Veritas Scores a Major Transfer-Pricing Victory

Veritas Scores a Major Transfer-Pricing Victory - CFO

Based on the licensing agreement, Veritas Software granted Veritas Ireland the right to use certain "covered intangibles," as well as the right to use Veritas Software's trademarks, trade names, and service marks. In exchange for the rights granted by licensing agreement, Veritas Ireland agreed to pay royalties, as well as a "prepayment amount."

In 2000 Veritas Ireland made a $166 million "lump sum buy-in payment" to Veritas Software. This amount was later adjusted downward to $118 million. At issue, from a tax perspective, is whether the buy-in payment was "arm's-length." The IRS concluded it was not, but the tax court found the payment was, indeed, arm's length.1 In fact, in ruling against the IRS, the court found that the Service's determination was arbitrary, capricious, and altogether unreasonable.

シマンテックに２００５年７月２日に買収される前に、アイルランドにあった子会社に

Veritas Software and Veritas Ireland entered into a research and development agreement, as well as a technology license agreement.

ということで、

In noting the comparability, the court also pointed out the following:

(1) Veritas Ireland and the OEMs undertook similar activities and employed similar resources in conjunction with such activities,
(2) there were no significant differences in contractual terms,
(3) the parties to the controlled and uncontrolled transactions bore similar market risks and other risks, and
(4) there were no significant differences in property or services provided.

As a result, the court was satisfied that the unbundled OEM agreements were sufficiently comparable to the controlled transaction with the result that the CUT method is the best method to determine the appropriate buy-in price. The buy-in payment actually charged met the arm's-length standard with the result that the IRS commissioner's conception of what the buy-in payment should be was summarily rejected.

こういうことになったのか。