TAX 700_Week 1_ Discussion_ Post 5

Secona 482a ofa thea Internala Revenuea Codea (IRC)a pertainsa toa thea transfera pricinga regulaon.a Thisa

provisiona becomesa applicablea whena mulplea enes,a regardlessa ofa theira organizaonala forma ora

locaon,a area owneda ora controlleda bya thea samea interests,a eithera directlya ora indirectly.a Accordinga toa

regulatorya guidance,a ita isa spulateda thata secona 482a appliesa toa alla transaconsa involvinga relateda

paresa anda commonlya controlleda pares,a irrespecvea ofa thea taxpayer'sa intenon.a Thea Uniteda Statesa

Congressa implementeda secona 482a toa preventa taxa avoidance.a Itsa purposea isa toa ensurea thata relateda

paresa accuratelya representa incomea anda toa establisha equitablea taxa treatmenta betweena controlleda

anda uncontrolleda taxpayers.a Secona 482a ofa thea Internala Revenuea Codea (IRC)a setsa fortha aa broada

criteriona thata appliesa toa transaconsa involvinga paresa witha aa relaonship,a alonga witha ana addionala

measurea thata musta bea meta specicallya fora transfersa ofa intangiblea assets.

Secona 482a ofa thea Internala Revenuea Codea grantsa thea Internala Revenuea Servicea (IRS)a thea authoritya toa

redistributea income,a deducons,a credits,a ora allowancesa withina aa controlleda groupa ofa enesa toa

reecta incomea ora preventa taxa evasiona accurately.a Whilea thea arm'sa lengtha principlea isa nota expresslya

menoned,a thea statutorya languagea incorporatesa ita bya perminga adjustmentsa toa thea taxablea incomea

ofa aa controlleda taxpayera toa accounta fora thea incomea thata woulda havea beena generateda hada thea

transacona occurreda betweena unrelateda pares.

Secona 482a alsoa oersa aa supplementarya assessmenta fora transferringa intangiblea propertya (IP).a Thea

incomea deriveda froma thea transfera ora licensinga ofa intellectuala propertya (IP)a musta bea proporonatea toa

thea incomea aributeda toa thea IP.a Accordinga toa thea commensurate-with-incomea standard,a ita isa

necessarya toa considera thea actuala protsa obtaineda froma ulizinga ana intangiblea asseta whena

determininga aa faira anda reasonablea pricea fora transferringa it.a Consequently,a ita isa imperavea thata thea

compensaona amounta accuratelya representsa thea uctuaonsa ina incomea associateda witha thea

intangiblea asseta throughouta itsa lifespan.

Thea regulaonsa abouta transfera pricinga area encompasseda withina thea rulesa establisheda bya thea Uniteda

Statesa Treasurya Departmenta anda overseena bya thea Internala Revenuea Servicea (IRS)a undera secona 482a

ofa thea Internala Revenuea Codea (IRC).a Thesea area specicallya deneda asa Regulaonsa 1.482-1a toa 1.482-9a

ina thea Treasurya Regulaons.a Thea Treasurya Regulaonsa playa aa centrala rolea ina thea transfera pricinga

frameworka ina thea Uniteda States,a servinga asa thea primarya authoritya fora interprenga thea arm'sa lengtha

standarda anda thea commensurate-with-incomea standard.a Taxa authoriesa mandatea thata taxpayersa

choosea thea mosta suitablea pricinga methoda toa assessa thea arm'sa lengtha naturea ofa transfera prices,a

consideringa alla relevanta factsa anda circumstances.

Somea reasonsa thata leada companiesa toa engagea ina transfera pricinga area asa follows:

Companiesa maya employa transfera pricinga strategiesa toa beneta froma variaonsa ina taxa ratesa acrossa

dierenta countriesa ora jurisdicons.a Companiesa cana reducea theira overalla taxa burdena bya strategicallya

relocanga protsa toa jurisdiconsa witha lowera taxa rates.

Severala naonsa providea taxa incenvesa ora advantagesa toa corporaonsa parcipanga acviesa ora

operaons.a Toa accessa thesea advantages,a corporaonsa usea pricea manipulaona taccsa toa generatea thea

percepona ofa heighteneda economica acvitya withina thosea regions.

Thea praccea ofa transfera pricinga cana bea employeda toa relocatea protsa associateda witha intellectuala

propertya rightsa toa jurisdiconsa witha lowera taxa rates.a Companiesa cana decreasea theira taxa liabilitya bya

transferringa ownershipa ofa patents,a trademarks,a anda copyrightsa toa theira subsidiariesa ina theira

respecvea jurisdicons.

Companiesa oena entera intoa cost-sharinga agreementsa fora researcha anda developmenta (R&D)a

expenses.a Theya cana allocatea thesea expensesa acrossa dierenta jurisdiconsa througha transfera pricing,a

potenallya reducinga theira taxa liabilitya ina higher-taxa jurisdicons.

Thea concepta ofa transfera pricinga isa undoubtedlya aa complexa subjecta withina thea realma ofa taxaon.a Froma

ana ethicala standpoint,a ita isa imperavea toa acknowledgea thea legala obligaona toa fulla taxa obligaonsa

whilea simultaneouslya recognizinga thea duciarya responsibilitya towardsa shareholdersa toa opmizea

nanciala gains.a Transfera pricinga strategiesa area deemeda acceptablea ifa companiesa adherea toa regulatorya

requirements.a Ia agreea witha thea praccea evena more,a whena thea resulnga taxa savingsa area allocateda

towardsa augmennga employeea wagesa rathera thana solelya benenga shareholders.

26a U.S.a Codea §a 482a -a Allocaona ofa incomea anda deduconsa amonga taxpayers.a (n.d.).a LIIa /a Legala

Informaona Instute.a hps://www.law.cornell.edu/uscode/text/26/482

McGee,a R.a W.a (2010).a Ethicala issuesa ina transfera pricing.a Manchestera Journala ofa Internaonala

Economica Law,a 7(2),a 24-41.

Transfera pricinga ina thea Uniteda States:a overview.a (2018,a Septembera 1).a Praccala Law.a

hps://uk.praccallaw.thomsonreuters.com/w-006-

9130?contextData=(sc.Default)&transionType=Default&rstPage=true

Worstall,a T.a (2016,a Julya 29).a Whata Facebooka anda Applea Cana Teacha Youa Abouta Transfera Pricing.a Forbes.a

hps://www.forbes.com/sites/mworstall/2016/07/29/facebooks-fun-with-transfer-pricing-and-joe-

sglitz-doesnt-understand-apples-tax-at-all/?sh=21be25d03838

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