Transfer pricing: the new Section 482 temporary and proposed regulations

Article Abstract:

Temporary transfer-pricing regulations adopted by the IRS in Jan 1993 provide businesses with more flexibility in adopting a transfer-pricing approach through the use of a 'best method' rule. The rule endorses the establishment of a range of arms-length prices, and eliminates much of the 'sound business judgement' reliance of previously proposed regulations. The Service also issued proposed regulations reintroducing three profit-split pricing methods and addressing the reasonable-cause exception to valuation-misstatement penalties resulting from transfer-pricing allocations.

Transfer pricing

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Proposed conduit financing regulations

Article Abstract:

Proposed regulations on conduit financing have been issued by the IRS under section 7701(1). The regulations apply for the most part to incoming foreign financing of U.S. companies. The IRS is allowed to recharacterize financing arrangements to ignore intermediary entities when the purpose is to avoid U.S. taxes. The key elements concern whether there is a financing arrangement, a reduction in U.S. withholding tax, and a tax avoidance plan. The types of arrangements that could constitute conduits are diagrammed, and a flow chart illustrating the regulations is also included.

Foreign investments, Tax planning, Withholding tax

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New section 367 temporary regulations

Article Abstract:

The IRS has released temporary regulations under IRC section 367 that detail when transfer of stock in a US corporation to a foreign corporation will be subject to taxation. The regulations identify when taxation will be avoided in such stock transfers by detailing the applicable ownership tests. The regulations also identify the reporting requirements imposed on US corporations transferring stock to foreign corporations. The regulations are effective for transactions after April 17, 1994, because they are consistent with Notice 94-46.

International aspects, Corporate reorganizations, Stock transfer, international

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