Altera And Cost-Sharing Requirements Under Section 482 By Jerald David August
P. 1
UNDER SECTION 482 Another Tax Court Rebuke to the IRS
In Altera Corp.,1 the Tax Court, per the majority opinion issued by Judge L. Paige Marvel, invalidated the 2003 final regulations on cost-sharing arrange- ments (CSAs). Following a brief intro- duction to Altera, this article will examine the application of the principles contained in the transfer pricing rules, and in particular, the regulations per- taining to cost-sharing agreements (for intangibles) and the government’s pri- or defeats in this area in Xilinx, Inc.2 and VERITAS Software. 3 The discus- sion will then focus in depth on the Tax Court’s Altera decision and the impact
that it will have on CSAs. The court’s emphasis on the fact that the IRS did not have a sufficient factual basis to include SBCs as an element of what a CSA must take into account poses chal- lenges to the issuance of “legislative” regulations currently under considera- tion and also into the future. Indeed, another consequence of the Tax Court’s analysis invalidating the CSA regula- tion with respect to SBCs is whether other legislative regulations previously issued also suffer from the same infir- mity. This article will be continued with the publication of a future second part
January/February 2016

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