![]() While the court did not expressly adopt DEMPE (or even mention it), its reasoning reflects an unwillingness to allow a mere cash box, with no real decision making ability or authority, to earn non-routine profits from its cash funding. Perhaps more fundamentally, the court’s decision seems to embrace substance concepts akin to the OECD’s “DEMPE” doctrine. As should be the case in transfer pricing, the facts mattered. Our view is that the Coca-Cola court’s acceptance of the CPM is not a departure from precedent, because it turns on findings of fact which, unlike in other recent decisions, allowed for the application of the CPM. This view arose in recent years when, in case after case, the Tax Court rejected IRS applications of the CPM (a method analogous to the OECD’s Transactional Net Margin Method) and other profits based methods in favor of the comparable uncontrolled transactions (“CUT”) method. The decision is a watershed not only because it is the biggest IRS win in decades, but because it debunks the myth that the Tax Court is uncomfortable accepting IRS adjustments based on applications of the comparable profits method (the “CPM”) and other profits-based methods. $7 billion in transfer pricing adjustments over three taxable years (2007-09), with more at stake for later years. The taxpayer must include in income more than U.S. Internal Revenue Service (“IRS”) on most issues, including those for which the most dollars were at stake. Writing for the court, Judge Albert Lauber ruled for the U.S. Commissioner marks an inflection point in U.S. ![]() ![]() The United States Tax Court’s Novemopinion in The Coca-Cola Company & Subsidiaries v. Below is the full article, and please visit this link to view the article as it appears on IBFD's website. Clark Armitage, Heather Schafroth, Elizabeth Stevens, and David Rosenbloom authored the Januarticle "Coke Concentrate: A Recipe for Understanding the IRS’s Biggest Win in 40 Years" for IBFD International Transfer Pricing Journal Volume 28, No.2.
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