Horse Racing and International Tax

Horse Racing and International Tax

In international tax, ... A multinational can save hundreds of millions of dollars in tax by "selling" foreign rights to its intellectual property (IP) to a wholly-owned subsidiary in a tax haven. The key to success for a multinational is getting the IRS to allow it to sell at a low price. If... the multinational prevails, the subsidiary will soon be generating big profits (on which it pays no foreign tax) that really should have been booked and taxed in the United States.

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Perhaps those who make our tax rules could learn something from the wonderful world of horse racing. Those dwindling few Americans who still follow the horses know about a common feature on any racing program: the claiming race...

Based on the same principle, here's what the IRS can do to prevent transfer pricing abuse. Before any multinational sells IP to a subsidiary in a tax haven for what it is telling the IRS is a fair price, it should allow any third party to purchase those rights at that price...

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View Marty Sullivan's opinion in its entirety on the taxanalysts® Blog.

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