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ABA Seeks Priority Guidance for Transfer Pricing Issues

The ABA recently issued comments to the IRS and Treasury regarding the new temporary regulations issued in TD 9738 concerning the aggregation of controlled transactions, under Section 482, which broaden (“clarify”) the scope of intangible value, to include “all the value provided” from a controlled transaction, and such other transactions that may occur before, during or after, that are so interrelated, as to require aggregate consideration. See attached. While the IRS does not explicitly mention goodwill or going concern—except by reference in one example—the regulations are intended to sweep in the consideration of any goodwill, including synergy, value that may relate to such transactions.

Given the inherent difficulty, and the persistent controversy, as exhibited in the past (i.e., theVeritas and Amazon cases) and as certainly more is yet to come (BEPS) in attempting to determine the value of intangibles generally, let alone goodwill, for the sake of good tax administration, the IRS would do well to provide more concrete/ explicit definitions, or at least boundaries, as to what or when this “extra” value may, or may not, be likely to apply.

This broader scope of consideration is now likely to make it easier for the IRS to recast transactions on economic substance or realistic alternatives grounds, leading to more controversy and disputes, not just with taxpayers, but with foreign governments as well.

© 2022 McDermott Will & EmeryNational Law Review, Volume VI, Number 159
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About this Author

Chief Economist, Transfer Pricing

A. Tracy Gomes is Chief Economist for the Transfer Pricing practice in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Houston office.

Tracy advises firm clients on a range of tax matters relating to international transfer pricing and competent authority proceedings, as well as the valuation of intellectual property, business enterprises and financial products.  He has particular experience in the valuation of technology and brand intangibles.

713-653-1787
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