Countries: United States

US vs 3M Company And Subsidiaries, February 2023, US Tax Court, 160 T.C. No. 3 (Docket No. 5816-13)

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“3M Parent” is the parent company of the 3M Group and owns the Group’s trademarks. Other intellectual property, including patents and unpatented technology, is owned by “3M Sub-parent”, a second-tier wholly owned US subsidiary of 3M Parent. “3M Brazil” has used trademarks owned by 3M US in its business operations. 3M Brazil’s use of these […]

US Supreme Court denies Whirlpool’s request for judicial review of the 2021 judgement from the Court of Appeal.

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21 November 2022 the US Supreme Court denied Whirlpool its request for judicial review of the December 2021 judgement of the Court of Appeal (Sixth Circuit).     10 August 2022 Whirlpool filed a “petition for writ” with the Supreme Court of the United States. “Petitioners Whirlpool Financial Corporation & Consolidated Subsidiaries and Whirlpool International […]

US vs Eaton Corp., August 2022, Sixth Circuit, Nos. 21-1569/2674

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Eaton is an Ohio corporation with a global presence. It manufactures a wide range of electrical and industrial products. During the relevant period—2005 and 2006—Eaton had its foreign subsidiaries in Puerto Rico and the Dominican Republic manufacture certain products which Eaton then sold to its other affiliates and third-party customers. In 2002, Eaton applied for an […]

US vs Medtronic, August 2022, U.S. Tax Court, T.C. Memo. 2022-84

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Medtronic had used the comparable uncontrolled transactions (CUT) method to determine the arm’s length royalty rates received from its manufacturing subsidiary in Puerto Rico for use of IP under an inter-group license agreement. The tax authorities found that Medtronic left too much profit in Puerto Rico. Using a “modified CPM” the IRS concluded that at […]

US vs TBL LICENSING LLC, January 2022, U.S. Tax Court, Case No. 158 T.C. No 1 (Docket No. 21146-15)

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A restructuring that followed the acquisition of Timberland by VF Enterprises in 2011 resulted in an intra-group transfer of ownership to valuable intangibles to a Swiss corporation, TBL Investment Holdings. The IRS was of the opinion that gains from the transfer was taxable. Judgement of the US Tax Court The tax court upheld the assessment […]

US vs Whirlpool, December 2021, U.S. Court of Appeals, Case No. Nos. 20-1899/1900

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The US tax authorities had increased Whirlpool US’s taxable because income allocated to Whirlpool Luxembourg for selling appliances was considered taxable foreign base company sales income FBCSI/CFC income to the parent company in the U.S. under “the manufacturing branch rule” under US tax code Section 951(a). The income from sales of appliances had been allocated […]

US Senate Committee request records related to tax schemes involving Caterpillar and Renaissance Technologies

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In a letter dated 28. April 2021 the US Senate Committee on Finance has request records related to tax schemes involving Caterpillar and Renaissance Technologies. “In 2015, Caterpillar disclosed that a federal grand jury in Illinois had begun investigating an alleged tax scheme involving the company’s Swiss subsidiary. This investigation led to raids by federal […]

Bristol-Myers Squibb in Dispute with IRS over “Abusive Offshore Scheme”

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According to the IRS, Bristol-Myers Squibb reduces its U.S. taxes by holding valuable intangibles in an Irish subsidiary. In a legal analysis, the IRS concluded that the Irish scheme saves Bristol-Myers Squibb up to $1.38 billion in US taxes. From Bristol-Myers Squibb’s 2019 10-K form, “Note 7. Income Taxes” “BMS is currently under examination by […]

US vs Coca Cola, November 2020, US Tax Court, 155 T.C. No. 10

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Coca Cola, a U.S. corporation, was the legal owner of the intellectual property (IP) necessary to manufacture, distribute, and sell some of the best-known beverage brands in the world. This IP included trade- marks, product names, logos, patents, secret formulas, and proprietary manufacturing processes. Coca Cola licensed foreign manufacturing affiliates, called “supply points,†to use […]

September 2020: IRS Guide to the Transfer Pricing Examination Process

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September 8, 2020 the IRS released a new guide to Transfer Pricing Examination Process. The Transfer Pricing Examination Process (TPEP) provides a guide to best practices and processes to assist with the planning, execution, and resolution of transfer pricing examinations consistent with the Large Business & International (LB&I) Examination Process (LEP), Publication 5125. This guide […]

