Our Convoluted Tax & International Business Systems

This was a win for Symantec, who sent something like 14 lawyers to the Tax Court to face off against the 7 for the IRS before Judge Foley. The Tax Court found the government's case arbitrary, capricious, and unreasonable.

If for some irrational reason you want the flavor of just how complex things can be in taxation relative to international entities and a single issue, consider reading this case, which has 71 pages and a table of contents as follows:

CONTENTS

Background

I. Storage Management Software Products

II. Product Distribution Channels

III. Intensely Competitive Market

IV. Product Lifecycles and Useful Lives

V. Geographic Expansion

VI. The Cost-Sharing Arrangement

VII. VERITAS Ireland's Operations

VIII. Procedural History

Discussion

I. Applicable Statute and Regulations

II. Respondent's Buy-in Payment Allocation Is Arbitrary, Capricious, and Unreasonable

A. Respondent's Notice Determination Is Arbitrary, Capricious, and Unreasonable

B. Respondent's Determination in Amendment to Amended Answer Is Arbitrary, Capricious, and Unreasonable

1. Respondent's "Akin" to a Sale Theory Is Specious.

2. Respondent's Allocation Took into Account Items Not Transferred or of Insignificant Value

3. Respondent's Allocation Took Into Account Subsequently Developed Intangibles

4. Respondent Employed the Wrong Useful Life, Discount Rate, and Growth Rate

III. Petitioner's CUT Analysis, With Some Adjustments, Is the Best Method

A. Comparability of OEM Agreements

B. Unbundled OEM Agreements Were Comparable to the Controlled Transaction

IV. Requisite Adjustments to Petitioner's CUT Analysis

A. The Appropriate Starting Royalty Rate

B. The Appropriate Useful Life and Royalty Degradation Rate

C. Value of Trademark Intangibles and Sales Agreements.

D. The Appropriate Discount Rate

V. Conclusion