Economist Provides Perspective on Amazon-IRS Dispute

SEATTLE, Aug. 21, 2019 /PRNewswire/ -- The 9^th U.S. Circuit Court of Appeals has upheld a lower court ruling that Amazon properly valued the transfer of certain intangible assets to a Luxembourg subsidiary in connection with a $1.5 billion dispute with the IRS.

Bradford Cornell, Emeritus Professor of Financial Economics at the Anderson School of Management at UCLA, testified in connection with the valuation of the intangible assets at issue. According to Cornell, the ruling, which stems from assets Amazon transferred in 2005 and 2006, has important ramifications regarding transfer pricing of intangible assets by multinational companies. Had the 9^th Circuit not affirmed the US Tax Court's 2017 decision, Amazon would have faced a significant potential tax liability for several tax years and for transfers of assets among its international subsidiaries.

"This ruling is significant for multinational companies engaged in cross-jurisdictional transactions, given the billions of dollars in tax liability that are at stake," Cornell said. "Intellectual property assets, including patents and trade secrets, are becoming a greater portion of the value of businesses and the rules regarding how to value and the ability to tax that value in international transactions is being defined and is likely to be subject of further disputes."

Circuit Judge Consuelo Callahan cited the Treasury Department's thinking regarding intangible assets during the mid-2000s as well as the effects of the Tax Cuts and Jobs Act of 2017.

SOURCE Bradford Cornell