The Knight Watch: 3M Company Tax Court Opinion—Blocked Income and Code Sec. 482 Allocations—It’s All About the APA
Tax attorneys James Dawson, Alan Granwell and Joshua Odintz authored an article in TAXES – The Tax Magazine about the U.S. Tax Court's ruling in 3M Company and Subsidiaries v. Commission of Internal Revenue. This decision was eagerly awaited as it marks the first opinion to adjudicate whether the Internal Revenue Service (IRS) has the authority to allocate income subject to foreign legal restrictions in a controlled transaction after the addition of the “commensurate with income” standard language to Code Sec. 482, and the subsequent promulgation of Reg. §1.482-1(h)(2), dealing with the effect of foreign legal restrictions. The authors outline the facts of the case, how the court ruled and the impact of the decision moving forward.
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