WTP Advisors’ Guy Sanschagrin was asked to weigh in about the recent decision in Medtronic v. Commissioner and whether the Court applied the right transfer pricing solution to the profit allocation of the case.
In Tax Note’s August 23, 2022, article “Medtronic’s Unspecified Method Raises Specific Questions”, written by Alexander F. Peter, Sanschagrin states that a more traditional residual profit-split method would have likely been more accurate than the court’s application of an unspecified transfer pricing method and the three-step analysis.
“Given the importance of the risk, I was surprised that the final analysis didn’t seem to attempt to quantify business risks that impact the distribution of profits, “ Sanschagrin said. Additionally, the decision fails to address the question of who bore the costs, the subsidiary or the parent, nor did if offer reasonable alternatives to manufacturing in Puerto Rico.
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