US Investigations into Digital Service Taxes

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Washington, DC – The United States Trade Representative announced today that his office is beginning investigations into digital services taxes that have been adopted or are being considered by a number of our trading partners. The investigations will be conducted under Section 301 of the 1974 Trade Act. This provision gives the USTR broad authority […]

US vs Whirlpool, May 2020, US tax court, Case No. 13986-17

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The US tax authorities had increased Whirlpool US’s taxable because income allocated to Whirlpool Luxembourg for selling appliances was considered taxable foreign base company sales income/CFC income to the parent company in the U.S. under “the manufacturing branch rule” under US tax code Section 951(a). The income from sales of appliances had been allocated to […]

Altera asking the US Supreme Court for a judicial review of the 2019 Decision from the U.S. Court of Appeals concerning the validity of IRS regs. on CCAs

Altera has asked the US Supreme Court for a judicial review of the Decision from the U.S. Court of Appeals for the Ninth Circuit over the validity of Internal Revenue Service regulations  that requires related companies to share the cost of stock-based employee compensation when shifting their intangible assets abroad applying US Cost Sharing regulations. […]

US vs Eaton, Oct. 2019, United States Tax Court, Docket No 5576-12

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Eaton Corporation is a global manufacturer of electrical and industrial products headquartered in the US.  This case concerning the computation of penalties is related to a previous 2017 dispute concerning the cancellation of two advance pricing agreements (APAs) establishing a transfer pricing methodology (TPM) for covered transactions between Eaton Corp and its subsidiaries. In 2011 IRS […]

US vs Amazon, August 2019, US Court of Appeal Ninth Circut, Case No. 17-72922

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In the course of restructuring its European businesses in a way that would shift a substantial amount of income from U.S.-based entities to the European subsidiaries, appellee Amazon.com, Inc. entered into a cost sharing arrangement in which a holding company for the European subsidiaries made a “buy-in†payment for Amazon’s assets that met the regulatory […]

US vs Altera Corp, June 7, 2019, US Court of Appeal, Nos 16-70496 and 16-70497

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The US Court of Appeal had reversed a decision from the Tax Court that 26 C.F.R. § 1.482-7A(d)(2), under which related entities must share the cost of employee stock compensation in order for their cost-sharing arrangements to be classified as qualified cost-sharing arrangements and thus avoid an IRS adjustment, was invalid under the Administrative Procedure […]

Facebook in billion dollar dispute with the IRS related to transfers of intangibles to Ireland

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In the annual report for 2018 Facebook Inc. has included the following statement on current tax disputes with the IRS. “…The tax laws applicable to our business, including the laws of the United States and other jurisdictions, are subject to interpretation and certain jurisdictions are aggressively interpreting their laws in new ways in an effort […]

Western Digital in $549 million transfer pricing dispute with the IRS

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Western Digital has been issued a $549 million tax assessment for fiscal years 2008 – 2012 by the IRS relating to transfer pricing with the Company’s foreign subsidiaries and intercompany payable balances. In the Annual Report for 2018 the following is stated by Western Digital on the case: “The Internal Revenue Service (“IRSâ€) previously completed […]

US vs SIH Partners LLLP, May 2019, US Third Circuit of Appeal, Case No 18-1862

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The Third Circuit of Appeal upheld the tax courts prior decision in a $377 million dispute involving the affiliate of a US based commodities trader. The Court found that SIH Partners LLLP, an affiliate of Pennsylvania-based commodities trader Susquehanna International Group LLP, owed taxes on approximately $377 million in additional income. The extra earnings stemmed […]

US vs Pacific management Group, August 2018, US Tax Court Case, Memo 2018-131

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This case concerned a tax scheme where taxable income was eliminated using factoring and management fees to shift profits. The Tax Court held that the scheme was in essence an attempt to eliminate the taxes. Factoring and management fees were not deductible expenses but rather disguised distributions of corporate profits and generally currently taxable to the individual shareholders […]

US vs Medtronic, August 2018, U.S. Court of Appeals, Case No: 17-1866

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The IRS was of the opinion, that Medtronic erred in allocating the profit earned from its devises and leads between its businesses located in the United States and its device manufacturer in Puerto Rico. To determine the arm’s length price for Medtronic’s intercompany licensing agreements the comparable profits method was therefor applied by the IRS, […]

