Case Conclusion Date:January 1, 2009
Outcome:IRS Appeals - zero net tax adjustment
Description:A US Parent Company (Taxpayer) owned a Mexican manufacturing company which performed environmentally sensitive labor. Mexican Sub got parts from US Parent and sold its output to Parent. Taxpayer's industry had a couple of bad years, and both Parent and Sub had losses. IRS audited the transactions with Mexico and proposed a $4.7 million total adjustment for the related party transactions. Through negotiations with the field examiner and IRS economist, I got the adjustment down to $2.3 million. I took the case to IRS Appeals and got it to a zero tax effect (about $350,000 in one year, and was offset by NOLs, which Appeals did not require be recalculated). Fortunately, Taxpayer had good facts and good data to use in a competing economic analysis to that which was proposed by the IRS field economist.