On June 9, 2016, the US Tax Court released its opinion in Medtronic, Inc. and Consolidated Subsidiaries v. Commissioner. The Internal Revenue Service had taken issue with the transfer pricing of transactions between Medtronic, Inc. and its Puerto Rican manufacturing arm under §482 of the Internal Revenue Code. Finding the IRS’s application of the comparable profits method (CPM) to the transactions arbitrary and capricious, and taking issue as well with the taxpayer’s comparable uncontrolled transaction (CUT) methodology, the court ultimately made its own decision as to arm’s-length pricing, arriving at new allocations by making adjustments to the taxpayer’s original CUT approach.
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