US vs Altera Corp, July 2018, US Court of Appeal, Nos 16-704996

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The US Court of Appeal reversed a decision from the Tax Court that 26 C.F.R. § 1.482-7A(d)(2), under which related entities must share the cost of employee stock compensation in order for their cost-sharing arrangements to be classified as qualified cost-sharing arrangements and thus avoid an IRS adjustment, was invalid under the Administrative Procedure Act. […]

US vs Reserve Mechanical Corp, June 2018, US Tax Court, Case No. T.C. Memo 2018-86

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The issues were whether transactions executed by the company constituted insurance contracts for Federal income tax purposes and therefore, whether Reserve Mechanical Corp was exempt from tax as an “insurance companyâ€. For that purpose the relevant factors for a captive insurance to exist was described by the court. According to the court in determining whether […]

US vs. Hewlett Packard, November 2017, Court of Appeals, Case No 14-73047

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This issue in this case is qualification of an investment as debt or equity. HP bought preferred stock in Foppingadreef Investments, a Dutch company. Foppingadreef Investments bought contingent interest notes, from which FOP’s preferred stock received dividends that HP claimed as foreign tax credits. HP claimed millions in foreign tax credits between 1997 and 2003, then […]

US vs. Cameco, July 2017, Settlement of $122th.

Canadian mining company, Cameco Corp, has settled a tax dispute and will pay the IRS $122,000 for income years 2009-2012. Cameco’s dispute with tax authorities relates to its offshore marketing structure and transfer pricing. Cameco sells uranium to its marketing subsidiary in Switzerland, which re-sells it to buyers, incurring less tax than the company would […]

US vs Wells Fargo, May 2017, Federal Court, Case No. 09-CV-2764

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Wells Fargo, an American multinational financial services company, had claimed foreign tax credits in the amount of $350 based on a “Structured Trust Advantaged Repackaged Securities” (STARS) scheme. The STARS foreign tax credit scheme has two components — a trust structure which produces the foreign tax credits and a loan structure which generates interest deductions. […]

US vs Santander Holding USA Inc, May 2017, Supreme Court, Case No. 16-1130

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Santander Holding USA is a financial-services company that used a tax strategy called Structured Trust Advantaged Repackaged Securities (STARS) to generate more than $400 million in foreign tax credits. The scheme was developed and promoted to several U.S. banks by Barclays Bank PLC, a U.K. financial-services company, and the accounting firm KPMG, LLC. The Internal […]

US vs. Amazon, March 2017, US Tax Court, Case No. 148 T.C. No 8

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Amazon is an online retailer that sells products through Amazon.com and related websites. Amazon also sells third-party products for which it receives a commissions. In a series of transactions  in 2005 and 2006, Amazon US transferred intangibles to Amazon Europe, a newly established European HQ placed in Luxembourg. A Cost Sharing Arrangement (“CSAâ€), whereby Amazon […]

US-vs-Analog-Devices-Subsidiaries-Nov-22-2016-United-State-Tax-Court-147-TC-no-15

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The US Tax Court held that a closing agreement did not result in retroactive indebtedness. Analog Devices Corp. repatriated cash dividends from a foreign subsidiary and claimed an 85% dividends received deduction for FY 2005, cf. US regs § 965. No related party indebtedness was reported by the company which would have limited the deduction available. During […]

US vs. Medtronic Inc. June 2016, US Tax Court

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The IRS argued that Medtronic Inc failed to accurately account for the value of trade secrets and other intangibles owned by Medtronic Inc and used by Medtronic’s Puerto Rico manufacturing subsidiary in 2005 and 2006 when determening the royalty payments from the subsidiary. In 2016 the United States Tax Court found in favor of Medtronic, […]

US vs. Guidant Corporation. February 2016

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The U.S. Tax Court held in favor of the Commissioner of Internal Revenue, stating that neither Internal Revenue Code §482 nor the regulations thereunder require the Respondent to always determine the separate taxable income of each controlled taxpayer in a consolidated group contemporaneously with the making of the resulting adjustments. The Tax Court further held […]

US vs Altera. February 2016, Appeal

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On July 27, 2015 the United States Tax Court issued its ruling regarding the petition filed by Altera Corporation and its subsidiaries against the Commissioner of Internal Revenue. The court found in favor of Altera, and concluded that on an arm’s length basis employee profit sharing should not be included in compensation between related parties […]

