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Choosing an Advisor – Part 3
Selecting an advisor to meet the needs of the prior blog is relatively straight-forward. If you are hiring for the long-haul, then you need somebody competent as well as somebody you can relate to. Competence is extremely important here. Transfer pricing advisors have arisen in great numbers in recent years. Some are very capable and some aren’t. To distinguish between the two groups, use your lawyers, use other companies (make sure their goals for use ...
Choosing an Advisor – Part 2
This blog assumes that you’re looking for an advisor who can handle some, or all, of the challenges presented in the previous blog (except for the one discussed in that blog). In this case, our recommendation is to choose an advisor who has lots of experience and knows what he is doing. It’s not so important that the advisor has worked in your industry (although that helps). What is important is the depth of experience ...
Middle Market Companies – Conclusion
Typically, today many middle market companies take a “Wait until they catch me. Then, I’ll worry about this” approach to transfer pricing. Depending on what IRS does with the reorganization that it is starting, this could continue to be the cost effective approach, or it could be a very dangerous approach if these companies become the focus of competent intensive audits. Only time will tell. The problem with taking a wait-and-see approach is that if ...
Middle Market Companies – Documentation alternatives – Selectively document transactions
The 80/20 rule almost always applies, i.e., 80% of the dollar amount at risk relates to 20% of the transactions. In that case, the obvious way to manage the risk at the same time that you manage the cost of compliance is to document the 80% and ignore the rest. This is obviously where a good IRS agent will focus given that they have a limited amount of time to audit any taxpayer, and they ...
Middle Market Companies – Documentation alternatives – Database dump CPM
In our experience, middle market (and some large) companies sometimes put their documentation exercise out for bid. Then, they choose the lowest bidder who almost always prepares a database dump CPM (that is the cheapest way to document transfer prices). This approach arguably provides penalty protection, but little else. The CPM, for those readers who aren’t familiar with it, is a method that tests whether the operating margin of one of the parties to the ...
