International Tax

Transfer Pricing: The Code, the Regulations and Selected Case Law (Portfolio 886)

  • This Portfolio is the foundation of the Transfer Pricing Portfolio Series.


The first part of this Portfolio discusses the evolution of §482 from its beginnings in the early 20th century to the current iteration and the adoption in 1986 of the commensurate-with-income standard for transfers of intangible property.
The second part of the Portfolio analyzes the §482 regulations in depth, focusing on the 1994 regulations (as amended to date), but including discussion of prior regulations to facilitate understanding of current concepts and methods. All aspects of these regulations and associated case law are addressed, including definitions and basic concepts, such as collateral adjustments; the power of the IRS to reallocate items among controlled taxpayers, the arm’s-length standard, and the scope of review; the basic elements of transfer pricing analysis, including the best method rule, comparability standards, the arm’s-length range, and methods applicable across transaction types, such as the comparable profits method (CPM); and finally, transaction-based methods for specific types of transactions, such as transfers of tangible property, transfers of intangible property, and controlled services transactions.
The final part of the Portfolio traces the development of judicial approaches to the problem of comparability through an analysis of significant cases decided under §482. The vast majority of these cases arose during the era of the 1968 regulations, but they remain instructive, albeit to a limited extent, under the current regulatory scheme.
The reader should note that many important topics, such as cost-sharing arrangements, documentation requirements and penalties, are only touched on here, but are treated in detail in other portfolios in the Transfer Pricing Portfolio Series.

Table of Contents

I. Example

II. Tax Disputes

Samuel Maruca
Covington & Burling LLP
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