The IRS’s $3.4 billion victory against Coca-Cola Co. signals that the battle with multinationals over how to account for profits from intangible property, like brand trademarks, isn’t going away.
The IRS’s U.S. Tax Court win last week comes after a string of high-profile cases for the agency in recent years over transfer pricing issues—how companies should value their intercompany transactions—involving Amazon.com Inc., Facebook Inc., Altera. Corp, and Medtronic Inc.
The agency’s argument in the case wasn’t surprising, practitioners said, but it hammered home one of the fundamental principles of transfer pricing: Profits should reflect the location of valuable intangibles—intellectual property ...