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Veritas Software Corporation entered into a cost-sharing agreement with Veritas Software Holding Ltd., a wholly owned subsidiary based in Bermuda. (Pursuant to a 2005 merger, Symantec is the successor in interest to the parent company.) In evaluating the subsidiary's buy-in payment, the court rejected as arbitrary, capricious,a nd unreasonable the IRS's application of the income method to allocate $1.675 billion to the taxpayer's income (adjusted from the IRS's initial allocation of $2.5 billion). The court instead favored the taxpayer's reported $166 million lump-sum buy-in payment based on the comparable uncontrolled transaction transfer pricing method. The court found the comparable uncontrolled transaction transfer pricing method to be consistent with the arm's-length method and the best available method for determining the requisite buy-in amount under the cost-sharing agreement.
LEXIS users can access the enhanced version of Veritas Software Corp. v. Comm'r, 2009 U.S. Tax Ct. LEXIS 34 (T.C. Dec. 10, 2009).
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