What is meant by the court’s deference to Treasury Regulations? What is the most recent Supreme...

80.2K

Verified Solution

Question

Finance

What is meant by the court’s deference to Treasury Regulations?What is the most recent Supreme Court case to speak to the issue(include a proper citation)? What did the court conclude? Explainwhy.

Answer & Explanation Solved by verified expert

4.2 Ratings (840 Votes)

Courts deference to Treasury Regulations is to court giving different view against the regulations in a case specific situations There can be IRS regulations which are cause undue influence to the assesse which court will save with its power Cases were regulations are not clear are to be raised to High courts which after studying the applicable law also study the reason behind that law and situation of case where in such situations there can be judgements which can create deference of court with standard regulations Same in case of Treasury regulations where court given judgement in favor of assessee as law was not clear and ambiguity were raised all over As the question asked for a latest case on this quoting here with blue print of the case as taken from a government official site to study the discretionary between the treasury regulations and the courts decision On July 24 2018 in Altera Corp v Commissioner a divided panel of the US Court of Appeals for the Ninth Circuit upheld the validity of a Treasury Department regulation that requires a US taxpayer to allocate a portion of stockbased compensation costs to a foreign affiliate that is a participant in a costsharing arrangement for the development of intangible assets1 In the decision the court reversed the Tax Courts prior unanimous decision in favor of Altera which had held that the Treasury Department failed to engage in reasoned decisionmaking in promulgating the regulation contrary to the requirements set forth by the Supreme Court in Motor Vehicle Manufacturers Association of the United States v State Farm Mutual Auto Insurance Co State Farm2 The decision in Altera is noteworthy in two broad respects First the Ninth Circuit like the Tax Court closely examined the history of the Treasury regulation under both State Farm and Chevron USA Inc v Natural Resources Defense Council Inc Chevron3 reaffirming the increasing significance of general administrative law principles in tax cases Focusing primarily on the reasoned decisionmaking standard of State Farm the court held that Treasury had adequately explained how it arrived at its decision in the notice of proposed rulemaking and the preamble to the final regulations Second the majority opinion agreed with the IRS that strict application of the traditional arms length standard for US transfer pricing analysis was not required in this case under section 482 of the Internal Revenue Code4 Historically the arms length standard has been understood to require US taxpayers to report income from transactions with their foreign affiliates in a manner consistent with the price that would be agreed upon if the transaction were between uncontrolled parties Instead the court reasoned that section 482 could be read to allow the IRS to reallocate income and expense if such reallocations are fair and reasonable regardless of what happens between parties dealing at arms length This reasoning could embolden the IRS to take more aggressive approaches in promulgating section 482 regulations in the future Alteras Challenge to the Validity of Treasurys StockBased Compensation Allocation Regulation When a US taxpayer transacts with a foreign affiliate under common control the US taxpayer must determine whether and to what extent income or expense relating to such transactions are attributable to the US taxpayer and the foreign affiliate5 This process of allocation of income and deductions between or among US taxpayers and their foreign affiliates is known as transfer pricing Taxpayers that are part of commonly controlled multinational groups generally have an incentive to allocate greater income and fewer deductions to jurisdictions with relatively low tax rates and less income and greater deductions to jurisdictions with relatively high tax rates As a result the IRS often closely scrutinizes the transfer pricing policies adopted by US taxpayers and their foreign affiliates Under section 482 the Secretary has been delegated broad authority to reallocate the income and expenses of taxpayers under common control and the Treasury Department has issued transfer pricing regulations describing various methods by which a taxpayer See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!

Become a Member

What is meant by the court’s deference to Treasury Regulations? What is the most recent Supreme...

80.2K

Verified Solution

Question

Finance

What is meant by the court’s deference to Treasury Regulations?What is the most recent Supreme Court case to speak to the issue(include a proper citation)? What did the court conclude? Explainwhy.

Answer & Explanation Solved by verified expert

Get Answers to Unlimited Questions

Membership Benefits:

Transcribed Image Text

Other questions asked by students

Consider the titration of 100.0 mL of 0.016 M HOCl (Ka=3.5Ã—10?8) with 0.0400 M NaOH. 1) How...

Problem 6 The current in a long solenoid of radius 3 0 cm and 20...

In this problem we will use the line segment PQ where P 1 3 and...

K Find a polynomial of least possible degree having the graph shown Use a leading...

QUESTION TWO (15 Marks) (a) Elikem (Pty) Ltd manufactured inventories at a cost of...

and sales data: \table[[,Pairs of Shoes,Pairs of Gloves,Range-Finder],[Unit sales price,$120,$30,$295

Gregs Breads can produce and sell only one of the following two products: Oven Contribution...

Mr and Mrs Vincent have $50,000 of non-superannuation savings invested in a managed fund operated...

joy a 55 year old taxpayer, receives $20,000 in wages. the maximum contribution she may...

Review the Final Project Guidelines and Rubric document and the associated scenario. Then, instructor in...

3. Below is a list of account balances for Fraggle Co mpany st of Goods...

9. Collin Co. issues a 90-day, 12.5% note for $19,300. What is the principal amount...