Tag: Falls outside the arm’s length range

§ 1.482-1(e)(3) Adjustment if taxpayer’s results are outside arm’s length range.

If the results of a controlled transaction fall outside the arm’s length range, the district director may make allocations that adjust the controlled taxpayer’s result to any point within the arm’s length range. If the interquartile range is used to determine the arm’s length range, such adjustment will ordinarily be to the median of all the results. The median is the 50th percentile of the results, which is determined in a manner analogous to that described in paragraph (e)(2)(iii)(C) of this section (Interquartile range). In other cases, an adjustment normally will be made to the arithmetic mean of all the results. See § 1.482-1(f)(2)(iii)(D) for determination of an adjustment when a controlled taxpayer’s result for a multiple year period falls outside an arm’s length range consisting of the average results of uncontrolled comparables over the same period ... Read more

TPG2022 Chapter III paragraph 3.61

If the relevant condition of the controlled transaction (e.g. price or margin) falls outside the arm’s length range asserted by the tax administration, the taxpayer should have the opportunity to present arguments that the conditions of the controlled transaction satisfy the arm’s length principle, and that the result falls within the arm’s length range (i.e. that the arm’s length range is different from the one asserted by the tax administration). If the taxpayer is unable to establish this fact, the tax administration must determine the point within the arm’s length range to which it will adjust the condition of the controlled transaction ... Read more

TPG2017 Chapter III paragraph 3.61

If the relevant condition of the controlled transaction (e.g. price or margin) falls outside the arm’s length range asserted by the tax administration, the taxpayer should have the opportunity to present arguments that the conditions of the controlled transaction satisfy the arm’s length principle, and that the result falls within the arm’s length range (i.e. that the arm’s length range is different from the one asserted by the tax administration). If the taxpayer is unable to establish this fact, the tax administration must determine the point within the arm’s length range to which it will adjust the condition of the controlled transaction ... Read more