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US Inbound: US Tax Court upholds IRS authority to make aggregated TP adjustments


Jim Fuller

David Forst

Guidant v Commissioner, 146 TC No 5 (2016) is a transfer pricing case addressing the IRS's ability to make a single adjustment for a US affiliated group where different US members of the group engaged in intercompany transactions and different types of transactions occurred. In the case, six related US entities variously engaged in sales, licensing and services transactions with a large number of foreign manufacturing and distribution affiliates.

The IRS made a single adjustment to the taxable income of the US parent and did not determine that any of the adjustments were the separate taxable income of any of the US subsidiaries. The IRS also did not determine the specific amount of the adjustment that related to tangibles, intangibles or services.

The taxpayer moved for partial summary judgment on the grounds that the IRS must determine the separate taxable income of each US affiliate and make specific adjustments involving provision of intangibles, the purchase and sale of tangible property, and the provision of services. The taxpayer argued that the IRS did not determine "true taxable income" of each member of the affiliated group under Treasury Regulation § 1.482-1(f)(iv).

The IRS stated that it did not believe that it could independently make reliable adjustments to the income of each corporation in the group on the basis of the information available to it. The taxpayer stated that it maintained all the necessary information and records to make the separate-company determinations.

The court ruled in favour of the IRS, stating that while making entity-specific adjustment would theoretically yield the most reliable results, the taxpayer here did not provide the IRS with reliable information for entity-specific adjustments. In such a case, the court held that the IRS has the authority under the law to make a single adjustment – both in respect of related taxpayers and in respect of different types of transactions.

The case, which was a summary judgment motion, did not address whether the taxpayer's pricing was arm's-length.

Jim Fuller ( and David Forst (

Fenwick & West


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