The U.S. Court of Appeals for the Ninth Circuit today affirmed a decision of the U.S. Tax Court concerning the regulatory definition of intangible assets and the method of the intangible assets’ valuation in a cost-sharing arrangement.
As the Ninth Circuit explained:
This case requires us to interpret the meaning of an “intangible” in the applicable (but now outdated) transfer pricing regulations. The case turns on whether, as the Commissioner argues, the regulatory definition is broad enough to include all intangible assets of value, even the more nebulous ones that the Commissioner refers to as “residual-business assets” (i.e., [the taxpayer’s] culture of innovation, the value of workforce in place, going concern value, goodwill, and growth options). We conclude that the definition does not include residual-business assets. Although the language of the definition is ambiguous, the drafting history of the regulations shows that “intangible” was understood to be limited to independently transferrable assets. We thus affirm.
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