A recent report from the Department of Treasury's inspector general highlights the difficulty IRS examiners are having sustaining tax adjustments through the internal appeals process. It's a problem tax professionals have long felt indicates either poor issue selection or overreach by examiners—although the figures in the report still raised some eyebrows. Peter A. Barnes, a senior lecturer at Duke University and of counsel at Caplin & Drysdale, Chartered, noted that focusing on audit adjustments may be misguided.
“In a perfect world, there would be zero adjustments, because taxpayers would have appropriate, defensible transfer prices in place and the results would be reported on the returns,” Barnes said in a Nov. 30 e-mail to Bloomberg BNA. “Both taxpayers and the government need to focus on good guidance, good compliance practices, safe harbors and other ways to reduce the number of adjustments.”
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Excerpt taken from the article “Why Are Taxpayers Winning on Transfer Pricing in IRS Appeals?” by Alex M. Parker for Bloomberg BNA.