The EdgarStat Blog explores issues in transfer pricing and application of the transactional net margin method (TNMM or CPM in the US) and other enterprise profit-based methods. Blog writings reflect the position of the authors and are not the opinion of EdgarStat.

Implicit Support in the US and Canada: Perrigo and GE Capital Canada
March 30, 2024 by Harold McClure

The IRS has recently asserted implicit support in several situations where a foreign based affiliate extended an intercompany loan to a US borrowing affiliate. In this piece, we'll discuss an intercompany loan involving Perrigo, and compare the IRS settlement to the litigation involving GE Capital Canada before we turn to another potential IRS issue.

Topics: US Internal Revenue Service Intercompany Guarantee Fees Intercompany Loans Intercompany Financing US Transfer Pricing Canada Revenue Agency

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U.S. Operating Profit Markup, 1950-2022
March 07, 2024 by Ednaldo Silva

Microeconomics are detached from the reality of corporate profits behavior. Here, I explore the operating profits (before depreciation and amortization) of a major group of U.S. corporations (consolidated entities) that make up a large fraction of U.S. gross domestic product.

Topics: Profit Indicators Corporate Profits Oligopoly US Transfer Pricing

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Operating Profit Margin of U.S. Big Oil
December 11, 2023 by Ednaldo Silva

Data suggest that “big oil” forms an oligopoly industry. Noise about oil and gas prices being determined by supply and demand is suspect.

Topics: Oil and Gas Transfer Pricing Profit Indicators US Transfer Pricing

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Intercompany Royalties: Does the Realistic Alternatives Principle Endorse CPM?
September 27, 2022 by Harold McClure

Licensees bear significant commercial risk when they use valuable intangible assets owned by another entity. As such, any method that affords them with an expected return to its tangible assets that is only as high as the overall enterprise’s cost of capital is inconsistent with sound economics.

Topics: Intangibles Medtronic Royalty Rates Tax Controversy Section 482 TNMM/CPM US Transfer Pricing

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Medtronic Litigation: Unspecified Methods vs. Traditional Methods
September 02, 2022 by Harold McClure

This discussion presents a simplified illustration of the issues with respect to the unspecified method applied in Medtronic III in contrast to the IRS' extreme CPM approach and a traditional RPSM approach based on sound financial economics.

Topics: Residual Profit Split Method Unspecified Method Intangibles Tax Policy Medtronic Tax Controversy Section 482 US Internal Revenue Service TNMM/CPM US Transfer Pricing

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