In a recent landmark case involving basic transfer pricing principles, Canada v. Cameco Corporation, 2020 FCA 112, the Canadian Federal Court of Appeal sided with the taxpayer. The Court rejected an argument by the Crown that would have applied “realistic alternatives”-like principles to effectively disregard and recharacterize certain related party purchase and sales transactions. For international observers, the case is worth studying, if for no other reason than to understand the government’s aggressive arguments. In light of the codification of the realistic alternatives principle in IRC § 482, the IRS might now be emboldened to make similar arguments in the US.
Continue Reading Canadian Federal Court of Appeal Nukes Crown’s Transfer Pricing Arguments

In May, the IRS asserted $340 million in transfer pricing penalties in Western Digital Corporation v. Commissioner. If the IRS prevails, these would appear to be the largest transfer pricing penalties sustained in US Tax Court history.

The penalties are notable not only for their amount, but also for the way the IRS raised them. The IRS did not apply penalties in its notices of deficiency or in its initial Tax Court pleadings. Instead, the IRS asserted the penalties in amended pleadings over a year after the case began.
Continue Reading IRS Asserts Big-Ticket Transfer Pricing Penalties in Western Digital