In Transfer Pricing Case, Tax Court Fails to Perform Adequate CUT Analysis

BVLaw
Court Case Digests
June 9, 2016
3841 Surgical and Medical Instruments and Apparatus
339112 Surgical and Medical Instrument Manufacturing
federal taxation
licensing, royalty rate, transfer pricing, expert testimony, intangible assets, deficiency, lump sum license, comparable uncontrolled transaction, comparable profits method (CPM)

Medtronic, Inc. v. Commissioner (I)
Tax Ct. Memo LEXIS 111
US
Federal Court
Federal
United States Tax Court
Louis P. Berneman, Robert S. Pindyck (petitioner/taxpayer); A. Michael Heimert (respondent/IRS)
Kerrigan

Summary

In transfer pricing case centering on taxpayer’s intercompany licensing agreements, Tax Court finds CUT method is the best way to calculate arm’s-length royalty rates; court accepts taxpayer-proposed uncontrolled comparable but makes adjustments to account for differences in transactions.

See Also

Medtronic, Inc. v. Commissioner (I)

In transfer pricing case centering on taxpayer’s intercompany licensing agreements, Tax Court finds CUT method is the best way to calculate arm’s-length royalty rates; court accepts taxpayer-proposed uncontrolled comparable but makes adjustments to account for differences in transactions.

Medtronic, Inc. v. Commissioner (II)

8th Circuit says Tax Court failed to do the required comparability analysis between selected uncontrolled license arrangement and contested intercompany licenses, making it impossible to say whether CUT was the best method for calculating arm’s-length royalty rates in transfer pricing case.