September 29, 2022

Medtronic Part Deux: The Best Method Is Yet To Come?

September 29, 2022/ Ruchelman P.L.L.C.

Bad blood exists between the I.R.S. and Medtronic Inc. when it comes to transfer pricing matters. Regarding the tax years 2005 and 2006, the I.R.S. challenged a transfer pricing methodology it approved in an M.O.U. settlement with Medtronic involving the same transactions and issues in the context of an earlier year. The I.R.S. lost in an earlier case, appealed to the 8th Circuit Court of Appeals, which sent the matter back to the Tax Court to address several factual issues. In a recent decision, the Tax Court modified its earlier finding by adjusting the comparable uncontrolled transaction (“C.U.T.”) in a subjective way to obtain a result that seemed to be fair in the view of the court. Michael Peggs suggests that the second trial did not produce practical guidance that was any better than the very limited guidance in the original decision.

September 20, 2017

Eaton A.P.A. Cancellations Were an Abuse of I.R.S. Discretion

September 20, 2017/ Ruchelman P.L.L.C.

A recent U.S. Tax Court decision involving Eaton Corporation affirmed that the I.R.S. cannot arbitrarily circumvent administrative rules that are set down in revenue procedures and relied upon by the I.R.S. and a taxpayer. As a result, the I.R.S. must reasonably exercise its discretion when seeking to terminate an advance pricing agreement with a taxpayer. Michael Peggs looks at the process of obtaining an advanced pricing agreement and comments on the court’s decision.

July 15, 2015

Eaton Corp.'s Transfer Pricing Trial Begins August 24

July 15, 2015/ Web Admin

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The U.S. Tax Court’s transfer pricing trial of Eaton Corp. v. Comm’r1 will begin on August 24, 2015, despite attempts by the I.R.S. to further delay the trial until 2016. The controversy between the parties began in 2011, when the I.R.S. used its discretionary power to cancel its advance pricing agreements2 with Eaton Corp. and issued a notice of deficiency. Eaton Corp. filed a petition in 2012 challenging the I.R.S. cancellations and claiming that the agreements should be upheld on the basis of contract principles. The outcome of the trial could have a substantial impact on the I.R.S. Advance Pricing Agreement Program and impact the finality of these agreements with other taxpayers.

The trial was originally scheduled to begin August 5, but the I.R.S. filed a motion to delay the trial for five months. In response to the motion, Judge Kathleen Kerrigan ordered a 19-day continuance. The I.R.S. filed another motion to reconsider the five-month delay, which Judge Kerrigan denied. The I.R.S. argued that Eaton Corp. has failed to cooperate during the discovery process and that it requires additional time to prepare for trial in light of new developments. Judge Kerrigan denied a further delay of the trial because she doubts that the hostile relationship between the parties will improve with additional time.