AICPA comments on proposed transfer pricing rules.In comments on regulations proposed by the Internal Revenue Service under tax code section 482-- concerning intercompany transfer pricing--the American Institute of CPAs emphasized regulations should be fully consistent with the arm's-length standard. If adopted in final form, the proposed regulations would change fundamentally the rules for determining intercompany transfer prices for both tangible and intangible property intangible property n. items such as stock in a company which represent value but are not actual, tangible objects. . They would also impose new requirements on costsharing arrangements between related parties. In a letter to IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. Commissioner Shirley Peterson accompanying the comments-which were prepared by the AICPA AICPA See American Institute of Certified Public Accountants (AICPA). international taxation committee--AICPA federal tax executive committee chairman Leonard Podolin called the arm'slength standard "the internationally accepted norm for evaluating the appropriateness of profit allocations resulting from transfer pricing Transfer pricing refers to the pricing of goods and services within a multi-divisional organization, particularly in regard to cross-border transactions. For example, goods from the production division may be sold to the marketing division, or goods from a parent company may be between related taxpayers." The comments warn that to implement procedures under section 482 that are not fully consistent with the arm's-length standard could expose U.S. taxpayers to double taxation. The AICPA comments also urged the IRS to remember the need for tax simplification. Rather than trying to take into account all of the real world complexities, the AICPA said the regulations should "use standards that are reasonably flexible and sensibly tolerant of the wide variety of transactions, patterns of business conduct and investment and trade situations that are clearly present in international transactions." The AICPA also recommended optional safe harbors Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. be included to reduce the compliance burden on taxpayers when the potential for tax avoidance The process whereby an individual plans his or her finances so as to apply all exemptions and deductions provided by tax laws to reduce taxable income. Through tax avoidance, an individual takes advantage of all legal opportunities to minimize his or her state or federal is minimal. |
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