CIP on Buy-In Royalties (revisited)

I regularly ask people what the "hottest topic" in transfer pricing is today and I hear again and again that it's the September 2007 CIP on Buy-Ins. I've had a variety of reasons cited ranging from, "it's illegal!" to this one I recieved on LinkedIn: "Because nothing is written is clearly and the anything to do with the IRS is bogus nonsense so you have hire a triple MBA to get through the crap." (Thanks Jan!) Some of your responses have been better thought out and logical than these, but most of the time the indignation is still there.

My understanding of the situtation is that, and I'm stealing these words from a manager at PwC, this CIP "neuters causuring" by having auditors apply the income method as the best method, because it essentially means that you need a subsidiary to buy-in to developing IP at market value eliminating any tax benefit.

So what?

Many companies don't use causuring anyway - it's seen as too risky - and that simply means that the rest will have to adjust accordingly or be penalized. This is a solid benefit for anyone in a consulting role because you will be seen as the experts on how to solve these problems that your clients now have.

Ultimately I think this is the decision of the regulatory body at hand and rightfully so. The concept of "Best Method," which they're applying here isn't intended to mean, "best for the company," but best and most fair and reasonable. It seems to me that they're saying that causuring is not. The same manager as above said that causuring is dead in the water.

I tend to agree.



-Skelly