U.S. Court Rejects IRS's Transfer Pricing Adjustment

The U.S. Bankruptcy Court for Middle District North Carolina has disallowed an IRS claim for adjustment and resulting tax because the IRS had performed a flawed transfer pricing analysis that was not in compliance with regulation.

The claim was based on a transfer pricing adjustment for a now bankrupt U.S. company that was a subsidiary of a Hong Kong furniture manufacturer. Furniture sales to customers in the U.S. were procured through the subsidiary.

When conducting the audit, the IRS determine…