Medtronic, US Give Dueling Offshore Transfer Pricing Methods (2)

A federal appeals court panel kept questions to a minimum Tuesday during oral arguments between Medtronic Inc. and the IRS over the best method for pricing the medical device maker’s transactions with its Puerto Rican subsidiary.

IRC Section 482 empowers the IRS to reallocate income from offshore subsidiaries back to a US parent corporation in order to accurately reflect the parent’s US taxable income. To do so, the government determines the arm’s-length price for intercompany transactions using the best-fitting transfer pricing method.

The IRS and Medtronic each appealed a Tax Court decision that adopted its own, “unspecified” compromise method for ...