized trading company, had a long history of very contentious examinations and large proposed adjustments. For the first year for which contemporaneous documentation was required, Ms Amerkhail's report included a very thorough description of the wide variety of products and customers with which the company dealt, as well as the limited functions and risks associated with its transactions, and a comparison of the company's financial results with those of independent distributors, after appropriate adjustments. As part of a new effort to calm relations with the IRS, this report was provided to the IRS early in the next examination cycle, even though the year it specifically covered was not yet under examination. As a result, the examination quickly focused on confirming the documentation and the selection of comparables, rather than exploring new theories and issuing information document requests, as in the previous examinations. Ms Amerkhail provided additional calculations and participated in meetings to respond to each concern raised by the IRS economist. The result, after considerably less time and expense than had been required in previous examinations, was a "no change" recommendation for the company's transfer prices. Winning in Competent Authority This company was an inbound distributor in a concentrated industry dominated by other controlled distributors, all of which were being targeted by the IRS. The IRS economist's report had used academic research on industrial concentration as the basis for a claim that all companies in this industry should earn significantly higher profits than companies in less concentrated industries. Ms Amerkhail's report made use of other academic research (based on FTC Line of Business data that had been collected for only a few years) which concluded that only the leading firm in a concentrated industry earned above normal profits. She also identified and analyzed CUP and profit split data that were used to convince the IRS that her client should be distinguished from the other controlled distributors in its industry. The successful competent authority settlement significantly reduced the tax adjustment initially proposed by the IRS, and resulted in a full refund of the additional tax from the foreign tax authority. Defending a Royalty This non-U.S. company had built a very successful business using intangibles licensed from a U.S. company. Eventually it rescued the U.S. licensor from financial difficulties by buying it, thus becoming the licensee of its own U.S. subsidiary. Several years later, the non-U.S. tax authority questioned whether the very successful parent should still be paying royalties to its less successful subsidiary. During interviews with personnel of the parent company, Ms Amerkhail identified aspects of the transferred intangibles that, while they had definitely been developed by the U.S. company, were more perfectly suited to the parent's culture, and thus were more valuable in the parent's home market than in the U.S. Ms Amerkhail's report explaining this relationship, and also describing the many ways in which the U.S. subsidiary was continuing to maintain and enhance the value of the intangibles, was used to persuade the non-U.S. tax authority that no change should be made to the long-established royalty. |
||||||||||||||||||||||||||||||||||||||||
ractice
Examples