Category Archives: International – Transfer Pricing

Proposed Sec. 367 Regs Say Goodbye to Goodwill Exception

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Citing aggressive taxpayer positions, recently proposed regulations do away with the foreign goodwill exception to gain or income recognition for outbound transfers under Section 367. The rules also restrict the type of property eligible for the active business exception. Reasons for Change Per the preamble, taxpayers interpret Section 367 and the regulations in one of two ways when claiming favorable treatment of foreign goodwill and going concern value. One interpretation argues that goodwill and going concern value are not IP within the meaning of Section 936(h)(3)(B) and thus not subject [...]Read more

International Tax ADVISORY: Treasury Issues New Final and Proposed Regulations on Dividend Equivalent Transactions

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On December 4, 2013, the U.S. Treasury issued final and proposed regulations under Section 871(m) of the Code. The final rules extend the current definition of “notional principal contracts” (NPCs) to payments made before January 1, 2016, while the proposed regulations introduce rules that may modify the scope and application of Section 871(m)’s resourcing rule for “dividend equivalent” payments. Also, in Chief Counsel Advice 201349015 (CCA), released December 6, 2013, the IRS advised on the proper reporting of U.S. taxable income and the proper standard for determining the “compulsory [...]Read more

Air Cargo Tax and Corporate Groups

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ILM 201123027 gives a big win to an air carrier and rules that for purposes of the federal excise tax on transportation of property by air (section 4271) the Carrier is the member of a corporate group that actually operates the planes, and the taxpayer is the sister corporation called Organizer that legally contracts with the Carrier to deliver the property that is accepted for transport by a third affiliate, the Retailer (owned by Organizer). The consequence of this ruling is that the tax base is the amount Organizer pays Carrier, as opposed to the amount the customer pays Retailer (or the amount [...]Read more

Foreign Patent Commercialization

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Facts Corp. A licensed certain technology to G (called Agreement A) in the past. It entered into a closing agreement with the IRS several years ago to treat Agreement A as a license. Later it modified Agreement A in Agreement B, under which Corp. A received an accelerated payment from G. Separately, Corp. A had received from B Agreement C, by which Corp. A acquired certain license rights to Device A, which appears to be the principal patent right in contention. The device manufactures Product, which B will commercialize in the foreign country.   Corp. A claims that the lump sum payment received [...]Read more