Tag: Advance pricing agreement (APA)

An arrangement that determines, in advance of controlled transactions, an appropriate set of criteria (e.g. method, comparables and appropriate adjustments thereto, critical assumptions as to future events) for the determination of the transfer pricing for those transactions over a fixed period of time. An advance pricing arrangement may be unilateral involving one tax administration and a taxpayer or multilateral involving the agreement of two or more tax administrations.

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

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

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 determined that Eaton had not complied with the applicable terms of the governing APA revenue procedures and canceled APA I and APA II, effective January 1, 2005 and 2006, respectively. The US Tax Court found that the cancellation of the APAs was an abuse of discretion (US vs Eaton TC opinion from July 2017), and the APAs remained in effect. Irespective of the ruling related to the cancellation of the APAs, the IRS determined that a section 482 adjustment were still necessary to reflect an arm’s-length result for Eaton’s intercompany transactions, and that the computations should include 40% penalties pursuant to I.R.C. sec. 6662(h). Section 6662(a) imposes a ... Continue to full case
US vs EATON-CORPORATION, July 2017, US Tax Court, TC memo 2017-147

US vs EATON-CORPORATION, July 2017, US Tax Court, TC memo 2017-147

The IRS decided to cancel two advance pricing agreements (APAs) with Eaton Corporation. The US Tax Court ruled that this decision was an abuse of discretion. US vs EATON CORPORATION AND SUBSIDIARIES, July 26 2017, United States Tax Court, TC memo 2017-147 ... Continue to full case