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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. They would also impose new requirements on costsharing arrangements between related parties.

In a letter to IRS Commissioner Shirley Peterson accompanying the comments-which were prepared by the 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 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 be included to reduce the compliance burden on taxpayers when the potential for tax avoidance is minimal.
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Publication:Journal of Accountancy
Date:Sep 1, 1992
Previous Article:Peterson alerts tax division to coming IRS changes.
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