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Altera charged $27 million by US IRS for employee cost transfer pricing

The IRS is demanding $27 million from tech company Altera because it says the company wrongly booked employee stock-based compensation in the US where it is tax deductible.

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Wrapped-up in the dispute is the company’s use of its Cayman Islands unit, where the IRS argues the company should have split its employee costs between 2004 and 2007, rather than booking them all in the US and claiming the full tax deduction.

Altera is challenging the IRS rules penned in 2003 that say stock-based compensation should be shared between a US parent company and a subsidiary because the rulings are impossible for companies to follow. The company is seeking for the court to rule the 2003 rules invalid.

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