US Transfer Pricing IRS Rulings
Internal Revenue Service Rulings Relating to Transfer Pricing in the United StatesHere is a partial listing of IRS Private Letter Rulings, Field Service Advice letters, and Technical Advice Memoranda relating to US Transfer Pricing:
|Private Letter Ruling Number 9234019||May 22, 1992||IRS reply to a request dated March 23, 1992 for a ruling as to certain federal income tax consequences of sales of qualified export property between members of the same controlled group.|
|Private Letter Ruling Number 200015024||January 11, 2000||IRS advice whether I.R.C. section 482 applies to taxpayer and other parties to the lease-stripping transaction at issue, and if so, what are the consequences of applying section 482.|
|Private Letter Ruling Number 200151019||September 19, 2001||Whether, under the recognized trade or industry usage standard of the foreign sales corporation transfer pricing grouping rules set forth in section 927(d)(2)(B) and attendant regulations, Taxpayer’s two product lines as defined in Temp. Treas. Reg. §§ 1.925(a)-1T(c)(8)(ii) and 1.925(b)-1T(b)(3) fall within the same broader product line grouping.|
|Private Letter Ruling Number 200207012||November 13, 2001||1. Whether Parent must allocate and apportion its research and development (R&D) expenditures for 1992, 1993, and 1994 to sales on which it pays to FSCsub a commission determined under the administrative pricing rules of section 925(a)(1) or (2) of the Internal Revenue Code, or whether the bonafide cost sharing arrangement that Parent had with CFC1 eliminates the requirement to allocate and apportion Parent’s remaining R&D expenditures. Whether this determination must be made before Parent determines its foreign source taxable income under sections 861(b), 862(b), and 863(b) for purposes of section 904(a). 2. Whether during a taxable year Parent must use the same method of allocating and apportioning its R&D expenditures for all applicable operative Code sections, including both section 925(a)(1) or (2) of the Code for purposes of determining the FSC commission due FSCsub and sections 861(b), 862(b), and 863(b) for purposes of section 904(a).|
|Private Letter Ruling 200229019||April 11, 2002||Taxpayer requests a ruling by the Internal Revenue Service (“Service”) that it may apply the principles of Rev. Proc. 65-17, 1965-1 C.B. 833, and its progeny, in accordance with any reasonable interpretation thereof, with respect to its tax years Year 1 through Year 3, for purposes of conforming accounts to reflect Taxpayer-initiated primary adjustments.|
|Private Leter Ruling 200406027||October 10, 2003||Company is the owner of all Company-related intellectual property. Company charges all of its subsidiaries royalties for the use of such intellectual property, with the royalties having been set at a percentage of sales in accordance with a § 482 transfer pricing study. Consistent with this practice, Target Subgroup members have begun using the intellectual property in their businesses and will pay Company for such use, although at a reduced rate for the remainder of Year A.|
|Field Service Advice 200103024||October 17, 2000||Under Treas. Reg. § 1.482-7, the value of compensatory stock options is an item of compensation cost for tax purposes that must be included in the pool of costs shared with affiliates under a qualified cost sharing arrangement.|
|Field Service Advice 200108003 (pdf)||October 24, 2000||There is a strong basis to conclude that the sham transaction theory or sham partnership theory can prevail because the formation of the partnership and allocation scheme was undertaken solely for tax purposes. We also conclude that there is a strong basis to conclude that the allocations set forth and carried out from the Operating Agreement, in the context of all the facts and circumstances, can be shown to lack substantial economic effect. There is also a strong basis to conclude that section 482 applies in the facts of this case to reallocate income to clearly reflect the taxpayer’s income. There is also a basis to argue that the foreign investors are more appropriately viewed as lenders rather than investors. Finally, we believe that penalties should be asserted regardless of the legal theory used.|
|Technical Advice Memorandum 200230001||March 25, 2002||This case involves USCorpA’s activities in developing Project A in Country A. Through a joint venture, USCorpA and unrelated USCorpB used their resources and skills to identify the opportunity for Project A, to design Project A, and to develop, negotiate and obtain a complete package of authorizations and contracts providing for the financing, construction and operation of Project A. USCorpA and USCorpB caused the ownership of Project A and all of the contractual rights and obligations with respect to Project A to be held by FPtnrshipA/B, a Country B limited partnership in which USCorpA and USCorpB each held, through other foreign entities, a 50% interest in profits and losses.|
|Technical Advice Memorandum 200231014||June 27, 2002||Whether, in computing the overall profit percentage limitation on combined taxable income determined under the marginal costing method of Temp. Treas. Reg. § 1.925(b)-1T, a foreign sales corporation (“FSC”) must include sale transactions to which the full costing method of Temp. Treas. Reg. § 1.925(a)-1T was applied.|
|Technical Advice Memorandum 200348004 (pdf)||August 8, 2003||Whether taxpayer’s method of accounting for the Advance Payment Transactions results in a material distortion of income under I.R.C. § 925(a) and Temp. Treas. Reg. § 1.925(a)-1T(c)(6)(iii)(B). 2. Whether the reimbursement payment claimed by taxpayer is a correct application of the “no loss” rule under Temp. Treas. Reg. § 1.925(a)-1T(e)(1)(i).|
|Technical Advice Memorandum 200430029 (pdf)||March 25, 2004||Taxpayer presented several arguments in support of its double counting of products for OPP grouping purposes despite the plain meaning of the double-inclusion prohibition in Temp. Treas. Reg. § 1.925(b)-1T(b)(3)(ii). After careful consideration, we conclude that Taxpayer’s arguments are unfounded. Double inclusion of products for purposes of OPP computations results in a distortion of a taxpayer’s worldwide profitability – a principal limitation on FSC benefits. In other words, Taxpayer’s OPP grouping methodology computes an artificially inflated worldwide profit margin. Taxpayer’s position disregards the purpose, policy, and plain language of the OPPL rules. Taxpayer also requested that we reconsider the arguments raised by a different taxpayer and rejected in TAM 200121018. We agree with the conclusions stated in TAM 200121018 and decline to review those arguments in detail in this memorandum.|
|Technical Advice Memorandum 200444022||July 12, 2004||The primary issues in this case are whether the ForSub payments constitute FTGR and whether Treas. Reg. § 1.861-17(c)(3)(iv) applies to the ForSub sales for purposes of determining the R&E expenses that are allocated and apportioned to the ForSub payments. Resolution of both of these issues depends, in significant part, on the correct characterization of the property that is the subject of the ForSub payments. In particular, in the context of the FTGR issue, before we can determine whether the property is export property or qualifying foreign trade property, we must analyze the cost sharing and buy-in provisions of Treas. Reg. § 1.482-7 to determine what property was transferred in exchange for the ForSub payments. Accordingly, our analysis begins with the section 482 issue, followed by the FTGR and R&E expense issues.|
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