US vs. BMC Software. March 2015

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The United States Court of Appeals for the Fifth Circuit issued its ruling on the case of BMC Software, Inc. v. Commissioner of Internal Revenue. The case discussed issues relating to § 965 regarding repatriation of dividends and § 482. Following an audit, BMC had entered into a Closing Agreement, making primary and secondary adjustments […]

US vs Buyuk LLC and Beyazit LLC, November 2013, US Tax Court, Case No. 11051-10, 6853-12

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The dispute in this case was transactions involving distressed asset/debt transaction. The tax authorities found the DAD transactions of russian receivables under a “DBO distressed debt structure scheme” lacked economic substance, and denied the taxpayers involved tax decuctions of USD 4.5 and 12.2 million. A report provided on behalf of the government analyzed whether a […]

US vs. Sherwin-Williams Company, March 2011, Massachusetts Appeals Court Decisions, Case No 79 Mass. App. Ct. 159

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In the case of Talbots Inc, the Massachusetts Appeals Court Decisions found that the Appellate Tax Board correctly affirmed the denial by the Commissioner of Revenue (commissioner) of a taxpayer’s request to abate corporate excise taxes that were assessed against the taxpayer on the basis of disallowed deductions for royalty payments the taxpayer made to a […]

US vs. Veritas Software Corporation, December 2009, US Tax Court, Case No 133 T.C. 297, 316

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The issue in the VERITAS case involved the calculation of the buy-in payment under VERITAS’ cost sharing arrangement with its Irish affiliate. VERITAS US assigned all of its existing European sales agreements to VERITAS Ireland. Similarly,VERITAS Ireland was given the rights to use the covered intangibles and to use VERITAS US’s trademarks, trade names and service marks […]

US vs Xilinx Inc, May 27, 2009, Court of Appeal

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In a decision the IRS determined that Xilinx should have allocated stock option costs for foreign subsidiary research and development employees as part of its Section 482-7 cost-sharing agreement calculation. The United States Tax Court overruled the IRS, finding that in an arm’s-length situation, unrelated parties would not allocate employee stock option costs in the […]

US vs National Westminster Bank PLC, January 2008, US Court of Appeals, Case No. No. 2007-5028

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NatWest is a United Kingdom corporation engaged in international banking activities. For the tax years 1981-1987, NatWest conducted wholesale banking operations in the United States through six permanently established branch locations (collectively “the U.S. Branchâ€). On its United States federal income tax returns for the years at issue, NatWest claimed deductions for accrued interest expenses […]

UK vs Cadbury- Schweppes, September 2006, European Court of Justice, Case C-196/04

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The legislation on ‘controlled foreign companies’ in force in the United Kingdom provided for the inclusion, under certain conditions, of the profits of subsidiaries established outside the United Kingdom in which a resident company has a controlling holding. The UK tax authorities thus claimed from the parent company of the Cadbury Schweppes group, established in […]

US vs. Xilinex Inc, August 2005

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In a decision the IRS found that Xilinx should have allocated stock option costs for foreign subsidiary research and development employees as part of its Section 482-7 cost-sharing agreement calculation. In this decision, the United States Tax Court overruled the IRS, finding that in an arm’s-length situation, unrelated parties would not allocate employee stock option […]

US vs. Sherwin-Williams Company, October 2002, Massachusetts Supreme Judicial Court, Case No 438 Mass. 71

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Sherwin-Williams is an Ohio corporation, headquartered in Cleveland, and is engaged in the manufacture, distribution and sale of paints and paint-related products. In 1991, it formed two subsidiaries under Delaware law to hold certain tradenames, trademarks and service marks that it had developed. Sherwin-Williams and the subsidiaries teen entered into nonexclusive licensing agreements for the […]

US vs. DHL. April 2002, U.S. Court of Appeals

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When DHL sold the “DHL” trademark to DHL International, the IRS disagreed with DHL’s evaluation of the arms-length price of the intellectual property and used its authority under Section 482 to reallocate income and impose penalties. DHL appealed the IRS ruling and the tax court upheld the IRS allocation to DHL. In this decision the […]

US vs Hyatt Group Holding, Inc. and Subsidiaries, October 1999, United States Tax Court, No T.C. Memo. 1999-334

