Google’s transfer of intangibles draws IRS attention

Bloomberg reports the IRS is auditing how Google Inc. avoided federal income taxes by shifting profit into offshore subsidiaries, including how the company valued software rights and other intellectual property it licensed abroad.

Transfers of intangibles to offshore subsidiaries located in lesser-taxed areas can allow for huge tax savings. Google, for example, is estimated to save $1B a year through this strategy. The IRS is increasingly scrutinizing how these transfers are priced (ktMINE is a popular source of pricing comparables), and one prosecution led to a recovery in excess of $3B.