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At issue in this case were (the lack of) royalties payments to Hyatt and Hyatt International from foreign subsidiaries. Hyatt US had not recieved royalties from its foreign Subsidiaries. The IRS had determined a 1.5 % rate of hotel gross revenues for foreign subsidiaries use of Hyatt trade names and trademarks. The Tax Court found the 1,5 % rate unreasonable, but did […]

US vs NESTLE HOLDINGS INC, July 1998, Court of Appeal, 2nd Circuit, Docket Nos 96-4158 and 96-4192

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In this case, experts had utilized the relief-from-royalty method in the valuation of trademarks. On this method the Court noted: “In our view, the relief-from-royalty method necessarily undervalues trademarks. The fair market value of a trademark is the price a willing purchaser would have paid a willing seller to buy the mark…The relief-from-royalty model does […]

US vs Laidlaw Transportation, Inc., June 1998, US Tax Court, Case No 75 T.C.M. 2598 (1998)

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Conclusion of the Tax Court: “The substance of the transactions is revealed in the lack of arm’s-length dealing between LIIBV and petitioners, the circular flow of funds, and the conduct of the parties by changing the terms of the agreements when needed to avoid deadlines. The Laidlaw entities’ core management group designed and implemented this […]

US vs Perkin-Elmer Corp. & Subs., September 1993, United States Tax Court, Case No. T.C. Memo. 1993-414

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During the years in issue, 1975 through 1981, the worldwide operations of Perkin-Elmer (P-E) and its subsidiaries were organized into five operating groups, each of which was responsible for the research, manufacturing, sales, and servicing of its products. The five product areas were analytical instruments, optical systems, computer systems, flame spray equipment and materials, and […]

US vs Proctor & Gamble Co, April1992, Court of Appeal (6th Cir.), Case No 961 F.2d 1255

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Proctor & Gamble is engaged in the business of manufacturing and marketing of consumer and industrial products. Proctor & Gamble operates through domestic (US) and foreign subsidiaries and affiliates. Proctor & Gamble owned all the stock of Procter & Gamble A.G. (AG), a Swiss corporation. AG was engaged in marketing Proctor & Gamble’s products, generally […]

US vs. Computervision. April 1991

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Computervision used a domestic international sales corporation (DISC) for export sales of its products and included those transaction costs in its combined taxable income (CTI) calculation. In this decision, the US Tax court upheld the IRS ruling to disallow inclusion of export promotion expenses in the calculation of taxable net income.

US vs Proctor & Gamble, September 1990, US Tax Court, Opinion No. 16521-84.

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Proctor & Gamble is an US corporation engaged in the business of manufacturing and marketing of consumer and industrial products. Proctor & Gamble operates through domestic and foreign subsidiaries and affiliates. Proctor & Gamble owned all the stock of Procter & Gamble A.G. (AG), a Swiss corporation. AG was engaged in marketing Proctor & Gamble’s […]

US vs United States Steel Corporation, March 1980, United States Court of Appeals, Second Circuit, 617 F.2d 942

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US Court of Appeal had to decide whether the controlled prices determined by US Steel was in accordance with the arm’s length principle, or rather what kind of evidence was sufficient for a taxpayer to challenge successfully the Commissioner’s determination that payments between a parent and a subsidiary are not “arm’s length” and thus are […]

US vs E.I. Du Pont de Nemours & Co, October 1979, US Courts of Claims, Case No 608 F.2d 445 (Ct. Cls. 1979)

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Taxpayer Du Pont de Nemours, the American chemical concern, created early in 1959 a wholly-owned Swiss marketing and sales subsidiary for foreign sales — Du Pont International S.A. (known to the record and the parties as DISA). Most of the Du Pont chemical products marketed abroad were first sold by taxpayer to DISA, which then […]

US vs First Security Bank of Utah, March 1972, US Supreme Court, Case No. 70-305

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The banks were subsidiaries of a holding company that also controlled a management company, an insurance agency, and, from 1954, an insurance company (Security Life). In 1948, the banks began to offer to arrange credit life insurance for their borrowers, placing the insurance with an independent insurance carrier. National banking laws prohibited the banks from […]

Gregory v. Helvering, January 1935, U.S. Supreme Court, Case No. 293 U.S. 465 (1935)

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The first rulings where the IRS proposed recharacterizing transactions that could be considered abusive through use of transfer pricing provisions. Judgement of the Supreme Court The court instead applied the general anti-abuse doctrine. “It is earnestly contended on behalf of the taxpayer that, since every element required by the foregoing subdivision (B) is to be […]